NAFTA Negotiators Close Fifth Round, Prepare to Set Stage for 2018 Talks

23 November 2017

Negotiators from Canada, Mexico, and the US have concluded their fifth round of talks to modernise the North American Free Trade Agreement (NAFTA), the last such meeting of 2017 following an intense negotiating schedule which kicked off in August.

The 17-21 November talks were held in Mexico City, and negotiators have pledged to continue meeting “intersessionally” in the coming weeks to prepare for the next formal round in the new year. That event is slated for 23-28 January in Montreal, Canada, with negotiators currently aiming to conclude the talks by the end of March.

That March target date is a revision from an earlier goal of finalising negotiations this year. (See Bridges Weekly, 19 October 2017)

As previously signalled by ministers, the pace of the talks has slowed down significantly, now that they have entered into more contentious topics. While they had earlier announced the substantive conclusion of a competition chapter, no new chapters have been closed since. (See Bridges Weekly, 19 October 2017)

While the past four rounds closed with a press conference from ministers, this fifth round did not have ministers present. A statement from the three trading partners said that this was due to ministers having met in Vietnam earlier this month on the margins of an Asia-Pacific summit, and also to give negotiators the space to advance their work. (See Bridges Weekly, 16 November 2017)

A subsequent “trilateral” statement issued after the talks noted that around 30 working groups met over the course of the negotiating round, referring to advances made in certain areas, but without getting into detail.

Mexican officials gave further details on areas with most progress. “Although no chapter was concluded, there were substantial advances in anti-corruption, telecommunications, good regulatory practices, sanitary and phytosanitary measures, trade facilitation, e-commerce, technical barriers to trade, and various sectoral annexes,” said a statement by the Mexican Secretariat of the Economy.

However, other public statements noted that the three parties remain openly at odds over certain issues, including a proposal put forward by Washington on increasing US content requirements in automobile rules of origin, as well as Washington’s push to eliminate the Chapter 19 dispute settlement chapter on trade remedies, among others.

“It should be noted that, notwithstanding the good progress we made on many of these bread-and-butter issues, significant differences remain on some key areas, for example rules of origin and chapter 19,” said Canadian Foreign Minister Chrystia Freeland in comments to local reporters.

“There are some areas where more extreme proposals have been put forward. These are proposals we simply cannot agree to,” she said, noting that her team has asked for more information to understand these proposals better.

Freeland also announced that Canada has now put forward its proposal for a chapter on indigenous peoples, as previously planned.

Statements from her US counterpart also made clear that the three parties are in a challenging situation. The US’ top trade official reiterated past worries over pace and approach, while casting doubt on a successful deal should talks continue in this way.

“While we have made progress on some of our efforts to modernise NAFTA, I remain concerned about the lack of headway. Thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result,” said US Trade Representative Robert Lighthizer in a statement following the round.

Meanwhile, Mexican Economy Secretary Ildefonso Guajardo Villareal told Reuters that his country is “prepared to work towards that (rebalancing) goal, provided it doesn’t limit Mexico’s ability to produce and export,” while echoing his Canadian counterpart’s interest in learning more about Washington’s more contentious proposals in order to comprehend them better and respond accordingly.

Updated USTR negotiating objectives

The Office of the US Trade Representative (USTR) also released an updated set of negotiating objectives on 17 November, which was the first official day of this round.

The revised negotiating objectives, while in many areas similar to the original version released in mid-July, also show some notable differences or clarifications, including in the areas of agricultural goods, rules of origin, investment, government procurement, intellectual property, and dispute settlement, among others.

For example, in the area of dispute settlement, the document now has a bullet point which refers to providing “mechanisms for ensuring that the parties retain control of disputes and can address situations when a panel has clearly erred in its assessment of the facts or the obligations that apply.”

On goods market access, the negotiating objectives now refer specifically to pushing Canada to drop its dairy, poultry, and egg import tariffs.

The previous version of the negotiating objectives had not singled out particular policies from the US’ NAFTA partners individually. It also refers to “seek[ing] to eliminate unjustified measures that unfairly limit access to Canada’s markets and unfairly decrease market access opportunities in third countries for US dairy products, such as cross subsidisation, price discrimination, and price undercutting.”

It also goes into substantially more depth on what the US would like to see in the areas of intellectual property rights (IPRs) and investment. On intellectual property, it removes an earlier reference to the WTO’s Agreement on Trade-Related Aspects of Intellectual Property (TRIPS), referring instead to “obtain[ing] commitments to ratify or accede to international treaties reflecting best practices in intellectual property protection and enforcement.” It also refers on multiple instances to the importance of preventing IPR violations and ensuring strong enforcement, among other objectives.

On investment, it calls for establishing a series of rules, including national and most-favoured nation treatment, banning expropriation without timely and appropriate compensation, and banning forced technology transfer and technology localisation, among others. It also refers to investment dispute settlement, calling for “improving” those procedures on various fronts.

On rules of origin, it has changed earlier wording focusing on sourcing goods and materials from the NAFTA countries to language that calls for “ensur[ing] that the rules of origin incentivise production in North America as well as specifically in the United States.”

The release of revised NAFTA negotiating objectives was welcomed by some high-profile US lawmakers who work on trade, including Democratic Senator Ron Wyden of Oregon, who is the ranking member of the Senate Finance Committee. The Oregonian official had raised transparency concerns, particularly given legal requirements in this area, as well as the importance of NAFTA to the US economy.

Wyden had temporarily put on hold the advancement of USTR nominees, which need to be approved by that panel before being voted on by the full Senate. The Oregon lawmaker had argued that USTR was behind a federally mandated deadline to update these negotiating objectives, under the current “trade promotion authority legislation,” known otherwise as the  2015 Bipartisan Congressional Trade Priorities and Accountability Act.

“The American people should not have to rely on anonymous leaks to the media in order to know what their government is purportedly seeking on its behalf, so I am glad the US Trade Representative’s office has finally updated its public summary of its objectives for the NAFTA renegotiation as required by the provision I secured in a 2015 law,” said Wyden.

TPP-11 in the background

The fifth NAFTA round kicked off just days after the 11 remaining Trans-Pacific Partnership (TPP) countries – a group which includes Canada and Mexico – confirmed that they were within the final stages of completing a plan to ratify the deal. (See Bridges Weekly, 16 November 2017)

The TPP had originally included the US as a signatory, but President Donald Trump withdrew from the pact earlier this year. (See Bridges Weekly, 26 January 2017)

The TPP-11 is now named the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the remaining 11 members have agreed to put at least 20 provisions of the original pact on hold, including several related to IPRs and investor-state dispute settlement, which were key areas for the US when it was still part of the group. Four more provisions remain under consideration, while the rest of the pact remains intact.

What this will mean for the NAFTA talks remains unclear. Lighthizer had previously criticised Canada and Mexico for allegedly not being willing to endorse language that had been agreed under the original TPP.

ICTSD reporting; “NAFTA deadlock: Canada blames the U.S., the U.S. blames Canada and Mexico,” THE CANADIAN PRESS, 21 November 2017; “NAFTA talks hit wall as Mexico, Canada push back on U.S. demands,” REUTERS, 21 November 2017.

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