[CTC] U.S. won't make a new labor offer during round 7; Mexico to propose dispute settlement, investment, sunset text

[Arthur Stamoulis]

INSIDE US TRADE
 
U.S. won't make a new labor offer during round 7; Mexico to propose dispute settlement, investment, sunset text

February 26, 2018 
The Office of the U.S. Trade Representative has shared new text on labor with cleared advisers and Capitol Hill but will not put forward that text at the seventh North American Free Trade Agreement negotiating round in Mexico City this week, sources said.

Meanwhile, Mexico's chief negotiator says Mexico will advance “constructive proposals” on “dispute settlement, investment, and sunset among others.”

In a tweet Monday evening, Mexican chief negotiator Kenneth Smith Ramos said Mexico “comes to [Round] 7 with constructive proposals on the toughest issues on Dispute Settlement, Investment, and Sunset among others.”

He added in another tweet that Mexico’s goals for the round are to advance “‘modernization’ chapters such as Telecoms, Digital Trade,” along with technical barriers to trade, sanitary and phytosanitary measures, and good regulatory practices.

USTR will not table the labor text because it is seeking more input from stakeholders, sources close to the negotiations told Inside U.S. Trade – with one saying it was “a good thing for now”that USTR was not putting forward the new proposal because it needed more refinement.

USTR Robert Lighthizer last week called for a White House meeting with labor leaders and President Trump, which union leaders in a statement called a “productive” discussion <https://insidetrade.com/node/162043>.

One labor source said the meeting was an attempt by Lighthizer to “show the president that he was not just blowing smoke” when he promised a new NAFTA would be able to pass Congress with a high number of Democratic votes.

The USTR said at a meeting with Trump and lawmakers earlier this month that he believed “20 or 25 Democrats in the Senate and a large number of them in the House” were “very much in reach <https://insidetrade.com/node/161975>.” After that meeting, Sen. Sherrod Brown (D-OH) said he agreed with Lighthizer's assessment that 20 to 25 Democrats could vote for a renegotiated pact as long as it was "good for American workers."

The labor source argued that the goal was achievable “if they do the right thing.”

The Feb. 21 meeting with union leaders was initially intended to be a private meeting, with no notice given on the president’s daily schedule, but some sources said they believed publicizing it aided Lighthizer in his efforts to gain Democratic support.

Democrats have made clear their support for a new deal is contingent on strong, enforceable labor language that would address what they consider loopholes in the May 10 agreement that led to the first-ever U.S. loss in a labor dispute with Guatemala last year. USTR’s proposal to date does not address those issues, sources said.

According to one source, the administration could address one loophole by clearly defining what it means for a labor violation to occur “in a manner affecting trade or investment” – the issue at the heart of the Guatemala case – and for that definition to be broadly applicable. Ahead of the fourth round last November, a group of Democratic senators called for “manner affecting trade” language to be stricken from a modernized deal. The U.S. lost the Guatemala case because it was unable to prove that Guatemala’s labor violations affected trade and investment.

Still, labor leaders and congressional Democrats say they take Lighthizer at his word that the new agreement will have enforceable labor provisions.

“I don’t believe we’re yet at a satisfactory point,” a source told Inside U.S. Trade. “But I believe Bob [Lighthizer] is a man of his word. He has been generous with his time and his attitude towards labor and is willing to try to work through problems.”

Negotiators in Mexico City are scheduled to discuss the labor chapter on Monday and Tuesday, a copy of the agenda shows, and a congressional delegation, including labor leaders on the House Ways & Means Committee, is set to travel to the round next weekend.

The agenda says negotiators will not address investor protections during the seventh round. Negotiating teams met in Washington, DC, last week for discussions on that issue. During those meetings, Canada was expected to propose the elimination of the investor-state dispute settlement chapter <https://insidetrade.com/node/162013>, which the U.S. was expected to accept. Mexico, which is in favor of maintaining the ISDS mechanism, was not expected to torpedo the U.S.-Canada deal in hopes of obtaining concessions in other areas.

Another major issue that will not be fully addressed in Mexico City this week is automotive rules of origin, as the chief U.S. negotiator in that area abruptly returned to Washington to participate in consultations with the auto industry, at Lighthizer’s request <https://insidetrade.com/node/162070>. Negotiations on rules of origin were slated to be held on Sunday, Monday and Tuesday. USTR’s consultations with industry were set for Monday and Tuesday, sources said.

In a Monday evening tweet <https://twitter.com/KenSmithramos/status/968271079570583552>, Smith Ramos said “Discussions will continue on how to strengthen competitiveness of [the] auto industry. The [three] industries share a common goal: to succeed worldwide.” In yet another tweet <https://twitter.com/KenSmithramos/status/968271867911065602>, Smith Ramos said the three NAFTA governments “must work together with their #auto industries with this common goal in mind. North America wins with NAFTA modernization.”

