March 30, 2017 / 1:51 PM / 5 months ago

Trump to seek tariff 'snap-back', tax equality in NAFTA revamp - letter

FILE PHOTO - Trucks wait in a long queue for border customs control to cross into the U.S. at the Otay border crossing in Tijuana, Mexico on February 2, 2017.Jorge Duenes/File Photo

WASHINGTON (Reuters) - In revamping the North American Free Trade Agreement (NAFTA), the Trump administration will seek tax equality and the ability to reimpose tariffs if a flood of imports from Canada and Mexico causes "a threat of serious injury" to U.S. industry, a draft of negotiating objectives shows.

The administration also will seek to eliminate a requirement in the 23-year-old trade deal that anti-dumping and anti-subsidy disputes be settled via a special dispute panel. Some U.S. industries including lumber have complained that the mechanism is ineffective in stopping unfair subsidies.

The objectives are contained in a draft notification letter circulated by the U.S. Trade Representative's office to members of Congress for review. The letter, seen by Reuters, is part of the legal process required to start negotiations to revamp the NAFTA.

President Donald Trump called NAFTA a "disaster" throughout the 2016 election campaign, but the plan outlined in the letter would keep many of its provisions in place, including a settlement system for other disputes that circumvents local courts.

"The persistent U.S. deficit in goods trade with Canada and Mexico demands that this administration take swift action to revise the relationship to reflect and respond to new 21st century challenges," Acting USTR Stephen Vaughn said in the letter, which is subject to revisions before it is finalised.

The draft negotiating objectives will "seek to level the playing field on tax treatment," a broad statement that Commerce Secretary Wilbur Ross told CNBC would be aimed at solving the problem of many countries exempting exports from value-added taxes, while the United States has been unable to offer such credits.

"We will be using NAFTA as a partial means of addressing that," he said.

Both Canada and Mexico have value-added taxes, while the Trump administration is considering a border adjustment tax levied on imports.

Another draft objective says the administration wants “to establish rules that require government procurement to be conducted in a manner that is consistent with U.S. law and the administration’s policy on domestic procurement preferences,”

This could allow for Trump's "Buy American" plan, but also cause U.S. companies to lose business in Mexico and Canada.

The document also calls for protections of digital trade and commerce, tougher intellectual property enforcement and requirements that state-owned companies operate in a commercial fashion.

After revisions to the document, Ross said he hopes next week to trigger a 90 day consultation period leading to NAFTA talks.

Reporting by David Lawder and Eric Walsh; editing by Jonathan Oatis and Grant McCool

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