NAFTA Negotiations 2017

Written by  //  October 17, 2017  //  Americas, Canada, Trade & Tariffs  //  No comments

The Trump Unit: Inside Canada’s PMO squad to save NAFTA
Canada-U.S. 2015-17

How Mexico Deals with Trump
Its citizens loathe him. Its politicians are trying to find common ground.
(The New Yorker) Twenty-three years later [after NAFTA took effect], Mexico’s economy has been transformed, especially in the north, and a new middle class has emerged. But a number of the Zapatistas’ assertions have been borne out. The agricultural sector, centered in the mostly indigenous southern regions, has been devastated. Towns and villages that relied on the sale of produce have seen their markets collapse, and many have fallen into surging criminal economies imposed by drug cartels. At the same time, Mexico has become utterly dependent on the U.S. for economic viability.
[Foreign secretary, Luis Videgaray] “When we get some good news, we should regard it as a small piece of good news, and when we get a tweet or a threat, we should consider it a small tweet or threat. We can’t allow our positions and actions to be overly influenced by what happens day to day. We have to be supremely patient. ” The Mexicans’ greatest obstacle may be Trump’s unorthodox economic ideas. He is obsessed with the trade deficit, which last year, according to U.S. government figures, came to fifty-five billion dollars, out of a total trade relationship worth nearly six hundred billion. … Gary Clyde Hufbauer, of the Peterson Institute for International Economics, told me, “Most of us in trade economics disregard deficit as a metric to measure the worth of a trade agreement. President Trump’s thinking is very simple, and comes from a concept called mercantilism,” a protectionist doctrine that has been assailed by economists since Adam Smith. “He is also a physiocrat, which means that services don’t count. The U.S. has a very large surplus globally in services. But, if you can’t see it and kick it, it doesn’t count for him.” (9 October)

17 October
Freeland calls U.S. NAFTA demands ‘troubling’ and ‘unconventional’
Canada, U.S. trade public barbs as tense round 4 of NAFTA talks concludes
Foreign Affairs Minister Chrystia Freeland accused the United States of deliberately trying to undermine the North American Free Trade Agreement, calling its list of unconventional proposals “troubling.”
Her remarks came during a tense joint news conference as the fourth round of NAFTA talks wrapped up in Arlington, Va., a suburb of Washington, D.C. As Freeland delivered the rebuke of the U.S. approach, her counterpart U.S. Trade Representative Robert Lighthizer silently looked down.
During a news conference at Canada’s embassy in Washington following the joint statements, Freeland said the fact all parties have agreed to take more time between talks and to extend negotiations into next year is a positive sign of good will among all partners.

13 October
U.S. tables NAFTA’s ‘poison pill’ with auto sector demands
American negotiators formally present changes to trade deal’s auto sector rules
(CBC) A source with direct knowledge of the talks says the Americans unveiled Friday their protectionist requests that would boost the overall North American content requirements from 62.5 per cent to 85 per cent.
The changes would apply to automobiles, trucks and large automobile parts.
A source told CBC the changes would be phased in gradually.
But the Americans also want a country-specific change that would increase U.S. content requirements to 50 per cent in the first year of the new deal.

No more NAFTA: How Canada could thrive without the trade pact
Obviously, the end of the North American free-trade agreement – the foundation of Canada’s relationship with the U.S. and Mexico – is not this country’s preferred option. There would be economic pain and dislocation, at least initially. Untold numbers of jobs would be lost and investments delayed or cancelled if the world no longer perceived Canada as a gateway to the vast U.S. market. Complex supply chains, particularly in the auto sector, would be disrupted.
But it wouldn’t have to be an economic catastrophe. If Canada plays its cards right, the death of NAFTA could become a catalyst for making the Canadian economy stronger, more outward-looking and less tethered to an increasingly unreliable partner.