Smith Ramos touched on another sensitive NAFTA issue in a series of Feb. 23 tweets: cross-border trucking. “#NAFTA modernization will help improve cross-border #transportation: a growing North American #Trucking industry depends on free #trade,” he tweeted <https://twitter.com/KenSmithramos/status/967214687124447232>.

At the fourth round of talks in Washington last October, the U.S. proposed that cross-border trucking be listed as an Annex II reservation, which would allow the U.S. government to come forward with future measures restricting the access of Mexican-domiciled carriers. Some key stakeholders believe the trucking industry could be used as a negotiating chip <https://insidetrade.com/node/161075> in the talks – and that the Mexican government is not prioritizing the industry in NAFTA.

Under NAFTA’s current rules, licensed Mexican-domiciled long-haul trucks are allowed to operate beyond the U.S.-Mexico border commercial zone, which extends about 20 miles beyond the border. A broad coalition of industry groups – including those in the agriculture, manufacturing, retail and transportation sectors – oppose the Annex II reservation and would instead prefer the trucking provisions in NAFTA to remain unchanged.

Smith Ramos addressed cross-sector benefits in a Feb. 23 tweet <https://twitter.com/KenSmithramos/status/967215154986438656>: “$2.4 [billion] USD generated in #trucking activity from #Mexican imports in #US. Value of trucking services grew 30 percent since 2008 #NAFTAWorks,” he said, adding in another <https://twitter.com/KenSmithramos/status/967215713013428225> that in 2016, “1.6 million trips took place and 16K trucks were used to carry imports from [Mexico] to the US in 2016. 63 percent went to southern border states.”

In a third tweet <https://twitter.com/KenSmithramos/status/967216223237869568>, Smith Ramos said the volume of U.S. imports of Mexican products transported via trucks has quadrupled since 1995 – and during that time, truck border crossings into the U.S. grew 83 percent.

In another tweet <https://twitter.com/KenSmithramos/status/967217015214747649>, he said “71 percent of the total value of MX-US trade is transported by #truck,” and added that a NAFTA 2.0 goal “should be to expand & facilitate cross-border trucking.”

Cross-border trade in services negotiations are slated for Wednesday and Thursday.

On Tuesday and Wednesday, negotiators will discuss intellectual property. Rights users and tech groups are calling for the chapter to include language that references “fair use,” which they believe balances the rights of users and rights holders.

“It is imperative that negotiators protect copyright limitations and exceptions – such as fair use and strong safe harbors – within an intellectual property chapter if such a chapter is included,” Re:Create Coalition Executive Director Joshua Lamel said in a Feb. 26 statement. “The American legal framework provides for a balanced copyright system, which includes copyright enforcement as well as copyright limitations and exceptions. If intellectual property is to be included in NAFTA, then we must also safeguard fair use and safe harbors.”

Re:Create's membership includes rights users and tech groups including the American Library Association, Association of Research Libraries, Public Knowledge and the Electronic Frontier Foundation.

At the third NAFTA round in September, the U.S. signaled it would move away from the text agreed to in the Trans-Pacific Partnership <https://insidetrade.com/node/160562> – which includes a reference to fair use – in favor of an approach pushed for by major U.S. rights holder groups and supported by Senate Finance Committee Chairman Orrin Hatch <https://insidetrade.com/node/160411> (R-UT). Hatch and rights-holder groups believe the TPP language was vague and not narrowly construed – and that its inclusion in a modernized NAFTA could lead U.S. trading partners to expand copyright exceptions.

Lamel told Inside U.S. Trade that a modernized NAFTA must contain fair use language to be consistent with the 2015 Trade Promotion Authority law. TPA says a principal U.S. negotiating objective is to ensure that any provision in a trade agreement reflects a standard of protection “similar to that found” in the U.S. Lamel says this includes the fair use doctrine and safe harbor protections.

Lighthizer and his counterparts on NAFTA, Canadian Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo, will hold a ministerial meeting on March 5.

On Monday, USTR tweeted out a 45-second video <https://www.youtube.com/watch?v=uN7lIbcR2pw> saying that its goal was to build on progress already made in the talks.

“With six completed rounds, the United States is continuing to push its objectives and is renegotiating NAFTA to be an agreement that benefits all Americans,” the video said. “Nearly 30 technical groups will meet in Mexico City for the seventh round of negotiations from February 25-March 5, 2018. The U.S. will look to build upon the progress made thus far to modernize the 24-year-old agreement and address the staggering trade deficit that has resulted in thousands of lost manufacturing jobs.”

The optimistic rhetoric is in stark contrast to what Lighthizer has employed in closing recent rounds, where he has bashed the other NAFTA parties for progress he considered too slow and singled out Canada in his criticism for not coming forward with constructive proposals. – Brett Fortnam (bfortnam at iwpnews.com <mailto:bfortnam at iwpnews.com>) and Jenny Leonard (jleonard at iwpnews.com <mailto:jleonard at iwpnews.com>)
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