[CTC] Articles on NAFTA opening round

[Arthur Stamoulis]

Four pieces below on NAFTA negotiations…


INSIDE US TRADE

NAFTA parties tout ambitious time line after avoiding contentious issues during first round
August 20, 2017
 
The United States, Canada and Mexico on Sunday jointly emphasized an ambitious time line and touted progress made in the inaugural NAFTA renegotiation round, though sources said negotiators avoided the most controversial issues -- some of which could torpedo negotiations -- during the five-day talks.
 
According to a joint statement <https://insidetrade.com/sites/insidetrade.com/files/documents/aug2017/NAFTA%20statement%20Round%20One.pdf> released after the negotiating round concluded on Aug. 20, “Detailed conceptual presentations were made by the United States, Mexico and Canada across the scope of the agreement, and negotiating groups began work to advance text and agreed to provide additional text, comments or alternate proposals during the next two weeks.”
 
The three nations acknowledged that “a great deal of effort and negotiation will be required in the coming months,” but added they were “committed to an accelerated and comprehensive negotiation process that will upgrade our agreement and establish 21st century standards to the benefit of our citizens.”
 
Despite that commitment, some sources have expressed doubt about how compatible the desired pace is with the comprehensive list of negotiating objectives the U.S. has put forward, as well as demands in key areas like dispute settlement and automotive rules of origin.
 
Sources described a lingering lack of trust among negotiators, with no side yet willing to show its hand as the parties remain unsure what they might get in return. Several sources said each side was focused on political posturing during the opening round, as some said was to be expected due to each country’s political sensitivities surrounding the talks.
 
When negotiating the joint statement, sources said, the three countres initially disagreed on how to describe the process -- with Lighthizer pushing for it to say “renegotiation” and Mexico and Canada asking for “modernization.”
Calling the process a modernization, one source said, “plays better” with the Mexican and Canadian people. Lighthizer’s push for renegotiation, on the other hand, is in line with President Trump’s rhetoric on the deal, these sources said.
A draft of the joint statement, obtained by Inside U.S. Trade, called it a “renegotiation to modernize” NAFTA.
 
Negotiators eventually settled on calling the process both a renegotiation and a modernization of the existing agreement, which sources said reflected a compromise for all three parties.
 
Sources also told Inside U.S. Trade earlier in the round that the U.S. had intended to table text for 10 to 14 chapters <https://insidetrade.com/node/159963>during the first round. But the U.S., those sources added, didn’t include specifics on automotive rules of origin or investor protections -- seen as two of the more controversial areas in the talks.
 
U.S. negotiators did table text during the rules of origin session this weekend, but sources said that session did not involve sector-specific discussions. Instead, the three parties held only a general discussion about the U.S. desire to increase content requirements in the rules across the board. NAFTA negotiators also did not discuss a specific content requirement or a particular methodology for the updated agreement, sources said. Negotiators are expected to discuss annexes on the auto rules during the second or third round, sources added.
 
U.S. Trade Representative Robert Lighthizer, during his opening remarks on Aug. 16, made clear the U.S. was looking for a higher regional value content requirement in the automotive sector, as well as “substantial U.S. content.” That idea was quickly and forcefully refuted by the Canadian and Mexican trade chiefs, who spoke to reporters on the first day of the round and made clear that both Ottawa and Mexico City opposed such an approach.
 
Even though the U.S. did not advance a specific proposal on investor protections, it did internally float the idea of an opt-in mechanism for the investor-state dispute settlement system <https://insidetrade.com/node/159969>, sources told Inside U.S. Trade. However, sources said Canada is pushing for an “investment court system” like the one it agreed to in its trade agreement with the European Union. During Transatlantic Trade and Investment Partnership negotiations, the Obama administration pushed back against the EU’s ICS proposal.
 
The ICS in CETA established a permanent pool of 15 judges that could hear cases. ISDS mechanisms in U.S. trade agreements allow parties to select arbitrators from the International Centre for Settlement of Investment Disputes pool. As of Aug. 20, that pool had 272 eligible arbitrators. In TTIP, the U.S. said the size of the ICSID pool allowed parties to select arbitrators with the appropriate expertise, which would not be available with a 15-member pool.
 
