[CTC] Articles on latest NAFTA round

[Arthur Stamoulis]

INSIDE US TRADE
 
Canada pushing regulatory cooperation in second round of NAFTA talks

September 03, 2017 
The Canadian government is pushing for stronger regulatory cooperation provisions during the second round of NAFTA renegotiation talks, hoping to move beyond the U.S.-Canada Regulatory Cooperation Council established by the Obama and Harper governments in 2011, according to Canadian stakeholders.

Canada is looking to include in NAFTA requirements for a regulatory cooperation council that is led at the political level, meets regularly and establishes agendas for future outcomes. The proposed provisions are expected to be similar to those included in the Comprehensive Economic and Trade Agreement between Canada and the European Union, the sources said.

Stakeholders from various sectors are dissatisfied with the U.S.-Canada Regulatory Cooperation Council because they believe it has failed to produce substantive results. For one thing, they lament, the council does not provide a timetable for outcomes. Formalizing a regulatory cooperation body with political-level leadership via NAFTA could serve to push an agenda that produces substantive results, they said.

CETA established a regulatory cooperation forum that is obligated to meet “at least annually” and must be co-chaired by a Canadian deputy minister and an EU director general, or by designated officials or those of equivalent rank. The forum shall meet “at least annually” and shall “periodically exchange information of ongoing or planned regulatory projects.”

The EU proposed similar provisions in the context of the Transatlantic Trade and Investment Partnership negotiations with the U.S., but the U.S. pushed back against the formation of a regulatory cooperation body because it did not want a trade agreement to prescribe actions for its regulators. The U.S. has expressed similar concerns during the NAFTA talks as well, sources said.

The EU and U.S. did establish the Transatlantic Economic Council in 2007 to reduce regulatory barriers, but U.S. and EU stakeholders widely view the TEC as a failure because it does not produce substantive outcomes, they say. Like the U.S.-Canada council, the TEC does not meet at the political level.

However, stakeholders have held out hope that the NAFTA renegotiation will result in a regulatory cooperation mechanism because of language in the U.S. summary of its negotiating objectives published by the Office of the U.S. Trade Representative in July. They also cite a February joint statement from President Trump and Prime Minister Justin Trudeau that recognized the importance of bilateral regulatory cooperation. Some stakeholders suggested that a regulatory cooperation body among NAFTA parties would be more appealing to the U.S. than a transatlantic forum because of the EU's “sophisticated and burdensome” style of regulating.

The USTR objectives said the U.S. would “promote greater regulatory compatibility” for industrial and agricultural goods, “including through regulatory cooperation where appropriate.” The February joint statement said the U.S. and Canada would “continue our dialogue on regulatory issues and pursue shared regulatory outcomes.”

Outside of the formation of a regulatory cooperation body, stakeholders said that NAFTA parties could widely benefit from regulatory coherence and cooperation provisions for biotech authorizations, pharmaceutical approvals and maximum residue levels (MRLs) for pesticides on fruits and vegetables.

At the first round, U.S. negotiators raised the possibility of including biotech provisions <https://insidetrade.com/node/159970> in a modernized NAFTA. The U.S. was able to secure biotech provisions in the Trans-Pacific Partnership, which was the first U.S. FTA to include such provisions until President Trump withdrew from the deal.

U.S. agriculture groups are hoping for biotech provisions that go beyond what was negotiated in TPP.

TPP included transparency measures for approval applications, set up a procedure for parties to follow in the event trace amounts of an unauthorized trait were found in a shipment, and established a working group to continue biotech discussions. The agriculture groups said the best-case scenario for biotech provisions in a retooled NAFTA would be for the parties tomutually accept each other's biotech approvals <https://insidetrade.com/node/159205>.

On pharmaceuticals, regulatory cooperation could allow drug producers to submit the same data to regulators in different countries rather than conduct different studies or submit different data sets -- both costly for companies.

Sources said that MRLs are generally not an issue among the NAFTA parties, but language on MRLs would set a global standard for FTAs at a time when other countries maintain zero tolerance for pesticides on produce. Zero-tolerance policies block U.S. exports and have been characterized as having no scientific justification by U.S. officials and some stakeholders from NAFTA countries. Language on MRLs could be part of the “science-based measures” USTR outlined as a priority for SPS provisions in its negotiating objectives.

