[CTC] NAFTA countries enter round 5 with hardened stance

Wed Nov 15 09:32:02 PST 2017

Three articles on the current NAFTA round...

INSIDE US TRADE

Trade ministers announce they will not travel to Mexico for the fifth round of NAFTA talks
November 15, 2017

U.S. Trade Representative Robert Lighthizer and his NAFTA counterparts will not travel to Mexico City this week for the fifth round of talks between the U.S., Canada and Mexico, the parties announced on Wednesday.

Noting that they had met last week on the sidelines of the Asia Pacific Economic Cooperation leaders meetings in Danang, Vietnam, the trade ministers said in a joint statement they would leave the next round of talks to their chief negotiators.

The statement says the ministers, in Vietnam, “instructed NAFTA Chief Negotiators to focus on advancing discussions on tabled proposals as much as possible. Given the substantive discussions held between Ministers at APEC, Ministers agreed not to attend the 5th Round so negotiators can continue to make important progress on key chapters advanced in Round 4.”

Sources suggested the trade ministers decided not to attend because they do not expect the negotiating teams to make significant progress on thorny issues during the next round.

The statement also notes that while the fifth round officially opens on Nov. 17, some negotiating groups would begin meeting on Nov. 15.
“Nearly 30 negotiating groups will be meeting during the 5th Round, which will conclude on November 21st,” the statement reads.

“Chief Negotiators from Mexico, United States and Canada will be in constant communication with their respective Ministers and will report on the progress reached in this round,” it adds.

The negotiators are slated to meet again in December – again without ministers – for a so-called “mini-round” of talks. Sources say that round will be held Dec. 11-15.

POLITICO

NAFTA countries enter round 5 with hardened stance
By MEGAN CASSELLA <https://www.politicopro.com/staff/megan-cassella>
11/15/2017 05:02 AM EST

Tensions were running high after trade ministers closed their previous round of talks to renegotiate NAFTA last month. After talks ended, the idea of a U.S. withdrawal seemed more like a question of not if, but when.

Since then, the war of words seems to have simmered down, but that doesn't mean that the coming round of negotiations will fare much better.

In an effort to keep the peace — at least for now — negotiators from Canada and Mexico are entering their fifth round of talks this week determined to avoid engaging with the United States on some of Washington's most extreme proposals, leaving the onus on the Trump administration to come back with reworked offers its North American counterparts are willing to consider.

At the same time, Canada and Mexico are hoping to gain clarity during Round 5 in Mexico City this week on if — and how much — the United States is willing to compromise on proposals that the two others have made clear are unacceptable on areas related to automobiles, seasonal produce and government procurement.

“You’re going to see an active and very lively debate going on in Canada and also in Mexico about, 'Are these negotiating positions, or are these hard and fast U.S. proposals?'” said Eric Miller, president of the cross-border consulting firm Rideau Potomac Strategy Group, which focuses on trade issues. “The parties are essentially going to eyeball each other and see who blinks.”

President Donald Trump also continues to leave open the possibility that he will give notice of withdrawing from the pact. Originally believed to be a negotiation tactic, industry and business groups in all three countries have a growing sense of unease about whether he would follow through.

For now, no one is seriously talking about quitting. Officials have added two extra days of talks to the start of the round — Wednesday and Thursday — in an attempt to make sure all negotiating groups have a chance to meet before activities formally kick off on Friday.

Taking advantage of the extra days, negotiators are intent on making at least some progress in Mexico City even though they acknowledge broad differences that remain. The primary focus of the six days ending on Nov. 21 will be on the “modernization” aspect of the renegotiation — areas like digital trade, electronic commerce and streamlined customs procedures where all three countries feel there is a need for adjustment and a way forward. Officials are also near completion and could announce progress on chapters relating to telecommunications, anti-corruption and food safety standards, sources close to the talks say.

Some hope that progress in any capacity will placate the Trump administration and quiet calls for withdrawal.