The U.S. also tabled text on biologics, hoping to ensure the other NAFTA parties agree to a 12-year market exclusivity period, pursuant to U.S. law. The 12-year time frame was a contentious issue in the run-up to a potential congressional vote on TPP, with Senate Finance Committee Chairman Orrin Hatch (R-UT) faulting the Obama administration for not securing concessions in accordance with U.S. standards.
 
The U.S. proposal for 12 years was met during round one with what one source described as “major, coordinated pushback” by Canada and Mexico, which claimed there was “no need” to go beyond the existing NAFTA provision in that area, sources said.
 
U.S. negotiators also put forward a proposal for trade remedies, which some sources claimed contained “non-starters” for Canada and Mexico. They said the U.S. proposal touched upon almost all the points USTR listed on trade remedies in its negotiating objectives. Among those non-starters, they said, were the elimination of the NAFTA global safeguard exclusion and the elimination of the Chapter 19 dispute settlement mechanism, as well as a proposal to facilitate the ability to impose measures based on third-country dumping.
 
After facing pushback, the U.S. did not include language on a separate domestic industry provision for perishable and seasonal products in antidumping and countervailing duty proceedings, which was expected to be put forward <https://insidetrade.com/node/159959> this round.
 
Lighthizer, tasked by the president to renegotiate what Trump called “the worst trade deal ever,” did not, unlike his counterparts, hold a press conference during the round. Despite NAFTA’s prominence during the election and since Trump took office, neither the White House nor the president himself commented on the talks during the initial round.
 
On Aug. 14 the president said on Twitter: “The Obstructionist Democrats have given us (or not fixed) some of the worst trade deals in World History. I am changing that fast!” In a separate Tweet the same day he promised, “Great trade deals coming for American workers!”
 
Some sources described Canada’s approach during the first round as “patient,” with negotiators asking questions about U.S. proposals rather than working to consolidate text. However, one source said the U.S. and Mexico have taken a similar approach in asking questions about proposals tabled by Canada at the round.
 
Asking questions about tabled text and comparing proposals to existing agreements are normal for trade negotiations and not indicative of a country “dragging their feet,” one source said.
 
The first NAFTA renegotiation round was starkly different from other inaugural negotiating rounds, sources said, in that the U.S., Canada and Mexico progressed quickly to working on text. Typically the first negotiating round is focused more on logistics and introductions, they said.
 
But a persistent issue throughout the first round was whether negotiators should use the existing NAFTA text or chapters from the Trans-Pacific Partnership as a starting point. Canadian sources said it would make more sense to start with the NAFTA text because it is easier to amend an existing agreement rather than use text that has never been implemented. One Canadian source pointed out that the original NAFTA text repeatedly references the U.S.-Canada free trade agreement. TPP texts would not include those references, which Canada is keen to maintain, the source said.
 
The three countries in their joint statement also confirmed that the second negotiating round will take place Sept. 1-5 in Mexico City, as Inside U.S. Trade reported <https://insidetrade.com/node/159817> earlier this month. That leaves NAFTA negotiators with just 11 days to go home and brief their respective governments and stakeholders as well as to prepare and clear text for the second round.
 
USTR will debrief cleared advisers and the congressional committees of jurisdiction early next week.
 
Sources said dates for the third round, reportedly slated for Sept. 23-27 in Canada, were not yet set and could be moved because the time frame overlaps with other commitments for the negotiating teams.
 
Observers have questioned whether the three sides can keep up the frenetic pace of the negotiations, with some suggesting the parties will have to reassess whether it will be possible to conclude the talks by early 2018 -- as the U.S. and Mexico hope -- before they return to the U.S. in October for the fourth round. Sources said that round is likely to be held in Washington, DC. -- Jenny Leonard (jleonard at iwpnews.com <mailto:jleonard at iwpnews.com>) and Brett Fortnam(bfortnam at iwpnews.com <mailto:bfortnam at iwpnews.com>)
 
Sources: USTR considering ISDS proposal that would require NAFTA countries to opt in

August 19, 2017
 
U.S. negotiators are considering a new approach to the controversial investor-state dispute settlement mechanism featuring an opt-in clause that would allow each of the three NAFTA countries to decide whether to use the provision, sources told Inside U.S. Trade.
 
Citing a recent letter to U.S. Trade Representative Robert Lighthizer and other Cabinet members signed by more than 100 business groups <https://insidetrade.com/node/159835>, these sources said the Trump administration likely would face “massive pushback” from the business community should it decide to put forward an ISDS proposal of that kind.
 
