Trump pushing hard for NAFTA agreement in principle as soon as possible

(April 3) The Trump administration is pushing hard for a preliminary NAFTA agreement in order to announce it at a summit in Peru next week.

Bypassing regular negotiations

According to three people familiar with the talks the Trump administration will host talks with cabinet ministers in Washington to attempt a breakthrough on the NAFTA renegotiations.

The White House wants leaders from Canada and Mexico to join in revealing the broad outlines of an updated pact at the Summit of the Americas that starts on April 13. Meanwhile technical talks hammer out the finer details and legal text could continue on. The three people who revealed this asked not to be identified as the talks are private.

The negotiations are already quite opaque with little detail of what is happening being revealed. Although what happens at these meetings is quite important to the welfare of the general public the public has little say in what goes on. It seems that the negotiating groups are not moving fast enough, so the US is having just high level political representatives from the three countries negotiate a deal in principle and will leave the details to the staff of the negotiators.

Major divisions remain among the 3 countries

Divisions remain even on the US proposal for more North American content in automobiles. There was supposed to be a breakthrough on the issue but apparently it is still not settled. There are wide divergences between the US chief negotiator, Robert Lighthizer and that of the chief Canadian negotiator on the progress of the talks with the latter claiming little of importance has been settled and there are wide differences. The US negotiator claims they are near an agreement in principle. Perhaps this is wishful thinking.

The White House has not commented on these rumored plans to announce a NAFTA deal.

Mexican official to meet Lighthizer in Washington

Two of the informants claim that Ildefenso Guajardo, the Mexican Economy Minister will meet with the US Trade Representative Lighthizer this Wednesday. Some meetings could include Jared Kushner and the Mexican Foreign Minister Luis Videgray. Apparently Kushner and Videgray have been handling relationships between Trump and Mexican President Enrique Nieto.

In the upcoming Mexican presidential elections the clear leader is a leftist NAFTA sceptic. No doubt the US would like to see the deal finished before the election.

Further Washington meetings

On Thursday Canadian Foreign Minister Chrystia Freeland will fly to Washington to meet with Lighthizer. Meetings on Friday would include all three countries' representatives.

Originally there were to be an eighth round of NAFTA talks that were to start in Washington next week. Lighthizer is alleged to have fought against this idea and there has as yet been no invitation for people to resume talks. He claims more progress can be made by holding meetings between smaller groups of negotiators. Perhaps the US hopes to better control events in this environment. The new scheme seems to have come from Lighthizer and the US.

In spite of Trump from time to time threatening to abandon NAFTA, the US actually seems anxious to obtain an agreement. It has gone so far as using various bullying tactics to do so.

Adam Austen, a spokesperson for Canadian minister Freeland's office said: “Canada is committed to concluding a modern, mutually beneficial NAFTA as soon as possible." He declined to comment on what her travel plans were.while declining to comment on her schedule. Mexican officials had no comment.

Trump's bullying tactics

Trump has made Canada and Mexico being excluded from steel and aluminum tariffs contingent upon a NAFTA agreement creating leverage to gain concessions favorable to the US.

Lighthizer told reporters: “The president’s view was that it makes sense that if we get a successful agreement, to have them be excluded. It’s an incentive to get a deal." One could consider this a threat as well.

Trump also claimed that Mexico's failure to stop the migrant flow into the US threatened the NAFTA deal.

Important issues for Canada such as the proportionality clause are not even being considered. NAFTA is less a free trade deal than a pact to create international structures that will further the interest of global corporations. Trump wants to make those structures more favorable to the national interests of the US. Global corporations are probably willing to concede a few crumbs to Trump's America First policy as long as their global interests are not much impacted by the concessions.

Published previously in Digital Journal

White House upbeat about NAFTA talks

(March 29) Although the Trump administration sounds upbeat about the progress of NAFTA negotiations and the chances of reaching an agreement the chief Canadian negotiator claimed that the US had yet to make compromises necessary for an agreement to be reached.

US and Canadian negotiators gave quite different assessments of the situation.

Trump's chief negotiator Robert Lighthizer, who has publicly criticized both Mexico and Canada said that he was optimistic that an agreement "in principle" in the next little while is possible with some effort and compromise. In contrast the Canadian chief negotiator Steve Verheul said that significant gaps remain and that Canada is not sure what the US means by an agreement "in principle". He also complained that the US had yet to make the necessary compromises to reach a deal.

