5 things to watch as U.S. reveals its NAFTA objectives

Monday marks an important milestone on the road to renegotiating the North American Free Trade Agreement.

Thirty days before formaltalksbegin,United States Trade Representative RobertLighthizer'soffice mustpublish hisnegotiating objectives, layingout the Trump administration's plan for reaching a beneficial deal.

Under the terms of Congress's 2015trade promotion authority (TPA) legislation(also called the fast track), the USTR negotiates agreements. But before doingso, he mustconsult extensively with Congress for three months. This processbegan in May.

• Early signs raise little alarm

What should Canadiansexpect?

1. 'Trade deficits'?

When U.S. President Donald Trump talks about "balanced" trade, he seemsfixatedon America's"deficit": the U.S.bringingin more than itshipsout.

Negotiationaimed at reducingbilateral tradedeficits is "a ridiculous objective. It won't work," said Fred Bergsten, a member of the president's advisory committee on trade and a founding director of the Washington-based Peterson Institute for International Economics.

Will Trump stick to it? That's an"overwhelming and pivotal question" heading in.

"If the administration does go down that path, particularly with Mexico, then there's a chance the whole NAFTA could blow up," Bergstensaid.

Yes, the U.S. has a big bilateral deficit with Mexico. But: "even if you could find a way to get your bilateral deficit with Mexico down, it would just shuffle it elsewhere."

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Trade talks don'tfocus on balances. They focus on reciprocity: equivalent gainsfor each side thatthey can sell politically.

"No country can come to its parliament and say, 'Well yes, we gave up three times what we got in this one to help the other country,'" he said.

"The whole thing is just crazy."

2. 'Modernization'

"My instinct is that digital technology will receive a featured place, if not top of the list in Monday's letter," said international trade lawyer Dan Ujczo,who specializes in CanadaU.S. disputes.

He represented several clients duringthree days of NAFTAstakeholder hearings in Washington in late June.

"There was a strong emphasis on digital and intellectual property issues," he said. "That's consistent with [the Trump administration's stated goal of] 'modernization'... There's very little opposition."

In other words: low-hanging fruit.

Everyone wants to get tech workers and other 21st-century careers ontoNAFTA'soutdated list of professions with cross-border mobility rights.

Easy win, especially for the small- and medium-sized businesses that benefit. And helping the little guy, not just corporations, is a big priority.

Similarly straightforward:adding language on e-commerce already agreed upon by all three countries in the Trans-Pacific Partnership talks, even if it does hoist the White House on its own petard by acknowledging the valueof the 12-country agreement Trump bailed on.

3. Tricky auto talks

Few expect a deal that doesn't take a run at regional contentrules, particularly for automotive products.

The Trump administration wants to tighten country-of-origin requirementstoprotect jobs threatened by cheapimports. But the car companiespushback, fearingdisruption in an industry where components come from all over the place.

"The U.S. and Canadian and Mexican industries are saying, 'Don't rock the boat,'" Bergstensaid, calling this a "bone of contention."

An analysis from his institute suggests that if rules tighten too much, businessesmay just ignore them: is it cheaper to pay tariffs than comply with complicated requirements?

Ujczoseesthings "falling in line with a tweak,"not an overhaul.

The auto industry made its case on integration, he said, whileMexico "has done a greatjob of proving it's not a back door for Chinese and other Asian-made goods."

Canadian and American unions haveanother demand: strengthen NAFTA's labour rules.

"Poor labour standards [in Mexico] have a real economic impact as companies relocate to take advantage of workers who lack basic rights and are underpaid," a joint statement from Unifor and the United Auto Workers said Tuesday.

4. Farm fear

Ujczo said Monday's language on agriculture may be a bellwether. Trump'stone on Canada's supply-managed dairy, poultry and egg sectors has changed dramatically.

Calls for dismantling the system have diminished. The focus now is stopping Canada from spillingexcess supply into competitive global markets, as the U.S. contendshappens with skim milk.

"The U.S. doesn't have much to give Canada in return for dismantling supply management," he said. Atough negotiation like that would take more time than Trump's got.

Bergsten said hisUSTR advisory committee advised that going after supply management wouldn't be worth the adverse Canadian reaction.

Meanwhile, the U.S. farm community is "really, really nervous,"Bergstensaid. "They were very unhappy when Trump dropped out of the TPP," which would securenew markets for American farmers.

Bergstensaidit was Trump's agriculture secretary, Sonny Perdue, who changed Trump's mind about pulling out of NAFTA.

"U.S. agriculture would be apoplectic," he said, and agriculture is the No. 1 or 2 industry in 26 of the 30 states Trump won in the 2016 presidential election.

"They supported him, but they've also said they're ready to dump him," Bergstensaid.

5. Trumpnot in charge?

ThisWhite House can'tworkalone.

In an analysis last week for the C.D. Howe Institute, Christopher Sands explained howthe TPA has redefined trade negotiations dramatically. This time, it's Congress across the table.

While thisunprecedented consultation iscumbersome, Canadians getmore transparency, as Congress exerts its right to be informed and shape positions.

Lighthizer may prefer not to disclosemuchMonday, similar to his shortletter startingconsultations in May.

"Congress kind of let the USTRskate with a vague 90-day letter," Ujczo said. But "there were a lot of statements on both sides of the aisle saying you better not do that on the 30-day letter."

"They may try to keep their powder dry for a while, but I don't think Congress will permit that," Bergstenagrees.

A House subcommittee meetsTuesday to start reviewing what's published.

"Even if the administration comes up with a bunch ofspecifics ... that's going to get modified by the Congress," Bergsten said.