The ‘crown jewel’ of NAFTA: Why Canada must fight to retain dispute resolution clause despite tough talks
Several Canadian industries see the mechanism as an indispensable tool in avoiding being slapped with unfair duties from U.S. buyers
Scrapping NAFTA would lead to Canada and the U.S. snapping back to bilateral agreements under the Canada-U.S. Free Trade Agreement or World Trade Organization rules—a reversal that would lead to higher tariffs for many Canadian industries, particularly auto manufacturers.
But the bigger threat in the absence of NAFTA might actually be a lack of access to dispute mechanisms, which has in some ways provided a more powerful tool to Canadian firms than reduced tariffs.
“That’s why we sought a free trade agreement in the first place. It’s the dispute resolution process, not low tariffs, that is the jewel in the NAFTA crown,” CIBC economist Avery Shenfeld said in a note Friday.
The Chapter 19 dispute mechanism is used to review the fairness of anti-dumping and countervailing duties, a common flash-point between the U.S. and Canada in industries like softwood lumber and aerospace.

11 October
Trump muses about pulling out of NAFTA as Trudeau arrives in Washington
(Globe & Mail) Prime Minister Justin Trudeau arrived in Washington on Tuesday as U.S. President Donald Trump created yet another wave of uncertainty about the fate of free-trade, and NAFTA negotiators hunkered down for another tense round of talks.
Mr. Trump mused publicly again about pulling out of the North American free-trade agreement, setting the stage for an unpredictable week in Washington.
Trudeau in Washington: What’s on his mind, and what’s on Trump’s? A guide​
Why Justin Trudeau is on a Save-the-NAFTA tour
With a January deadline to strike a deal, Mr. Trudeau is visiting Washington and Mexico City this week to meet the leaders of the two other NAFTA countries. His trip comes as the fourth round of talks begins in Arlington, Va., on Wednesday, for which the United States is said to be preparing tough proposals on the automobile and dairy industries.

Wish List for NAFTA Modernization
Canadian American Business Council
As Canada and the U.S. engage in discussions about the future of the North American Free Trade Agreement and management of our common border, the CABC is pleased to offer our top ten suggestions for how to grow the economy and seize the opportunities presented by the Trump and Trudeau administrations and the 115th Congress. These ideas represent diverse sectors from both sides of the 49th parallel, with some of the most iconic brands in the world as well as innovative startups and entrepreneurs,” said Maryscott Greenwood of the Canadian American Business Council.
Wish List for NAFTA Modernization and Renewed Canada/US Border Policy
1. Create a chapter on regulatory cooperation that codifies and strengthens the Canada/US Regulatory Cooperation Council as a permanent entity, and ensures the governments work on tandem on new major rules, with a process to “look back” and align existing regulations.
2. Mutually recognize product standards, testing and certification, and implement zero tariffs on all products.
3. Revamp “Buy America and Buy Canada into one Buy US/Canada” requirement, or consider Canada “domestic” for the purpose of all official procurement at the federal and state levels as it currently is in the defense sector.
4. Support further integration of our North American energy markets, the importance of a robust and interconnected infrastructure system to connect supply and demand, and promote predictable, efficient and expedited regulatory regimes to ensure necessary cross-border infrastructure can be placed in-service in a timely fashion to benefit the North American economy.
5. Enhance protection of intellectual property including, but not limited to, exploring policy options in Canada to counteract judicial interpretations of IP rules, which serve to invalidate long standing pharmaceutical patents. …

6 October
Trump Twitter bombs and a negotiating standoff: How NAFTA talks could fail
(WaPost) As nearly 700 officials gather next week to discuss overhauling the free-trade agreement between the United States, Mexico and Canada, participants and analysts say the negotiations are at an increasing risk of failure.
President Trump’s Twitter bombs and rhetorical attacks on what he calls the “worst deal ever made” and his administration’s vague and confusing proposals have dismayed Canada, which is now exploring backup options. And they have infuriated Mexico ahead of a presidential election in which voters are demanding that their leaders stand up to the United States.
If officials cannot make more progress in revising the North American Free Trade Agreement next week — the meetings in Washington starting Wednesday are the fourth of seven scheduled rounds of negotiation — the odds of reaching a deal will decrease even more. That would give an opening to Trump to exit the agreement, a move that could disrupt the North American economy.
… there are growing risks that the U.S. negotiating stance could underestimate the limits of Mexican and Canadian leaders and inadvertently wreck the accord. “We’re being faced with a U.S. set of demands that is framed by an ‘America first’ perspective,” Lawrence Herman, a Toronto trade lawyer, said. “That colors the negotiations in a very negative way.”