One source called the idea -- because of the strong support for ISDS among business groups and on Capitol Hill -- “not viable.” Another source questioned the administration’s intent in considering such a proposal, contending that it was unlikely to help secure any additional Republican votes for a final NAFTA deal -- and equally unlikely to satisfy any Democrats enough to vote for the agreement.
 
But sources said USTR was “shopping around” for proposals and seeking reactions to the ISDS idea. During the first round of NAFTA talks, which wraps up in Washington on Sunday, the U.S. will not be tabling text on investment, and U.S. officials told sources the administration was still in the “policy development phase.”
 
In floating the ISDS idea, sources said, USTR officials did not provide details on how it would work, or say whether the Trump administration would choose to opt in to the dispute settlement mechanism.
 
Administration officials do, however, expect the provision will get “a lot of attention” during the NAFTA talks, sources said, and stressed that the U.S. has never lost an ISDS case.
 
One source described the proposal as “a way to kill ISDS without killing it” because the controversial provision would still be part of the agreement -- but the U.S. could decide not to make use of it.
 
Some sources said it was hard to imagine that Mexico and Canada would opt in if the U.S. did not, while others suggested they might to ensure U.S. investment.
 
Because the administration has touted NAFTA 2.0 as a vehicle for “model” provisions that could be part of future trade agreements, some sources cautioned that getting rid of ISDS would set a bad precedent for other deals.
 
Lighthizer has criticized ISDS as an impediment to U.S. national sovereignty, but USTR, in its July summary of NAFTA negotiating objectives on investment, was noncommittal on the mechanism -- leaving ISDS opponents and proponents guessing what the administration’s plans might be.
 
Sources said they suspected that Lighthizer likely would lean toward getting rid of the provision but noted that he would face pressure from congressional Republicans and the business community if he did so.
 
For that reason, some sources said, the opt-in clause could put the onus on Congress or the president to decide whether to opt in.
 
One source noted that several Republicans came out in opposition to the Trans-Pacific Partnership because its ISDS provision included a carveout for tobacco products. Sen. Richard Burr (R-NC), a vocal opponent of the carveout, said in questions for the record after Lighthizer’s confirmation hearing <https://insidetrade.com/sites/insidetrade.com/files/documents/mar2017/wto2017_0088.pdf> that the TPP provision “would have set a harmful precedent for future trade agreements and the treatment of other American agricultural exports.”
 
Lighthizer, in his answer to Burr, committed to “treating all U.S. agricultural products equally with respect to any foreign barriers.”
 
A USTR official told reporters before the first NAFTA round began that ISDS “is an issue we are still consulting on. So we don't have a position we can talk about <https://insidetrade.com/node/159900> at this point.”
 
Lighthizer, in his responses to questions from the Finance Committee following a June hearing on the president’s trade agenda, said the administration was seeking to comply with the negotiating objectives laid out in the 2015 Trade Promotion Authority law. However, in response to a question from Sen. John Cornyn (R-TX), he did not commit to attempting to preserve the provision in NAFTA and future trade agreements.
 
Instead, Lighthizer said, “I am mindful that seeking improved mechanisms to resolve investor-state disputes is a negotiating objective in TPA, and I am aware of the importance of ensuring U.S. investors abroad are treated fairly.”
“At the same time,” he added, “I acknowledge some of the concerns that have been raised about ISDS, including with respect to U.S. sovereignty. I look forward to working with Members to achieve an appropriate balance on this issue.”
In response to a question from Sen. Sherrod Brown (D-OH), Lighthizer said the Trump administration was “assessing the balance on these issues and is looking carefully at past agreements as part of that analysis.”
 
He also committed to work with Congress “to ensure that rules that we negotiate -- including rules on expropriation -- are consistent with U.S. legal principles and practice, as specifically called for” in TPA.
 
The business groups, in their Aug. 8 letter to Lighthizer, defended ISDS as an “essential part of the NAFTA and other high-standard U.S. trade and investment agreements” and a “strong enforcement tool that helps ensure that American investors, businesses and their workers will be treated fairly overseas.”
 
