Areas of greatest contention for Round 5 – rules of origin, dispute resolution mechanism, and a mooted sunset clause for a reworked deal.
The International Trade Administration (ITA) in September 2017 released their Global Competitive Publications. Analysis of newly released data on the share of U.S.-produced content in manufactured imports from Mexico and Canada has eroded significantly since the mid-1990’s. This pattern of declining share of U.S.-produced value in NAFTA imports is also seen in the United States’ largest import from NAFTA, motor vehicles.
Market Watch on November 16, discussing the NAFTA Round 5 negotiations. The negotiations began November 15 in Mexico City and ended November 22. However, it was said to have been quieter this time as top trade officials chose to skip the event. Still in the technical phases, with Mexico and Canada digesting contentious U.S. proposals like stricter rules for the proportion of a vehicle’s components that must originate in North America, and in the U.S., to avoid tariffs.
Market Watch also on November 16, 2017 noted that the Peso and the Canadian dollar had actually made a gain against the US dollar as the three countries began Round 5 of their NAFTA negotiations. The article also mentioned that Mexican officials proposed a review mechanism after five years as a counter to a hardline sunset clause the US had been proposing. Their explanation is that rather than an abrupt cessation of trading, the review would still allow trade to continue as negotiations and adjustments were being discussed.
On November 22, American Shipper did not sound optimistic about reaching a deal anytime soon.
“Round 5 of NAFTA talks ended in stalemate. Little progress was made this week on key divides in the negotiations over a new North American Free Trade Agreement (NAFTA), including rules of origin and a sunset clause, and Mexico is indicating negotiations could stretch beyond its July 2018 elections.
The New York Times reported in September that negotiators did make progress on more technical aspects of a reworked NAFTA, “including those that govern digital trade, telecommunications, anti-corruption, customs procedures and health and safety standards for food.”
But sizable divides remain in areas like labor rights, where the United States and Canada are pushing Mexico to lessen the pay gap that allows companies to hire Mexican labor for a fraction of what they’d pay elsewhere in North America, and on content requirements for the automotive industry to qualify for zero tariffs under NAFTA.
The content issue is among the most divisive, and is being seen by trade experts as a sort of bellwether for rules of origin content changes for other industries that rely heavily on the trade agreement.
U.S. Trade Representative Robert Lighthizer, who did not attend the Mexico City round and also won’t take part in the next round in December in Washington, said he was discouraged by the intransigence of Canada and Mexico on the U.S.’s demands.
“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,” he said in a statement after talks wrapped Tuesday. “Absent rebalancing, we will not reach a satisfactory result. I remain concerned about the lack of headway. I hope our partners will come to the table in a serious way so we can see meaningful progress before the end of the year.”
The next time Lighthizer and his cohorts in Canada and Mexico are due to be involved in face-to-face talks is in January in Montreal. Until then, lower level negotiators will continue to try to make progress, which isn’t necessarily confined to formal talks.”
U.S. Trade Representative Robert Lighthizer released the following statement on the conclusion of the fifth round of renegotiations in Mexico City, Mexico for the North American Free Trade Agreement (NAFTA):
“While we have made progress on some of our efforts to modernize 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.
“A rebalanced, updated NAFTA will promote greater prosperity for American workers, farmers, ranchers and businesses and strengthen the North American region as a whole. Our teams will be meeting again next month in Washington. I hope our partners will come to the table in a serious way so we can see meaningful progress before the end of the year.”
While the US is talking about no evidence, apparently the Mexican and Canadians are more intent on finding drilling down on the US using some TPP wording in the NAFTA deal at least according to Political Canadian site. While at the same time it seems Canada and Mexico had “a strange thing happened on the way to the APEC summit” moment in Vietnam. The two cozied up on the sidelines of the summit and decided they would delay their decisions on the new TPP 11 agreement. The move angered the Australians in particular.
So we apparently are no closer to finalizing a “deal”. It is actually interesting to see how trade deals develop along classic lines — present, rebuttal, discuss, present and so on. It has to be tiring though for all involved to keep up with the many posturing and manipulative means necessary to get a reasonable deal.
Perhaps both Canada and Mexico read Trump’s “Art of the Deal” and are putting some of its information to use to exert their own country’s positions rather than simply going along.
Then we have interests within each country who are worried about their particular avenues of concern. For instance Senator Boozman (R-AR) led a bipartisan letter to Commerce Secretary Wilbur Ross asking the administration to conduct a robust economic analysis to evaluate how any changes to the North American Free Trade Agreement (NAFTA) would affect changes to the nation’s crop and livestock sectors.
Time will tell. Some say they think the NAFTA is a waste of time and that agreements should be between two nations. Others believe that a united multi-national America’s agreement is a better way to go. Some say pull out without thinking clearly of the long-term effects. While others focus on long-term revenue losses and problems without seeing the many parts already in play.
Balancing deals isn’t for the faint of heart but it is obvious that there has to be a thorough discussion of both present and future in order to balance the best deal. John Kerry and prior attempts at a “deal” fell way short of fair and reasonably balanced trade marks. The US has been on the losing end far too long. It is time we realize that we should expect reasonable progress for our country while also respecting the rights of negotiation for all involved not just one.