“The strategy is to ‘hold the line’ on the absurd U.S. proposals while introducing new proposals to improve trade,” said Jorge Guajardo, a former Mexican ambassador who now works as a senior director at McLarty Associates in Washington. He cited customs, food safety and agriculture as three areas where the country would like to focus.

But on other areas — especially over the U.S. issues that both Ottawa and Mexico City have balked at accepting — the fifth round is unlikely to move the needle at all. The general sense is that Canadian and Mexican officials will hold off on offering counter-proposals and will avoid the most controversial topics — except perhaps to ask the U.S. for additional details on its demands.

“It’s about exchanging information and trying to feel out where the limits may be,” said Dan Ujczo, a trade and customs attorney who focuses on cross-border business issues between the U.S. and Canada.

Among the U.S. proposals drawing the most rebuke from Mexico is one that would give produce growers the power to file trade cases based on seasonal and regional data. Mexico has already dismissed the proposal as a non-starter. Rather than counter the U.S. idea with one of its own, Mexican officials are waiting for the U.S. to come back with a reworked offer that it finds more palatable.

“We’re in a position where we are not willing to accept any proposal at any cost,” Bosco de la Vega, president of Mexico’s main agricultural group Consejo Nacional Agropecuario, told POLITICO <https://www.politicopro.com/agriculture/whiteboard/2017/10/mexican-agriculture-leader-calls-produce-proposal-a-nonstarter-for-nafta-talks-094278> after the close of the last round. “If the U.S. comes back in the next round with an adjusted proposal, they can continue with their negotiations — if they’re willing to negotiate.”

Another issue dominating headlines and hallway conversations during talks is the U.S.-backed sunset provision, which would automatically terminate the deal after five years unless all parties agree to renew it. Critics argue that a sunset provision would bring an ever-present uncertainty to trade relations, hurting investment and cross-border commerce, as well as greatly increase the likelihood of termination.

In terms of the auto rules of origin issue, the U.S. has proposed sharply increasing the amount of North American-sourced content in automobiles from 62.5 percent to 85 percent for the product to qualify for reduced tariffs. It is also pushing for the addition of a domestic content requirement, which would mandate that at least 50 percent of the automobile be sourced from within the U.S.

On that front, some in Canada are exploring ideas of how to work with the United States to adapt its proposal into something more acceptable. One thought is to propose that intangible components of a car — like research and development and marketing costs — could be included to reach that 85 percent threshold. That may meet the U.S.’ desired number without angering or hurting North American automakers, Ujczo said.

The original version of the U.S. proposal on autos would be “a recipe for offshoring jobs” from all three North American countries, Colin Bird, minister-counsellor for trade and economic policy at the Canadian Embassy, said <https://www.politicopro.com/trade/whiteboard/2017/10/canadian-official-nafta-talks-need-a-strategic-rethink-094856> late last month. Mexico has voiced similar concerns.

Meanwhile, opposition to various language is coming from the domestic front as well. U.S. business and industry groups have been pleading with American officials to remove the threat of withdrawal once and for all. The U.S. Chamber of Commerce, for one, has taken a leading role in pushing back on what its leaders have called “highly dangerous <https://www.politicopro.com/agriculture/story/2017/10/nafta-talks-trump-administration-chamber-of-commerce-163095>” and “poison pill <http://www.politico.com/tipsheets/morning-trade/2017/10/10/ustr-holds-dual-china-russia-hearings-today-222714>” proposals.

The domestic agricultural industry, largely centered in states that backed Trump in last year’s presidential election, has also launched <https://www.politico.com/story/2017/11/09/trump-nafta-farmers-defy-244769> a mobilization effort to stave off withdrawal, particularly after Commerce Secretary Wilbur Ross publicly disputed the belief that doing so would lead to a serious drop in ag exports.

The difference of opinion stretches all the way up into the administration itself, where there’s an apparent lack of agreement on the part of U.S. officials and career staff at USTR who are at odds with the Trump administration on certain policy areas. In at least one negotiating group in Round 4, for example, officials made a clear differentiation between USTR proposals and Trump administration proposals, one source said.