27 September
Freeland avoids awkward handshake after ‘difficult’ NAFTA round
(National Observer) When it came time for the handshakes at the end of five days of intensive negotiations in Ottawa, Foreign Affairs Minister Chrystia Freeland wasn’t taking any chances.
Canada, the United States and Mexico are far apart on a wide range of crucial issues in their ongoing efforts to update the North American Free Trade Agreement.
The three individuals gathered for a joint announcement that they have “effectively concluded” negotiations on one section of the new trade deal, covering small and medium-sized businesses.
Freeland also said she was “confident” negotiators would be able to declare the same level of progress on another chapter on competition, at some point before the fourth round of talks begins in Washington on Oct. 11.

Barrie McKenna (The Globe and Mail) on Bombardier and NAFTA: “Tuesday’s preliminary duties ruling by the U.S. Commerce Department is a vivid reminder that NAFTA’s Chapter 19 is worth fighting for. That’s the section of the North American free-trade agreement that allows Canada, the United States and Mexico to challenge subsidy or dumping decisions before a binding panel if they aren’t convinced another country has fairly applied their own trade laws. And on its current course, a Chapter 19 challenge might be Bombardier’s only hope of coming out on top in the dispute.”

23 September
NAFTA talks intensify; U.S. seen putting off key demand on autos
(Reuters) – Talks to update the North American Free Trade Agreement intensified on Saturday although U.S. negotiators looked set to once again withhold proposals for one of the Trump administration’s most challenging issues.
Teams from the United States, Mexico and Canada kicked off the third of seven planned rounds of discussions in Ottawa amid warnings from trade experts that time was quickly running out to seal a deal by the end of the year as planned.
One key issue is the U.S. desire to strengthen rules of origin for autos, which dictate how much of a vehicle’s components must originate from within North America to qualify for tax free status.
The American side did not mention a specific goal in the first two rounds and Canada’s chief NAFTA negotiator on Saturday said he did not think the United States would provide more details during the Ottawa round.

11 September
You Won’t Like Mexico When It’s Angry
President Trump’s insults are pushing the Mexican political system into dangerous territory.
(Politico) In Mexico, however, many believe Americans want to screw us, and Mexican politicians, like politicians everywhere, have to pander to voters if they want to win elections. No matter which of Mexico’s three main political parties they support, the demand is the same: Don’t submit us to humiliation from the United States. Not again. Not ever.
What U.S. observers see as a bargaining tactic for Trump, Mexicans see as a litmus test for our leaders. Any concession to him will be seen as cowering and politically unacceptable for any party, President Enrique Peña Nieto’s included.
This dynamic paints the Mexican NAFTA negotiators into a corner. On the left, presidential candidate Andres Manuel Lopez Obrador says negotiations should wait until after our 2018 elections because the current president is too weak to negotiate successfully. On the right, Senator Roberto Gil Zuarth of PAN, the rough equivalent of a Christian democratic party, calls for Mexico to leave the negotiating table unless we are shown respect by Trump, and PAN presidential contender Margarita Zavala demands our national dignity not be compromised. In the middle, the president’s Institutional Revolutionary Party (PRI) sits warily, hoping they can continue the negotiations without Trump blowing everything up. They know that if he continues to threaten and insult Mexico, they’d have no choice but to leave the negotiations and break the agreement. We would rather wrap ourselves in the flag and jump to our deaths than be humiliated.

5 September
(Globe & Mail) It’s the final day of the second round of renegotiations of the North American free trade agreement, and the Americans — who kicked off these trade talks — are taking the negotiating stance that they don’t need to concede a thing. Canada, meanwhile, is pushing for the U.S. and Mexican governments to strengthen labour standards in their countries. With a hardline administration in Washington and a progressive government in Ottawa, negotiators may be playing for their audiences at home.
And after months of barbs about how the Liberal government could be jeopardizing the NAFTA negotiations, the Conservative Party is taking a step back. Erin O’Toole, a former Conservative leadership candidate and the party’s new foreign affairs critic, says his party will not be in “attack mode” when dealing with the government’s approach to the NAFTA renegotiations. Mr. O’Toole says his party is willing to offer the Liberals nonpartisan support.

