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USTR: Once NAFTA Trade Talks are Resolved, CAFTA’s Next

Once the “problem” of trade within this America is solved, the U.S. government will be looking to Latin America to tackle imbalances there.

Trade negotiators just wrapped the third round of talks on the North American Free Trade Agreement last week, and U.S. Trade Representative Robert Lighthizer said speaking at a Latin America summit in Florida Monday that trade deals with Peru, Colombia, Panama and the Central America Free Trade Agreement will “need to be modernized, more or less,” as Inside U.S. Trade’s World Trade Online reported.

The news could put a slew of sourcing executives embracing more reshoring and nearshoring on edge, as relations with China get increasingly wobbly.

According to Lighthizer, among the biggest issues with current trade relations between the U.S. and Latin America is digital trade, an area he said was ripe for improvement. The region could also stand to get better at trade facilitation, he said.

“We have to make it easier for sales to happen and products to ship back and forth,” World Trade Online reported Lighthizer as saying. “There’s still a fair amount of inefficiency just in that process, and smaller countries tend to be less efficient than bigger countries…There’s a whole trade facilitation process that has to go on.”

Beyond that, Lighthizer said corruption and lacking legal standards have made it “very difficult” to ensure long-term trade benefits with Latin America.

“I mean there’s just a whole lot of good government things that these countries need and I don’t want to single them out because it is true not only there…” Lighthizer said, pointing to countries in Asia and Africa that suffer from the same shortfall. “I do think, though, if you don’t have basic rights and you don’t have property values…if you don’t have those kinds of things that’s going to make it very difficult to get investments.”

Creating “better” and “fairer” agreements has been the Trump Administration’s rallying cry for trade, and Lighthizer said it’s been the driving force behind the NAFTA renegotiations and it will also inform the approach to “trade issues” with Latin America.

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And despite the ruckus abandoning a trade deal could cause, Lighthizer reiterated the United States’ willingness to do so if talks don’t reach a suitable place.

“I think this president will walk away from deals and I guarantee you that I will,” World Trade Online reported Lighthizer as saying, and adding that while leaving NAFTA and KORUS, the trade deal with South Korea, would be “very disruptive,” the U.S. would have little other choice if it couldn’t agree on a “good deal.”

Last week marked the end of a five-day third round of NAFTA renegotiations, and though there have been allusions to sealing the deal by the end of this year, remaining challenges could put it off until 2018.

A statement by the Office of the United States Trade Representative following the Ottawa, Canada talks said negotiators made “significant progress” in several areas and narrowed some gaps in agreement.

In particular, according to the statement, “meaningful advancements were made in the areas of telecommunications, competition policy, digital trade, good regulatory practices, and customs and trade facilitation. Parties also exchanged initial offers in the area of market access for government procurement.”

Beyond that, USTR said discussions related to small and medium-sized enterprises and supporting their growth and development by enhancing the benefits they glean from the agreement were “substantively completed.” A draft on the contentious rules of origin, for which the U.S. wants to increase the required amount of U.S. inputs, is expected to emerge at the next round of talks.

[Read more about what the apparel industry wants from NAFTA: Apparel Associations go to Bat for Maintaining Tariff Preference Levels in NAFTA]

The next round of NAFTA talks is slated for Oct. 11-15 in Washington, D.C., and though the hope is to have a deal settled by the end of the year, Mexico has alluded to talks spilling over into 2018 because of how complex the talks are. Canada—with which relations are growing increasingly tense since Boeing accused rival jet manufacturer Bombardier of unfairly receiving government subsidies for some of its aircraft and the U.S. said it would impose a tax on those planes—may even walk away from the NAFTA talks over disagreement on the dispute settlement mechanism, Canada’s foreign minister Chrystia Freeland told Reuters.