NAFTA Talks at Pivotal Point as Ministers Resume Work in Washington

9 May 2018

Negotiators from Canada, Mexico, and the US have resumed high-level discussions aimed at bringing talks for updating their North American Free Trade Agreement (NAFTA) to a successful close, with officials calling for an ambitious result despite the limited time remaining before electoral dynamics escalate.

Ministers reconvened in Washington on Monday 7 May, telling reporters that they expected to continue discussions throughout the week in order to narrow down some of the most significant gaps between them. How long this process might take was not clear at press time, and ministers have avoided naming any set timeframe for wrapping up their meetings.

“We are definitely making progress. I am not going to predict, you know, the day and the minute and the hour that we will be finished, but we are certainly very, very hard at work,” said Canadian Foreign Minister Chrystia Freeland to reporters on Tuesday 8 May. “This isn’t just about ministers from the three countries meeting. It is about talking to the people who are really doing the jobs in these sectors.”

Freeland, US Trade Representative Robert Lighthizer, and Mexican Economy Secretary Ildefonso Guajardo Villareal, have already met on repeated occasions over the past few days, and have not said how long they intend to continue this round of discussions in Washington. Other top officials involved in this stage of the NAFTA talks include Mexican Foreign Secretary Luis Videgaray Caso and White House senior adviser Jared Kushner, among others.

Guajardo told the Reuters news agency that the teams would be in the US capital city “for as long as necessary.” The Mexican official has also called for ministers to ensure a full revamp of NAFTA, rather than a “partial result.” He explained that doing so would help guarantee a balanced outcome for all parties involved, according to comments reported by Politico.

At this stage, “we need to work simultaneously on all the items that are pending,” he said.

Mexico is less than two months away from its general elections, set for 1 July. The US, meanwhile, holds midterm elections in November, with the primary process already well underway for congressional, senatorial, and gubernatorial races. Meanwhile, Mexico has ratified a separate regional deal known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that also includes Canada and 10 other countries, which will also rewrite the trade rules for much of the region, though it does not involve the US as a member.

Key sticking points remain

The ministerial-level talks came after the three NAFTA parties spent most of last month holding technical meetings between them to lay the groundwork for a deal. While at least six chapters of the deal were confirmed as done in March, whether more chapters have been finalised of the planned 30 total chapters is not yet clear. (See Bridges Weekly, 8 March 2018)

“In Washington we will work on autos but also on other key issues for Mexico such as Sunset, Chap 20, and seasonality, among others,” said Kenneth Smith Ramos, the Mexican official who heads the technical side of the NAFTA talks for his country, on social media site Twitter. Smith Ramos is also participating in this week’s talks, as is Mexico’s Undersecretary of Foreign Trade Juan Carlos Baker.

Sunset refers to whether to have a review clause in NAFTA and, if so, whether the trade deal’s renewal would be contingent on all parties agreeing to continue with it after a set period of time. Chapter 20 refers to the existing accord’s dispute settlement procedures, while seasonality refers to a specific aspect of agricultural goods trade, in this case to a US proposal to impose duties on imported produce depending on whether it is in season.

One of the most high-profile challenges, however, will be finding common ground on automobile trade. The US’ push to both increase the level of regional content in automobiles, as well as to tie some of their production to higher wage-earning areas, has drawn scrutiny from its NAFTA partners and industry stakeholders, particularly those in Mexico, over whether it would be viable in practice.

Canada had previously put forward suggested alternatives, to mixed results. On Tuesday, reports emerged that Mexico has suggested its own formulation of automobile rules of origin, which would involve a 70 percent regional content threshold instead of the 75 percent favoured by Washington, as well as building in longer transition periods for some types of cars, along with some flexibility on the wage issue, among other provisions.

Bridges will feature a full update on the NAFTA process in its next edition, after the ministerial talks draw to a close.

ICTSD reporting; “Comercio estacional fracturaría TLCAN: SE,” EL ECONOMISTA, 28 September 2017; “Mexico pitches auto proposal as NAFTA talks grind on,” REUTERS, 8 May 2018; “NAFTA Talks Enter Critical Week with U.S. Pushing Hard Line,” REUTERS, 6 May 2018; “NAFTA talks resume amid fears of ‘zombie’ deal,” REUTERS, 7 May 2018; “Mexico pushes for a full deal,” POLITICO, 8 May 2018; “Freeland: There's movement on NAFTA, unclear when deal will come,” CTV NEWS, 8 May 2018.

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