“It suggests that the U.S. doesn’t have a common position at the negotiating table,” the source said, calling it “sort of disturbing.” “It’s somehow not surprising, but still it underscores the difficulty that the U.S. is having in putting this forward.”

In public comments this week, Ross offered a forceful defense <https://www.politicopro.com/agriculture/article/2017/11/ross-nafta-withdrawal-would-be-devastating-for-mexico-165011> of even the more extreme proposals this week and offered no sign that the administration would be willing to back down. His comments Tuesday help set the stage for a fifth round of talks resembling a balancing act, with Canada and Mexico trying to stand their ground without setting off the unpredictable U.S. administration.

“As long as negotiators can show that some progress at least is happening,” one source close to the talks said, “I don’t think the U.S. will say, ‘OK, we’re withdrawing.’”

https://www.washingtonpost.com/business/economy/trump-and-big-business-collides-as-nafta-teeters/2017/11/14/3c5a56f0-c97e-11e7-b0cf-7689a9f2d84e_story.html?utm_term=.ba60e7874b15 <https://www.washingtonpost.com/business/economy/trump-and-big-business-collides-as-nafta-teeters/2017/11/14/3c5a56f0-c97e-11e7-b0cf-7689a9f2d84e_story.html?utm_term=.ba60e7874b15>

WASHINGTON POST

Trump and big business collide as NAFTA teeters
 <>By David J. Lynch November 14 at 7:20 PM
U.S. business groups are pinballing between despair and panic as negotiations over a new North American Free Trade Agreement resume, with the Trump administration’s hard-line demands risking a worsening standoff and perhaps the eventual collapse of the talks.

Corporate concerns were only inflamed by President Trump’s Asia trip, which showcased his “America First” trade policy and left the United States isolated <https://www.washingtonpost.com/politics/trumps-america-first-looks-more-and-more-like-america-alone/2017/11/11/5cffa150-c666-11e7-aae0-cb18a8c29c65_story.html?utm_term=.96d39bbc4be6> as 11 other nations agreed to new trade liberalization measures.

On the eve of this week’s NAFTA talks, the fifth of seven scheduled rounds, the uncompromising U.S. stance now risks scuppering a 23-year-old treaty that helped knit together a colossal continental economy, business groups said.

“Everybody I talk to is very gloomy,” said Bill Reinsch, a distinguished fellow with the Stimson Center and a former head of the National Foreign Trade Council. “People are expecting very little out of this round.”

In a belated mobilization to save the deal, the U.S. Chamber of Commerce in recent weeks flooded Capitol Hill with executives from companies that stand to lose lucrative trade preferences if Trump fulfills his threat to withdraw from the treaty.

The Trade Leadership Coalition, a separate industry-funded group headed by a former Caterpillar lobbyist, last week began airing pro-NAFTA advertisements in nine states that Trump won in 2016.

The 60-second television ads — running in Texas, Tennessee, Nebraska, South Dakota, Mississippi, Michigan, Ohio, Iowa and Indiana — highlight economic gains in manufacturing and agriculture before concluding: “The United States is stronger than ever before . . . NAFTA works, but President Trump is threatening to withdraw from NAFTA.”

The conjunction of the NAFTA talks in Mexico City this week and the president’s return from his five-nation Asia swing <https://www.washingtonpost.com/politics/trumps-america-first-looks-more-and-more-like-america-alone/2017/11/11/5cffa150-c666-11e7-aae0-cb18a8c29c65_story.html?utm_term=.96d39bbc4be6> have underscored Trump’s continued difficulty translating his populist trade instincts into tangible achievements.

The last NAFTA round, in Washington, ended on a sour note  <https://www.washingtonpost.com/business/economy/trump-twitter-bombs-and-a-negotiating-standoff-how-nafta-talks-could-fail/2017/10/06/96b25f68-a91b-11e7-850e-2bdd1236be5d_story.html?utm_term=.c98cf49501b5>with Mexico, Canada and U.S. business groups expressing alarm over several U.S. proposals.