Establishing a new regulatory cooperation council might require its own chapter, but specific regulatory outcomes could come via other chapters such as the those on sanitary and phytosanitary measures, technical barriers to trade and good regulatory practice. TBT issues were discussed on Friday and Saturday, while good regulatory practice negotiations are set to take place on Sunday and Monday and SPS discussions are slated for Monday and Tuesday.

Agriculture discussions were held on Friday and Saturday. Sources said the three sides are generally in agreement on key issues, including where where regulatory cooperation is a possibility, though they noted that hot-button market access issues such as dairy market access had not yet been raised. Thornier issues are not expected to be addressed in depth until later in the negotiating round, sources said.

Day-two talks at the scond round went on as broader U.S.-Mexican relations and the U.S.-Korea FTA dominated public discussion. In Mexico City on Saturday, President Enrique Peña Nieto indirectly responded to Trump's repeated threats to withdraw from NAFTA in his annual state of the nation address by saying the Mexican negotiating team “has precise indications to participate in this process with seriousness, in good faith and with a constructive spirit.” Peña Nieto also spoke of his country's relationship with the Trump adminstration, emphasizing that Mexico “will not accept anything that goes against our dignity as a nation” or the Mexican national interest.

Trump's consideration of withdrawing from the U.S.-Korea FTA also drew the focus of many U.S. stakeholders who would otherwise be prioritizing the NAFTA round.

USTR, meanwhile, issued two tweets about the second round, saying that a “stronger #NAFTA is critical for our farmers, ranchers and job creators,” and that “the new #NAFTA will promote a market system that functions more efficiently, leading to reciprocal and balanced trade.”



 
INSIDE US TRADE
 
At second round, U.S. making push for domestic content requirement in NAFTA's auto rule of origin

September 04, 2017 
MEXICO CITY -- The U.S. is making clear at the second round of NAFTA modernization talks that it is serious about incorporating a domestic content requirement in a retooled deal's auto rule of origin, sources told Inside U.S. Trade.

The proposed requirement for U.S. content in a NAFTA-eligible vehicle could range from 35 percent to 50 percent, these sources said. Another source said U.S. negotiators have specifically discussed a 40 percent domestic content requirement.

The U.S. is not, however, expected to table at this round a text that contains a proposed number. By discussing a range instead, the U.S. could be attempting to warm Canada and Mexico to the idea of including a domestic content requirement, sources said. It also allows the U.S. to probe what domestic content requirement could be acceptable to all three parties without tabling a number and then having to accept less, one source said.

Canada and Mexico have been vocal in their opposition to a country-specific rule of origin in NAFTA. At the first round of talks in Washington, DC, in mid-August, Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo Villarreal said they were firmly against country-specific content requirements <https://insidetrade.com/node/159920>. Freeland and Guajardo were responding to U.S. Trade Representative Robert Lighthizer's comments at the round's opening ceremony, where he called for a higher regional value content for autos and auto parts as well as “substantial U.S. content.”

While some – noting that the entire automotive sector is opposing the idea – speculated that the rhetoric on U.S. content was a negotiating tactic, other sources said the Office of the U.S. Trade Representative is “serious” about pushing for it. Some have referred to Lighthizer, his general counsel Stephen Vaughn and others in the agency as “true believers.”

U.S. automakers have pushed hard against the administration's goal of raising the regional content value threshold and adding a country-specific requirement. Any country-specific requirement, they argue, would add significant administrative burdens. Combined with the U.S.' low bound tariff rate for autos, such administrative burdens could be enough to compel automakers to forgo NAFTA benefits, sources said. The U.S. insistence on a country-specific content requirement could also lead Mexico and Canada to respond in-kind and demand domestic content requirements of their own, they said.

The Trump administration has said it hopes to include “model” provisions in NAFTA and replicate them in future free trade agreements. For that reason, sources opposed to the move say they fear that including a domestic content requirement would set a bad precedent for future deals.

On the regional value content requirement, sources said the administration has floated to stakeholders numbers exceeding 70 percent and even 80 percent. However, they added, USTR did not propose specific numbers during the first round.

The U.S. is also pushing for an overhaul of NAFTA's tracing list and could seek to have all elements of an auto included on it, sources said. The U.S. steel industry is asking for steel to be added to that list. If included, steel would be the only commodity on the list. Any element not included on the tracing list is considered to be from the NAFTA region.

Lighthizer, at the opening of the first round, listed as one of the Trump administration's demands that “country of origin should be verified, not 'deemed.'”

