Nafta Negotiators Extend Talks, Delaying Its Potential Demise

By on Oct 17, 2017

The Mexican presidential race will begin in earnest leading up to a July 1 election, raising the risk that President Trump’s proposals for revising Nafta will become a sensitive topic that Mexican candidates will shy away from supporting.

In the United States, legislation will expire in July that gives the Trump administration more extensive authority to negotiate trade deals and then submit them to Congress for a simple up or down vote, without amendments. Campaigning for midterm elections will also begin in the United States, while Canada will hold provincial elections.

Given its current gridlock, Congress is unlikely to renew the legislation, called Trade Promotion Authority, Wilbur L. Ross Jr., the secretary of commerce, told a conference on Oct. 11.

“If we lose T.P.A., I don’t think you’ll ever see a deal done here,” Mr. Ross said. “In general terms, once you get much into next year, nobody is going to be able to get as big and complicated of a deal as this done.”

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Robert E. Lighthizer, the United States chief trade negotiator, said the “end of the year was never a hard target” to renegotiate Nafta.

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Manuel Balce Ceneta/Associated Press

Speaking to reporters on Tuesday after the fourth round of talks, Robert E. Lighthizer, the United States chief trade negotiator, said the “end of the year was never a hard target” and that the previous timeline was putting too much pressure on the process, which requires consultation with Congress, labor unions and industry associations.

Mr. Lighthizer described the hard process of renegotiating a substantially altered trade agreement that, he hoped, would capture support from businesses, labor groups, the president and both political parties in Congress.

“It is important for the trading system that we end up establishing a solid majority for the kind of things we’re doing, and we not keep operating right on the fringe,” he said. “If we can do that, then this will truly will be historic agreement.”

Negotiators for Mexico and Canada expressed frustration after the talks concluded.

Chrystia Freeland, Canada’s minister of foreign affairs, said her country had seen “a series of unconventional proposals in critical areas of the negotiations that make our work much more challenging.”

“We have seen proposals that would turn back the clock on 23 years of predictability, openness and collaboration under Nafta,” Ms. Freeland said. “This is troubling.”

Ildefonso Guajardo, the Mexican secretary of the economy, said his country was still striving to bring constructive solutions and not end up “in a lose-lose-lose situation.”

The demise of Nafta, a deal that has knit together the North American economy over the last quarter century, would be a heavy blow to all three economies. A new study by Impactecon, an American consulting firm, found that the United States would lose 256,000 net jobs if it withdrew from Nafta, with the most severe impact on low-wage employment. Mexico would lose 951,000 net jobs, and Canada 125,000, the report projected.

The outcome could also damage the North American security relationship, straining cooperation to combat money-laundering, terrorism, the drug trade and undocumented migrants coming through Central America, the report said.

The Trump administration came into office promising to scrap or overhaul trade deals like Nafta and the Trans-Pacific Partnership and forge new bilateral deals in their stead. But the Nafta talks illustrate that the Trump administration has found it easier to criticize trade deals than forge politically popular ways to amend them.

The delay in talks into next year will give the United States government time to try to resuscitate the 1994 trade pact. But it is still unclear how the United States will move forward with provisions that foreign partners and the business community in the United States consider to be non-starters.

Those provisions include a five-year sunset clause that would cause Nafta to automatically expire unless the three countries voted to continue it — a proposal that businesses say would inject so much uncertainty into the deal as to effectively nullify it.

The Trump administration is also pushing for drastic revisions to the mechanisms that help to resolve disputes under Nafta. Its proposals would allow countries to reject the ruling of independent panels on state-to-state disputes, as well as change the investor-state dispute settlement provision to an opt-in basis, and substantially curtail the ability of investors to bring such cases.

In his remarks, Mr. Lighthizer said he considered these provisions to be a kind of “political risk insurance” and a market distortion that encouraged businesses to invest abroad.

The Trump administration is pushing for higher thresholds for the amount of products that must be manufactured in North America to qualify for Nafta’s zero tariffs — for instance, 85 percent for automobiles, up from 62.5 percent previously. The United States has also proposed that cars manufactured in Canada and Mexico be made with 50 percent American content, effective immediately.

Other sticking points center on agriculture, which makes up a large part of commerce between the three nations. The United States is pushing to eliminate a program that lowers prices for certain Canadian dairy products, and also create a faster channel for American produce growers to bring trade cases against low-price imports of Mexican produce like tomatoes and avocados.

Many businesses in Mexico appear to be planning ahead for life without Nafta. Jorge Guajardo, Mexico’s ambassador to China (no relation to the economy minister), said he no longer got the sense while speaking with Mexican chief executives “that there was any hesitation that Nafta is dead.”

The clash over Nafta, including the tough talk and threats by Mr. Trump, are making countries more hesitant to jump into talks with the United States.

Speaking Tuesday morning, Jyrki Katainen, a vice president at the European Commission, said that the United States trade posture had benefited Europe. About eight or nine months ago, other countries started to call European leaders, asking to move more quickly in their trade negotiations.

“You cannot get bilateral agreements if it’s only useful for your country, but not benefiting the other party,” Mr. Kaitnen said.

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