Verheul told reporters in Ottawa: “An agreement in principle, to our understanding, means some sense of direction on the big issues, the important issues. We’ve not seen that from the U.S. so far. We’ve not seen any proposals in that regard. If we’re going to achieve that, we would fairly require some considerable flexibility in U.S. positions.”

Canada's large Unifor union also criticized the US assessment

President of Unifor union, Jerry DIas, representing autoworkers was quite blunt in an interview: “I don’t know what Lighthizer is smoking, but he should stop it.” Dias said that at most the three countries could complete negotiations on a number of smaller issues by the end of April. On bigger issues they still remain far apart.

Auto manufacturing issue still not solved

Verneul played down recent reports of a breakthrough on the auto manufacturing issue that had been a source of tension. Lighthizer had said last week that the countries were "starting to converge" on the issue. David MacNaughton the Canadian ambassador to the US said that the talks took a positive turn when the US had placed a compromise proposal to its earlier demands that were rejected by both Canada and Mexico. Nevertheless, Verheul claimed that the auto manufacturing issue was still not close to being resolved saying: “We welcome that signal, but ... we are still quite a distance away from any kind of agreement on the approach to auto rules of origin."

The earlier US demand was that 50 percent of a car had to be made in the US in order to qualify for tariff-free treatment plus there would be an increase from 62.5 percent to 85 percent in the amount of a car that would be required to be made in North America.

Factfile on NAFTA. US President Donald Trump has denounced NAFTA as a "disaster" and the worst agreement ever signed by the United States, blaming it for a $64 billion trade gap with Mexico and loss of countless jobs

John SAEKI, AFP

The new proposal

The publication Inside US Trade reported on Tuesday that the US would drop its US content proposal if Canada and Mexico agree to count autoworker's wages toward the North American content requirement. Mexico could avoid tariffs by paying their auto workers higher wages. However, the qualifying wage for this is thought to be around 15 dollars per hour. This is more than three times higher than the average current Mexican wage.

This could be a boon for Mexican workers but big automakers no doubt would reject it, as one of the main reasons for moving production to Mexico is the lower wages. The Mexican government might reject it as well since there would be no motive for automakers to increase production in Mexico and some production might even move back to the US. No doubt this is part of the aim of the proposal.

Horacio Lopez-Portillo, a trade lawyer with Vazquez Tercero and Zepeda in Mexico said that fifteen dollars as a cutoff was not workable. Lopez-Portillo claimed: “There is no way it’s going to happen. Can the Mexican government be pressured to increase wages in the auto industry higher than they currently are? Maybe. But it won’t be much higher than where they actually stand.”

In contrast to this rejection of the new proposal Canadian PM Justin Trudeau said on March 21st that there was a certain momentum in negotiation. The US confirmed that there had been a breakthrough in negotiations over the auto sector. In Mexico Trudeau said: “There is very strong resistance to including this. Having said that, will it happen? Maybe. And I say maybe because we’re trying to reach common ground ... so Mexico might actually cede a little bit here. How much, I don’t know.”

US wants a deal soon

From time to time Trump threatens to simply terminate NAFTA but in March his administration has struck a more positive tone, indeed more positive than that of Canada or Mexico. The Inside US Trade reports that US trade representative Lighthizer wants a deal by May 1. However, the three countries have yet to even agree to a calendar for the next round of negotiations that are expected to take place in Washington DC in April.

The Mexican presidential election is on July 1 and Andres Obrador the front runner is left-leaning NAFTA skeptic. Obrador is sure to drive a harder bargain that Enrique Nieto the present president.

The last talks were in Mexico in early March. At that time Trump announced that exemption of Mexico and Canada from steel and aluminum tariffs would depend on the completion of successful NAFTA renegotiations. In effect he is using the tariff threats to drive a harder bargain.

Conclusion

NAFTA is basically a trade agreement meant to increase the power of global corporations in North America and foster their interests. Trump wants to change the agreement so that more jobs are created in the US and have the terms align more closely with US national interests and national corporations in line with his America First policy.

Canada continues to take the perspective of global corporate interests. Basic imperfections in NAFTA such as the proportionality clause are not even opened and the press for the most part does not even talk about it. The issue is discussed in a http://www.digitaljournal.com/news/politics/op-ed-canada-s-nafta-priorities-excludes-key-proportionality-clause/article/500171 in August of last year.

Previously published in Digital Journal

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."