“NAFTA is in a very difficult place because the U.S. has put a series of demands on the table that are unlike demands that have been seen in any other trade agreement,” said Robert Holleyman, deputy U.S. trade representative under President Barack Obama. “Canada and Mexico are completely unclear about how to respond.”

Still, both Mexico and Canada are under pressure to reply to the U.S. demands, however unconventional, in the next round. “If there are not counterproposals, then NAFTA disappears,” said Rogelio Ramírez de la O, an economist and director of the consulting firm Ecanal.

Key stumbling blocks include the administration’s bid to rewrite the “rules of origin” to require more of a product to be made within North America, and within the United States, to qualify for the treaty’s lower tariffs. Robert E. Lighthizer, the U.S. trade representative, also is seeking a new “sunset clause” that would require the treaty to be renewed every five years, a feature that business groups say would introduce excessive uncertainty in their planning.

“I can’t imagine Mexico or Canada agreeing to any of these ‘King Trump’ demands. Even if they did, I can’t imagine Congress approving them,” said Scott Miller, former director of global trade policy for Procter & Gamble.

The unusual proposals, aimed at shrinking the bilateral trade deficits that vex the president, are designed to set the stage for the walkout that Trump has repeatedly threatened, says Miller, now a senior adviser at the Center for Strategic and International Studies.

Such a move probably would trigger an uproar on Capitol Hill, as well as legal challenges.

The political calendar in Washington — where Republicans are occupied with a make-or-break debate over tax legislation — means there is little prospect of a dramatic breakthrough or angry walkout in Mexico City this week.

“There’s a recognition that they’ve now hit serious resistance, and with tax reform moving they need to be a little more careful about things blowing up,” one business representative said.
But the slowdown is narrowing an already tight window for agreement. Negotiators last month agreed to extend the talks through March, painfully close to Mexico’s July 1 presidential election, which could inflame nationalist sentiments.

“The outlook is extremely negative,” said Edward Alden, a trade expert at the Council on Foreign Relations. “The issues the U.S. tabled are tremendously contentious, and none of them have an obvious path to compromise.”

Economic fallout from an eventual NAFTA collapse would land hardest on Mexico, which would lose nearly 1 million jobs, according to ImpactECON, a Boulder, Colo.-based consultancy.

In public, the Mexican government insists its economy can weather the trade accord’s demise. Mexican officials have been courting trade partners in South America, Asia, Europe and elsewhere. to diversify the economy outside its reliance upon the United States. President Enrique Peña Nieto was in Vietnam last week for talks that produced agreement on the “core principles” of an 11-nation trade accord without the United States.

But others think it will be difficult to find a replacement for the United States. “Despite the rhetoric of the Mexican government, there are not a lot of commercial options besides the United States market,” said Jerjes Aguirre Ochoa, a researcher at the University of Michoacan. “It is the Mexican government that is weak here, and should negotiate and not just deny irrational proposals . . . We would lose a trade war.”

Mexico’s private-sector advisers have warned the Mexican government that there is little room to alleviate Trump’s concerns about the deficit by restricting the key automobile, textile, or agricultural sectors, according to Juan Pablo Castañon, president of Mexico’s Business Coordinating Council.

“We have already told the government that these are areas where there is no opportunity,” said Castañon, whose coalition of business groups is advising Mexico’s negotiating team. “In energy, e-commerce, technology, that is where we can find answers to the deficit.”

Despite the pervasive gloom, some business executives find solace in the fact that the U.S. president often blusters before taking a more moderate path. The potential economic consequences of the talks failing next year also should concentrate negotiators’ minds.

“I continue to think this can be done,” Holleyman said. “It’s clearly in the interest of all three countries to find a win-win-win outcome. But we’re a long way from that.”

Joshua Partlow and Gabriela Martinez in Mexico City contributed to this report.

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.citizenstrade.org/pipermail/ctcfield-citizenstrade.org/attachments/20171115/78e4db15/attachment-0001.html>