1 September
NAFTA lessons: What I’ve learned negotiating with the US
As a Canadian ambassador once said, negotiating with the US means coping with ‘a country of a thousand players who can deliver a thousand wounds.’ As NAFTA talks continue, veteran diplomat Jeremy Kinsman reflects on his own experience and cautions against appearing too eager for an accord.
(Open Canada) We’ll inevitably have to disagree with the US on some international and even bilateral issues: how we communicate that is important, including what we say for political purposes back here. We sure shouldn’t go down there to woo partisan allies against the president, as Stephen Harper did in telling a New York audience that Obama’s choice on Keystone XL was a “no-brainer,” or in thinking it was smart for Canadian Conservative cabinet ministers to traipse to Washington for GOP prayer breakfasts.
That being said, we need to connect to Americans who are able to see the benefits in a win/win NAFTA deal, from tens of millions of workers, to state governors and legislators, to media and to civil society, to all who have positive feelings for Canada at a time of unprecedented favourable profile in the US for our attractive young prime minister. We shouldn’t vaunt those connections but at the end of the day, they are very pertinent assets in a negotiator’s toolkit.
Of course, in hoping for even-handedness, objectivity about the facts, and a balanced outcome, we know it has to be one that enables the president to declare victory. But we need him also to celebrate it as a win for North America as a whole, one that we and the Mexicans will endorse for our own economies. It would be even better if we could describe our accord as something exemplary for others in the world. North Americans should re-ignite faith in such transnational agreements at a competitive and even dangerous time when protectionism and populism have made a cyclical resurgence.

27 August
‘May have to terminate?’ Trump says Canada being ‘very difficult’ on NAFTA
(CTV) U.S. President Donald Trump is again suggesting that NAFTA be terminated, this time saying that both Canada and Mexico are being “very difficult”.
While he’s threatened to end the trade agreement before, this is the first time Trump has complained about Canada’s role in the talks.
Experts of trade law say cancelling NAFTA would be complicated: it would prompt a legal showdown between the White House and Congress.
The latter once passed a law implementing NAFTA and could argue it is still on the books, meaning the agreement remains in effect.

21-23 August
Justin Trudeau, unlike Trump, is taking NAFTA renegotiation really seriously
The self-proclaimed master dealmaker is likely to get taken to the cleaners.
(Vox) A fundamental question about this process is whether NAFTA revision — which featured so heavily in Trump’s campaign rhetoric — is even something the White House cares about anymore.
With Steve Bannon gone, the administration’s leading advocate of protectionism isn’t around anymore. Trump’s top economic policy officials, Gary Cohn and Steve Mnuchin, don’t appear to particularly share the president’s views on trade policy, and Republican Party congressional leaders certainly don’t. Trump himself, unlike his foreign counterparts, did not make the renegotiation launch a major messaging point or send a top-ranked official to represent the United States at the talks.
All three countries have agreed to conduct the NAFTA renegotiation talks on an expedited basis, suggesting a likely emphasis on picking some low-hanging fruit and declaring victory.