Sources said the U.S. administration also could seek “creative” changes to the tracing list that would not compel auto companies to overhaul their supply chains. For instance, if research and development – which for the U.S. auto industry takes place mostly in Detroit – was added to the tracing list and another item that is not primarily sourced in North America was removed, automakers could attain a higher regional value content without changing their manufacturing process.

The U.S. and Canadian auto sectors are also pushing for the retooled NAFTA to include provisions on regulatory cooperation. Specifically, the industries want Mexican regulators to accept U.S. and Canadian vehicles that have met U.S. and Canadian safety standards.


https://www.wsj.com/articles/canada-emerges-as-a-tough-negotiator-in-nafta-talks-1504559935 <https://www.wsj.com/articles/canada-emerges-as-a-tough-negotiator-in-nafta-talks-1504559935>
 
Canada Emerges as a Tough Negotiator in Nafta Talks
Ottawa pushes environmental and labor provisions that may struggle to gain traction in Washington
BERNSTEIN/REUTERS
By 
William Mauldin,
 
Paul Vieira and
 
Dudley Althaus
Sept. 4, 2017 5:18 p.m. ET
54 COMMENTS <https://www.wsj.com/articles/canada-emerges-as-a-tough-negotiator-in-nafta-talks-1504559935#comments_sector>
MEXICO CITY—The latest challenge to renegotiating the North American Free Trade Agreement is coming from an unexpected direction: Canada.

For months, President Donald Trump has pointed the finger at Mexico as the source of U.S. trade deficits in North America, and U.S. officials are pushing for new provisions in the 23-year-old trade pact that would make it harder for Mexican manufacturers to send goods to the U.S. duty free.

But in the second round of talks for overhauling Nafta, running through Tuesday in Mexico City, it is Canada that appears to be giving the U.S. the most difficulty at the negotiating table, according to people familiar with the negotiations.

The soft-spoken neighbor to the north has avoided slinging rhetorical barbs or political warnings at its partners, in contrast to the tweets of Mr. Trump or public comments of President Enrique Peña Nieto of Mexico.

But Ottawa has introduced new provisions on labor and the environment that may struggle to gain traction in Washington, and the Canadian negotiators have balked at supporting some less-controversial language that they agreed to in Trans-Pacific Partnership, the unratified 12-nation trade deal that Mr. Trump exited in January, the people say.

Canada’s tough stance is seen partly as a defensive strategy to notch some wins in case it needs to agree to tough requests made by the Trump administration in Nafta, including removing a dispute-resolution system that allows one Nafta country to challenge another’s tariffs. The country is also in parallel talks with the U.S. on softwood lumber, and officials in Ottawa are keen to defend their system for supporting dairy farmers, criticized by U.S. lawmakers from dairy states.

“We are just defending our interests,” Canada’s chief negotiator, Steve Verheul, said at the talks late Sunday.

But the country’s approach may prove difficult for the U.S. and Mexico, which are seeking to wrap up talks as early as December or January, ahead of election seasons that have a potential to sour trade talks among the three countries.

Besides Canada, Mexico is also sending a tough political message: It won’t accept U.S. trade proposals or government policy that hurts the country’s interests. “I’ve said it and I will reiterate it: We won’t accept anything that affects our dignity as a country,” Mr. Peña Nieto said on Saturday in a speech several miles from the posh high-rise hotel hosting the Nafta talks.

Mexican Foreign Minister Luis Videgaray said last week he’ll halt negotiations if Mr. Trump starts the process of pulling out of Nafta. Mexican officials have also said privately that they won’t discuss proposals that include tariffs or quotas as well as anything that restricts trade above and beyond the rules both countries already face in the World Trade Organization.

“No Nafta is better than a bad Nafta,” one person close to the Mexican government said.  One U.S. idea, to set a minimum threshold for U.S. content to gain tariff-free access in North America, was set to be discussed Monday. But the person said the proposal has already met firm resistance from Mexico and Canada, which say the proposal is unprecedented and potentially unworkable.

Officials involved in the talks have sought to distinguish the political backdrop—unusually intense for the early stages of trade negotiations—from the work of professional negotiators, many of whom know each other from the TPP Pacific talks or even the original Nafta talks in the 1990s.

“The tone remains very constructive,” said a person involved in the talks, adding that “there is a climate where all this is happening, and everyone is aware of that.”

“At the table, nothing crazy has been presented so far,” said another person familiar with the talks. Some sensitive U.S. proposals aren’t expected to be aired until at least the third round later this month.