In a nod to those who have expressed concerns about U.S. sovereignty, the groups wrote that “ISDS panels have never overturned -- and do not have any authority to change -- any country’s laws or regulations.” 
U.S. seeking biotech provisions, export subsidies ban in NAFTA agriculture talks
August 20, 2017
 
U.S. NAFTA negotiators are discussing provisions that would regulate biotechnology imports, as well as a possible ban on agricultural export subsidies, according to a source familiar with the renegotiation discussions.
 
NAFTA would be the first U.S. free trade agreement with biotech provisions if they are added to a retooled deal. The U.S. was able to secure biotech provisions in the Trans-Pacific Partnership <https://insidetrade.com/node/151131>, but President Trump withdrew the U.S. from that deal shortly after taking office.
 
As is the case in other areas of the agreement <https://insidetrade.com/node/159963>, NAFTA parties so far have not been able to agree on a starting point for bitoech talks. Canada is in favor of opening with the TPP text, the source said, but Mexico has not agreed. TPP laid out transparency measures for new biotech approval applications, established a procedure for importing and exporting nations to follow if trace amounts of an unauthorized biotech were found in a shipment, and created a working group for TPP parties to discuss biotech trade issues.
 
U.S. agriculture groups have urged the U.S. team to seek NAFTA provisions that go beyond TPP <https://insidetrade.com/node/159205>, with their best-case scenario moving NAFTA countries to mutually accept each others' biotech approvals.
 
On agricultural export subsidies, the U.S. is pushing for a ban; Mexico is not opposed. Canada, however, would like to maintain the ability to use those subsidies, the source said.
 
World Trade Organization members agreed to phase in a ban agriculture export subsidies in December 2015. It is set to take full effect in Canada in 2020. In August 2016, Canada informed WTO members that it intended to maintain its ability to use those subsidies for butter, in particular, until the ban is fully implemented.
 
But Canada has been described by several sources as very patient in all aspects of the talks, including agriculture, in the first round. Canada's approach, some sources say, could stem from a lack of political pressure to wrap up the negotiations quickly -- something the U.S. and Mexico have said is a key goal ahead of elections next year. -- Brett Fortnam (bfortnam at iwpnews.com <mailto:bfortnam at iwpnews.com>)
 

Canadian unions expect government to push for ILO ratifications in labor chapter

August 19, 2017
 
Canadian labor unions believe the Trudeau government will push for provisions in a renegotiated NAFTA that would oblige the U.S. and Mexico to ratify the International Labor Organization's eight core conventions and address the U.S.' "right to work" states.
 
The U.S. has signed only two of the ILO's eight core convetions and the issue has been a non-starter in U.S. trade negotiations. Mexico has signed seven of the core conventions. According to the National Right to Work Legal Defense Foundation, 28 states have passed right to work laws. Right to work laws generally prohibit agreements that would require workers to join a union.
 
According to Canadian Labour Congress President Hassan Yussuff, Canada needs to address right to works laws in the U.S. because those laws act as a subsidy because they depress wages. Jerry Dias, the president of Unifor, a union representing over 300,000 Canadians, told Inside U.S. Trade that it doesn't make sense to discuss creating jobs unless the U.S.' right to work laws are addressed.
 
"If you take a look at some of the challenges you have here in the United States, you have right to work states -- they don't free collective bargaining in half the states here as well," Dias said. "The United States has two problems. Number one is Mexico, number two is themselves. Canada has two problems: Mexican labor [wages] and right to work states in the United States."
 
Yussuff, who sits on the NAFTA council formed by Canadian Foreign Affairs Chrystia Freeland, said the Canadian labor proposal has been put togehter to address problems that workers have experienced for the past 20 years under NAFTA.
 
At the NAFTA round this week, Canada tabled its proposed chapter on labor, but the U.S. was unwilling to consider it because it would have required changes to U.S. law. According to Yussuff and Dias, the first round is mostly about political posturing rather than textual negotiations.
 
Both believe the ILO and right to work issues will be key aspects of the Canadian position, adding that it would be disingenuous for the U.S. to criticize Mexican labor standards without looking at its own as well.
 
According to Dias, there has to be a dramatic shift in the U.S.' position for the deal to get done because addressing labor standards is the best way to ensure that more U.S. and Canadian jobs do not shift to Mexico. Dias said he has met twice with Commerce Secretary Wilbur Ross. -- Brett Fortnam (bfortnam at iwpnews.com <mailto:bfortnam at iwpnews.com>)
 
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