Canada should prepare for life without NAFTA
By Lawrence L. Herman,former Canadian diplomat and is a senior fellow of the C.D. Howe Institute
(Globe & Mail) [U.S. Trade Representative Robert] Lighthizer’s opening statement last week in Washington was disappointingly negative, including incomplete factual statements, a bullying declaration that NAFTA has “fundamentally failed many, many Americans.” Calling for “balance and reciprocity,” higher U.S. automotive content and even provisions on currency manipulation, he made it clear that there was little common ground with Canada and Mexico.
Things may change and prospects may improve, as the professional negotiating teams get down to hard work in 26 or 27 separate groups and hard bargaining takes place. Some of the rhetoric will dissipate as drafts are reviewed and proposals are discussed in quieter chambers in Washington, Ottawa and Mexico City over the next few months.
There are indeed areas where all three countries share a fair degree of consensus, notably in the NAFTA 2.0 modernization agenda, bringing the agreement into the 21st century, the things Foreign Minister Chrystia Freeland and her Mexican colleague have spelled out.
However, considering the divergence with the Americans on the fundamentals and the absence of shared vision, combined with very real time constraints and a toxic and volatile political climate in Washington, the prospects for a successful outcome are not particularly favourable.
Hopefully, we won’t reach the cliff edge. But given the possibility of such an outcome, no matter how regrettable, Canada should be considering a world without the NAFTA or, possibly, without even the Canada-U.S. free-trade agreement. Contingency planning is what trade-policy formulation is all about.

U.S. demands end to NAFTA trade-dispute panels
(Globe & Mail) The United States has formally demanded the Chapter 19 dispute resolution panels favoured by Canada be scrapped from the North American free-trade agreement and broached the thorny subject of government procurement and contracting in the first round of trade talks, The Globe and Mail has learned.
Trade negotiators wasted no time diving into some of the most contentious pieces of NAFTA in the opening round of talks in Washington, which wrapped up Sunday after five days.
The United States did not, however, present further details on the U.S. content requirement in cars and trucks that Washington has signalled it will push for, sources with knowledge of the discussions said.
Opinion: Is Chapter 19 worth fighting for in NAFTA negotiations?
“The scope and volume of proposals during the first round of the negotiation reflects a commitment from all three countries to an ambitious outcome and reaffirms the importance of updating the rules governing the world’s largest free trade area,” read a trilateral statement from the Canadian, U.S. and Mexican governments Sunday.
The United States made official its demand that the binational panels used to settle trade disputes under Chapter 19 be done away with. One source with knowledge of the talks said American and Canadian negotiators each have presented vastly different texts for a revamped Chapter 19. Ottawa has vowed to walk away from the talks before it accepts a NAFTA without the panels.

17 August
(Quartz) How to succeed at Nafta without even changing it. US border cities are indeed growing slower than their Mexican and Canadian counterparts. But contrary to US president Donald Trump’s rhetoric, the fault lies not with Nafta. Ana Campoy and Youyou Zhou dive into the economic data and find the problem is that US border towns are too often treated as solitary outposts, rather than part of the international hubs of economic activity to which they contribute.
Here’s a way the US could get a better deal out of Nafta without changing it

15 August
NAFTA Negotiations: Your guide to the players and priorities that matter
The first round of renegotiations of the North American Free Trade Agreement kick off this week in Washington. Here’s what — and who — you need to know.
(Open Canada) As talks begin Wednesday — the second round is expected to be held in Mexico in early September, with the third in Canada at a date yet to be determined — we bring you up to speed on the priorities identified so far by Canada, the United States and Mexico, along with the players who will be at the table this week in Washington and those who hold influence behind the scenes.

14 August
Foreign Affairs Minister Chrystia Freeland attended a meeting Monday morning at the Standing Committee on International Trade to discuss the government’s plan in the NAFTA renegotiations set to begin on August 16th in Washington. The Minister did not reveal much in terms of specifics and mainly highlighted the preparation and consultation efforts carried out until now. The US and Mexican governments have formally, and voluntarily, released their negotiating goals (see here and here (Spanish only), respectively). Link to the full text of the speech