Officials in Mexico City took note when Mr. Trump said recently that he is looking at withdrawing <https://www.wsj.com/articles/trump-administration-weighs-withdrawal-from-south-korea-trade-pact-1504375312> from the second-biggest U.S. trade agreement, the one with South Korea.
Canada’s Liberal government, which recently completed a trade deal with the European Union, laid out its Nafta objectives just days before the first round of talks began in Washington, pledging to make the North American trade pact more “progressive” by beefing up provisions dealing with the environment and labor <https://www.wsj.com/articles/canada-wants-to-make-nafta-more-progressive-1502716293>.
“If labor’s standards are not part of a trade deal, then there shouldn’t be a trade deal,” said Jerry Dias, president of Unifor, Canada’s largest private-sector labor group, on the sidelines of the talks.

Foreign Minister Chrystia Freeland, who has shown in the past she is willing to walk out of unfavorable trade talks, says Nafta should have provisions related to the environment that would prevent a country from intentionally weakening climate-change policies to attract investment. That is raising eyebrows in Washington, where the Trump administration has moved to exit from the Paris climate agreement.

Canada is also pushing for international labor standards that would not only put pressure on Mexico, but also the U.S. One provision, included in a previous Canadian trade pact with Chile, would push for gender equality in the labor force.

“They put things on the table that they know are not easily acceptable in Washington,” said Gary Hufbauer, senior trade expert at the Peterson Institute for International Economics, which backs trade liberalization.

While all three nations agree that Nafta’s environmental and labor provisions need to be upgraded, Canadian officials have pushed ambitious new goals in these areas. This reflects the priorities of Prime Minister Justin Trudeau and his government, according to a person familiar with Ottawa’s strategy. Ottawa is also pursuing business interests in digital trade and other areas.

Unlike in the U.S. and Mexico, there is no pressing timetable for Canada to conclude a deal by the end of 2017. Still, a White House statement summarizing a call between Messrs. Trump and Trudeau said both parties agree they want a deal this year.

Canadian officials have said they won’t be rushed into accepting a deal if it isn’t in the country’s interests. And if Mr. Trump pulls out of Nafta, then Washington and Ottawa could fall back on a bilateral trade deal that predates the one with Mexico, trade experts say.

Write to William Mauldin at william.mauldin at wsj.com <mailto:william.mauldin at wsj.com>, Paul Vieira at paul.vieira at wsj.com <mailto:paul.vieira at wsj.com> and Dudley Althaus at Dudley.Althaus at wsj.com <mailto:Dudley.Althaus at wsj.com>
Appeared in the September 5, 2017, print edition.

https://www.nytimes.com/reuters/2017/09/02/business/02reuters-trade-nafta.html <https://www.nytimes.com/reuters/2017/09/02/business/02reuters-trade-nafta.html>
 
NAFTA Negotiators Seek to Enshrine Mexico's Energy Reforms
By REUTERS
SEPT. 2, 2017, 10:54 P.M. E.D.T.
MEXICO CITY — U.S., Canadian and Mexican negotiators are zeroing in on ways to enshrine Mexican President Enrique Pena Nieto's sweeping energy reforms into a modernized North American Free Trade Agreement, Mexico's chief negotiator said on Saturday.

The 2014 reforms wrung control of the country's oil and gas sector from state hands, opening it up to private investment, and incorporating them into the 23-year-old NAFTA is seen as a way to help preserve them for the long term.

"We're working in this sense, analyzing all of the elements that need to be included in the energy discussion to reflect the reform Mexico established," Mexico's chief trade negotiator, Kenneth Smith, said on Saturday after a bargaining session in the second round of NAFTA modernization talks.

Smith, speaking to reporters as he walked side-by-side with his counterparts John Melle of the United States and Steve Verheul of Canada, added that negotiators would "look for mechanisms that allow us to integrate ourselves in a positive way in the energy sector."

Trade negotiators from the three nations are working through the weekend in Mexico City to present more proposals to revamp NAFTA, an accord that underpins more than $1.2 trillion in annual cross-border trade.

When NAFTA was enacted in 1994, Mexico's energy sector was closed and Pena Nieto's reforms ended a decades-long monopoly for national oil company Pemex [PEMX.UL] and ensured competitive oil auctions. Incorporating them into NAFTA would help shield them from any future governments that may want to reverse them.

Trade experts both in the United States and Mexico have said that increasing energy trade and investments through NAFTA would help reduce the $64 billion U.S. trade deficit with Mexico that irritates U.S. President Donald Trump, partly through increased U.S. gas and oilfield equipment sales to Mexico.

