WASHINGTON—The Trump administration is signaling to Congress it would seek mostly modest changes to the North American Free Trade Agreement in negotiations with Mexico and Canada, a deal President Donald Trump called “a disaster” during the campaign.
According to an administration draft proposal being circulated in Congress by the U.S. trade representative’s office, the U.S. would keep some of Nafta’s most controversial provisions, including an arbitration panel that lets investors in the three nations circumvent local courts to resolve civil claims. Critics of these panels said they impinge on national sovereignty.
The draft, reviewed by The Wall Street Journal, talks of seeking “to improve procedures to resolve disputes,” rather than eliminating the panels.
The U.S. also wouldn’t use the Nafta negotiations to deal with disputes over foreign-currency policies or to hit numerical targets for bilateral trade deficits, as some trade hawks have been urging.
Mexico’s government had no immediate response to the draft proposal. Private-sector economists largely welcomed it as far less drastic than proposals to undo the trade accord or impose quotas that restrict trade. But they cautioned that it was still early in the process.
“The proposal looks to be very in line with existing U.S. trade laws,”
said Luis de la Calle, an economist who was on the original negotiating team for the Mexican government.
Mr. de la Calle said “snap-back” tariffs to safeguard industries already exists in Nafta. He cited a 1996 move by the U.S. to put tariffs on brooms from Mexico, a move that was scrapped later that year after Mexico put retaliatory tariffs on some U.S. products like Tennessee whiskey and North Carolina wood furniture.
The difference, said Mr. de la Calle, is that under the proposed changes, Mexico wouldn’t be able to take the case to international court, but would have to litigate in the U.S.
He added, however, that since Nafta is a reciprocal treaty, U.S. firms would have to litigate in Mexico courts if Mexico imposed safeguards.
Jeffrey Schott, a trade scholar at the Peterson Institute for International Economics, a free-trade think tank, said that the measures reimposing tariffs—called a “snapback” in trade lingo—was also sought by the Clinton administration 24 years ago. It became a side deal to Nafta, but didn’t have much effect, he said.