13 August
John Geddes: NAFTA emerges as Trudeau’s biggest, unexpected test
The Liberals have been hit with a challenge that never fit into their plan. As talks begin this week, the stakes are enormous.
The start of North American Free Trade Agreement (NAFTA) talks this week—negotiations foisted on Canada and Mexico by U.S. President Donald Trump—provides a moment to marvel at how trade has emerged, unexpectedly, as a defining issue for Prime Minister Justin Trudeau’s still-young Liberal government.
The public opinion consensus in Canada has turned free trade into a can’t-lose cause to champion in Ottawa. Last fall, the tenacity then-trade minister Chrystia Freeland displayed in sealing the deal on the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) cemented her status as one of the few undisputed rising stars in Trudeau’s cabinet. The PM promoted her to Foreign Minister early this year, conspicuously leaving her in charge of Canada-U.S. trade—a daunting defensive challenge after NAFTA-bashing, TPP-nixing Trump won the presidency.
Presiding over the file offers Freeland a plum chance to strategically bind together two politically promising themes. Safeguarding Canada’s NAFTA-assured access to U.S. markets is—as that Pew poll confirms—a pragmatic priority most Canadians back. Countering Trump’s retrograde “America First” rhetoric about NAFTA appeals to loftier principles, the kind Freeland venerated in her major speech to the House on June 6 about Canada’s steadfast commitment, in the Trump era, to the postwar international order. “The system,” Freeland said, “had at its heart the core notions of territorial integrity, human rights, democracy, respect for the rule of law, and an aspiration to free and friendly trade.”
Fitting NAFTA into that aspirational, elevated, internationalist, decidedly un-Trumpian frame conforms better with the self-image of Liberals, and many other Canadians, than the more familiar positioning of free trade as a priority of corporate lobbyists. Still, there’s that, too. The business-oriented C. D. Howe Institute flags three specific, stated Trump goals (plus his sweeping aim of somehow adapting NAFTA to shrink the U.S. trade deficit) that the Canadian negotiating team must “strongly resist”:

21 July
What the U.S. wants from NAFTA talks
The United States has released its objectives for the upcoming NAFTA talks. Here are some highlights
(Globe & Mail) United States Trade Representative Robert Lighthizer on Monday released a broad summary of objectives that will underpin the Trump administration’s trade talks with Mexico and Canada for the renegotiation of the North American free-trade agreement (NAFTA).
Although the document is vague, it does single out areas where the U.S. may seek concessions from Canada. Here are some highlights:

  • The U.S. says it aims to improve the U.S. trade balance and reduce the trade deficit with NAFTA countries, either by increasing American exports or by reducing Canadian and Mexican ones.
  • Canada’s supply management system for dairy and poultry could face closer scrutiny.
  • The U.S. wants to see Ottawa increase the amount Canadians can buy from the U.S. without paying duties to $800.
  • Another goal is to bring labour and environment provisions into the core of the agreement rather than a side agreement.

18 July

Donald Trump’s plan to overhaul NAFTA goes much deeper than a tweak

Econo-metrics: If the U.S. list of objectives for NAFTA talks represents what Trump wants to achieve, Canada’s negotiators have a fight on their hands
On Monday Donald Trump’s administration released its objectives for the coming renegotiation of the North American Free Trade Agreement, as required by U.S. law. Congress has 30 days to consider the agenda. Talks between the U.S., Canada and Mexico can now begin by the middle of August.
It is too early to separate tactics from aspirations. Still, the 17-page outline represents a new life for grievances that U.S. business interests have harboured against Canada and Mexico for decades. Earlier this year, Trump suggested that Canada-U.S. trade needed little more than a tweak. His starting point for the NAFTA negotiations suggest that he’s become more ambitious.

17 July
U.S. Calls for ‘Much Better Deal’ in Nafta Overhaul Plan
(NYT) Claiming it wants to negotiate a “much better deal for all Americans,” the Trump administration on Monday revealed its most detailed list of objectives to date for an overhaul of the North American Free Trade Agreement with Mexico and Canada.
The United States Trade Representative said a revamped Nafta must include provisions to eliminate unfair subsidies and give the United States broader authority to crack down on an influx of cheap products.
Trade is a centerpiece of President Trump’s economic agenda, and the renegotiation of Nafta has been a pillar of his promise to revive American manufacturing. “Too many Americans have been hurt by closed factories, exported jobs and broken political promises,” said Robert Lighthizer, Mr. Trump’s trade representative.
The 17-page document the administration sent to Congress echoes Mr. Trump’s tough talk on trade by making the reduction of America’s trade deficit with its neighbors its top priority. However, it also builds off the Trans-Pacific Partnership trade deal that Mr. Trump abandoned when he took office, borrowing concepts about labor regulations and the environment.

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