PENA NIETO STRIKES BACK AT TRUMP'S SWIPES

Trump has repeatedly threatened to rip up NAFTA, warning he could do so again just this week.

Pena Nieto, in his annual address to the nation on Saturday, defended free trade and young migrants in the United States, saying his government would not accept insults against "national dignity" from Trump's administration.

"The relationship with the new government of the United States, like any other nation, must be based on irrevocable principles: sovereignty, defense of the national interest and protection of our migrants," Pena Nieto said.

"We will not accept anything that goes against our national dignity," he told a crowd of politicians and the country's elite, who rose at that point to deliver the most vigorous standing ovation of his address.

Trump this week also insisted again that Mexico would eventually pay for his proposed wall on the southern U.S. border to block the flow of illegal immigrants and drugs.

Pena Nieto shied away from mentioning the wall but said Mexico would promote the recognition of migrants for their contributions and reject discrimination against them.

Pena Nieto also said Mexico would continue to defend NAFTA as a vehicle to further integrate the region.

"The negotiating team has precise instructions to participate in this process with seriousness, good faith and a constructive spirit," he said, "always putting first the interest of Mexico while reaching for a result where all three countries win."

Trump has repeatedly threatened to pull out of NAFTA if talks do not go his way and on Saturday said he would discuss next week with his advisers whether to withdraw from a trade deal with South Korea that he has also long criticized.

Top Mexican officials said Latin America's No. 2 economy would walk away from negotiations if Trump moves to withdraw from the deal.

Negotiators were going to take until Monday to get to one of the thorniest issues, U.S. demands for increased North American and U.S. content for autos and other manufactured goods, according to a schedule seen by Reuters.

Mexico's Smith said no specific proposals had been put on the table by U.S. negotiators regarding rules of origin.

(Additional reporting by Adriana Barrera and David Lawder; Writing by David Lawder and Michael O'Boyle; Editing by Lisa Von Ahn and Bill Trott)


https://www.washingtonpost.com/world/the_americas/mexicos-low-wages-are-under-fire-at-nafta-negotiations/2017/09/04/6796f6ae-91b9-11e7-8482-8dc9a7af29f9_story.html?utm_term=.ac89939db974 <https://www.washingtonpost.com/world/the_americas/mexicos-low-wages-are-under-fire-at-nafta-negotiations/2017/09/04/6796f6ae-91b9-11e7-8482-8dc9a7af29f9_story.html?utm_term=.ac89939db974>
 
Mexico’s low wages are under fire at NAFTA negotiations

By Associated Press September 4 at 5:38 PM
MEXICO CITY — Mexico’s low wages have become an increasing point of debate as the second round of negotiations on the North American Free Trade Agreement moved into their fourth day Monday.

The United States has said it wants to tighten labor standards in the 23-year-old trade pact. But Mexico has drawn plants and investments by capitalizing on low wages and weak union rules, and Mexican business and labor leaders appear to be resistant to any attempt to tighten labor standards or ensure that Mexican wages rise.

Mexican and Canadian auto unions have said in a report that Mexican autoworkers earn about $3.95 an hour, which is about one-ninth of average wages north of the border.

Canadian auto workers leader Jerry Dias said over the weekend that wages in the three nations under NAFTA should be equalized. But a top Mexican union leader, Carlos Aceves del Olmo, has said equalizing wages is “a pipe dream,” claiming wages in Mexico can’t be compared to U.S. and Canadian salaries.

Gerardo Gutierrez Candiani, head of Mexico’s special economic zones and the former leader of the country’s business chamber, said Friday that Mexico could not be expected to go beyond its current labor laws and its constitution. They include vague references to the freedom of workers to unionize, but in practice pro-government unions often sign contracts behind workers’ backs in Mexico.

On Sunday, the head of Mexico’s agricultural council told local media that the U.S. should keep its nose out of Mexico’s affairs.

“Let each country respect its labor issues, that’s what Mexico is proposing,” De la Vega said. “Mexico can’t interfere in U.S. and Canadian labor issues, and we ask them same, that they don’t get involved in this issue.”

The talks are also focusing on such issues as rules-of-origin and local content, electronic commerce, the environment and anti-corruption measures.

Mexico’s Economy Department said the five days of talks in 25 working groups are expected wrap up Tuesday. The first round of talks took place in Washington in mid-August, and several more rounds are expected.




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