First round of NAFTA talks ends with no agreement on key issues as yet

(August 24, Washington) American, Canadian and Mexican negotiations began the first talks on renegotiating NAFTA on Friday in Washington. The thorny issue of rules of origin for products in the NAFTA region, services trade, and a commercial dispute system were discussed.

The two key Canadian issues of the proportionality clause and water as a commodity to be traded have not been mentioned so far by the Canadian negotiating team as far as I have seen. U.S. Trade Representative Robert Lighthizer emphasized when the talks opened on Wednesday that the U.S. was seeking major increases in the regional content required for goods to enter the three countries free of tariffs. He also demanded "substantial U.S. content' in the auto sector. This demand will no doubt be strongly resisted by Canada as it could have a negative impact on the Canadian auto manufacturing sector.

Both Canada and Mexico urged the U.S. to be cautious in trying to change the rules so as to avoid disruption in a supply chain that has been developed over the 23 years that NAFTA has been in force. The U.S. auto industry also supports the position of Canada and Mexico. It remains to be seen if this view will prevail against Trump's American First campaign that promises that more will be made in the U.S.

However, Steve Bannon one of the strong nationalists is gone and so far globalists appear to be winning more power in the Trump administration. However, the Trump administration is often not very predictable. On Friday the Mexican Economy Minister Iledefenso Guajardo said that country-specific rules of origin would be impossible to include. On a Mexican radio station he said of the requirement: "In the world of international trade, there is not a single precedent (for that), not in a bilateral or multilateral agreement."

The U.S. has emphasized the trade deficits between the U.S., Canada and Mexico. In the case of Canada this may be in part because of the huge purchase of our natural resources such as oil. In the case of Mexico it may have to do with much export production from Mexico into the U.S. because of lower wages in Mexico. Large U.S. global corporations no doubt will not want this situation radically changed.

On Wednesday and Thursday discussions were held on Canadian and Mexican demands for better access to U.S. government procurement and U.S. public works projects. However, such demands conflict with Trump's touted "Buy American" scheme for spending taxpayer dollars. Canada is also pushing new rules on climate change counter to Trump's agenda which includes reviving the coal industry. Negotiators also discussed on Saturday a dispute resolution system that the U.S. wants to eliminated — but both Canada and Mexico want to maintain the provisions.

The next round of talks are scheduled for Sept. 1-5 in Mexico. After five days of discussion in Washington the three countries said that they want to wrap up negotiations quickly with a far-reaching deal. The three parties released a statement on Sunday saying: “While a great deal of effort and negotiation will be required in the coming months, Canada, Mexico and the United States are committed to an accelerated and comprehensive negotiation process that will upgrade our agreement and establish 21st century standards to the benefit of our citizens.” The talks are to move to Canada late in September and then back to the U.S. in October. There are also to be additional rounds before the end of this year. It appears that the group would like to finish negotiations before Mexico's general election next February and also the November 2018 U.S. mid-term elections.

The negotiations are very much behind closed doors and it remains to be seen if the group releases much if any information on their progress. The recent statement contains nothing about anything being decided. Chad Brown , a senior fellow at the Peterson Institute of International Affairs in Washington said: “Despite good intentions, this Nafta renegotiation may be more akin to a lengthy process of couples therapy than a quick exercise in speed dating." The joint statement does say that the negotiating groups agreed to provide additional text, comments or counter proposals within the next two weeks with the statement saying: “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." Trump has threatened to scrap the deal if he does not get the changes he wants. Given that his cabinet is filled with Wall Street executives and billionaires Trump may be pressed to change his mind — which he often does.

Some had doubts that the negotiations could be completed by early next year and at the same time result in a substantial revision of NAFTA. John Masswohl, of the Canadian Cattlemen's Association said: "It's hard to imagine how they can do something very substantive and do it very quickly. It's almost as if you can have one or the other. You can have it quick, or you can have it meaningful."