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Nafta Stalemate Persists as 5th Round of Talks Conclude Nafta Stalemate Persists as 5th Round of Talks Conclude
(35 minutes later)
WASHINGTON — The fifth round of talks among the United States, Mexico and Canada over the North American Free Trade Agreement drew to a close on Tuesday with negotiators still at odds over the pact’s future. WASHINGTON — The fifth round of talks among the United States, Mexico and Canada over the North American Free Trade Agreement drew to a close on Tuesday with negotiators still at odds.
Over a week of meetings in Mexico City, officials hammered out more technical details of the trade agreement, but barely broached the yawning gaps among the three countries on the most contentious issues. Those include rules for manufacturing automobiles, resolving trade disputes and issuing government contracts, as well as a proposed “sunset clause” that would require Nafta to automatically expire every five years unless the parties voted to continue it.Over a week of meetings in Mexico City, officials hammered out more technical details of the trade agreement, but barely broached the yawning gaps among the three countries on the most contentious issues. Those include rules for manufacturing automobiles, resolving trade disputes and issuing government contracts, as well as a proposed “sunset clause” that would require Nafta to automatically expire every five years unless the parties voted to continue it.
The lack of substantial progress was not unexpected. The top negotiators for each country sat out this round of talks, deciding instead to let staff work out some of the more granular details before returning to the hot-button issues that have threatened to derail the pact. The lack of substantial progress was not unexpected. The top officials for each country, including United States Trade Representative Robert Lighthizer, sat out this round of talks, deciding instead to let staff members work out some of the more granular details before returning to the hot-button issues that have threatened to derail the pact.
At the last round of negotiations, in Washington in October, proposals introduced by the United States on the main areas of contention raised tensions and provoked fears of Nafta’s demise. At the conclusion of the round, the United States called for a monthlong hiatus and extended future talks into the first quarter of next year to defuse tensions and keep lawmakers in Washington focused on a tax overhaul. At the last round of negotiations, in Washington in October, proposals introduced by the United States on the main areas of contention raised tensions and provoked fears of Nafta’s demise. At the conclusion of the round, the United States called for a monthlong hiatus and extended talks into the first quarter of next year to defuse tensions and keep lawmakers in Washington focused on a tax overhaul.
Nafta negotiators have come close to finalizing agreement on topics including state-owned enterprises and customs procedures. But the Mexico City round did not elicit much progress on issues like so-called “rules of origin,” which governs the amount of a good that needs to be manufactured in North America in order to qualify for Nafta’s zero tariffs. Nafta negotiators have come close to finalizing agreement on topics including state-owned enterprises and customs procedures. But the Mexico City round did not elicit much progress on issues like so-called “rules of origin,” which governs the amount of a good that needs to be manufactured in North America in order to qualify for zero tariffs under Nafta.
Canada and Mexico have not yet made specific counterproposals to the United States requests, including on automobiles, people familiar with the talks said. The United States had called for raising the auto production threshold to 85 percent, up from 62.5 percent previously, to qualify for the tariff-free treatment. And it had asked for a new requirement that 50 percent of the value of a car be manufactured solely in the United States — a provision at odds with American automakers, who fear it will drive up their costs and make them less competitive globally. Canada and Mexico have not yet made specific counterproposals to the United States requests, including on automobiles, people familiar with the talks said. The United States had called for raising the auto production threshold to 85 percent, up from 62.5 percent previously, to qualify for the tariff-free treatment. And it had asked for a new requirement that half of a car be manufactured solely in the United States — a provision at odds with American automakers, who fear it will drive up their costs and make them less competitive globally.
Instead of countering the proposal, Canadian and Mexican officials presented data that shows the harm the United States provisions would inflict on the North American auto sector.Instead of countering the proposal, Canadian and Mexican officials presented data that shows the harm the United States provisions would inflict on the North American auto sector.
On another thorny topic, government procurement, Mexico made a proposal that a person familiar with the talks said would effectively block United States companies from supplying goods and services to the Mexican government.On another thorny topic, government procurement, Mexico made a proposal that a person familiar with the talks said would effectively block United States companies from supplying goods and services to the Mexican government.
The United States has proposed limiting the amount of American government contracts that Canadian and Mexican companies are able to win, capping the level dollar-for-dollar to the total size of Canada and Mexico’s much smaller markets.The United States has proposed limiting the amount of American government contracts that Canadian and Mexican companies are able to win, capping the level dollar-for-dollar to the total size of Canada and Mexico’s much smaller markets.
In return, Mexico proposed linking its government contracts to the size of deals that Mexican companies have actually won under Nafta, a person familiar with the negotiations said. Since Mexican companies have won few, if any contracts, in recent years, that would largely prevent American companies from winning Mexican government contracts.In return, Mexico proposed linking its government contracts to the size of deals that Mexican companies have actually won under Nafta, a person familiar with the negotiations said. Since Mexican companies have won few, if any contracts, in recent years, that would largely prevent American companies from winning Mexican government contracts.
Moisés Kalach, a textile executive who represents Mexico’s private sector in the talks, said that while progress was made on some technical issues, including telecommunications, the controversial issues remain.
Speaking to reporters in Mexico City, Mr. Kalach said Mexico did present a counterproposal to the American “sunset clause,” under which Nafta would expire every five years unless the three countries agree to renew it.
Mexican negotiators, supported by Canada, have suggested that Nafta be reviewed every five years, but not expire automatically. The United States trade representative has not yet responded, Mr. Kalach said.
“There is a feeling that the positions of the U.S.T.R. are a little unmovable and this is slowing the process,” he said.
He added that Mexico has also rejected an American demand that would allow new seasonal restrictions on imports of Mexican produce.
Mexican and Canadian officials, as well as American industries that depend on the pact, are hoping that concerns within the United States about the Trump administration’s Nafta proposals will help shift the debate. Canada and Mexico are hedging against the potential collapse of Nafta by pushing for trade agreements with new partners, including China.
At a hearing on the modernization of Nafta in San Antonio on Monday, Senator John Cornyn, a Republican from Texas, emphasized that Nafta had been “overwhelmingly positive” for the Texas economy. “The data is staggering, and the verdict is clear: Nafta worked as intended,” he said.
Speaking from the hearing, Stephen P. Vaughn, general counsel for the United States trade representative, reiterated that the administration believes that the current version of Nafta is a bad deal for the United States.
“Of course, there are Americans who benefit from Nafta, and we want to avoid harming them,” he said. “The U.S.T.R. must look at trade deals from that perspective of the country as a whole, and from that perspective there are serious problems with Nafta.”
In a study published last week, researchers at the Peterson Institute for International Economics found that withdrawing from the North American pact would directly cost the United States 187,000 jobs over a one- to three-year period — not accounting for further indirect damage to the economy.
Sherman Robinson, who led the research, said that withdrawing from Nafta alone is unlikely to cause a recession, but that it would do serious damage to manufacturing value chains, including for automobiles and agriculture.
Mark Zandi, chief economist at Moody’s, agreed that simply withdrawing from Nafta would probably not push the United States into a recession. However, the decision would have deeper ramifications by disrupting faith among businesses and foreign officials about the United States as a place to do business.
“If we can’t get it together with our biggest trading partners, what does that mean for China, Korea, Germany? I think it would make industries very nervous, and financial markets very upset,” he said.
The failure of Nafta would reverberate even more significantly in Mexico. Standard & Poor’s has estimated that a collapse of Nafta would slow Mexican growth to 1.8 percent a year through 2020, from an average of 2.4 percent if Nafta remains in place.