NAFTA negotiations continue with limited results

by Jay Sjerven
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The future of NAFTA appears to be in doubt.
 
WASHINGTON — The fourth round of negotiations aimed at revitalizing the North American Free Trade Agreement (NAFTA) ended without fanfare and with only limited results on Oct. 17. If anything, the future of the agreement was in greater doubt as the Trump administration tabled proposals sharply opposed by the governments of Mexico and Canada, and with the president repeatedly affirming his willingness to end US participation in NAFTA if US demands weren’t met.  

A joint statement from representatives of the three nations noted a “significant conceptual gap” over revision to the 23-year-old agreement, but said some common ground had been reached in the less controversial parts of the negotiation.

US Trade Representative Robert Lighthizer

US Trade Representative Robert Lighthizer noted the talks had “substantively completed discussions on the competition chapter” as well as agreement in principle on customs, trade facilitation, digital trade, regulatory practices, and NAFTA annexes related to specific sectors.

But Lighthizer noted that, in the United States’ view, “the agreement has become very lopsided and needs to be rebalanced.”

“We have a $500 billion trade deficit,” he said. “For us, deficits do matter.”

Canadian Foreign Minister Chrystia Freeland

Canadian Foreign Minister Chrystia Freeland said some of the “America first” language proposals from the United States would disrupt supply chains and violate commitments made previously by trading nations through the World Trade Organization. Freeland said she hopes for “fresh creative perspective” when talks resume.

“We knew this process would be difficult,” said Ildefonso Guajardo, Mexico’s economic minister. “We must realize we have limits. None of us wants to leave this process empty-handed.”

IIdefonso Guajardo, Mexico's economic minister

The next round of negotiations will begin Nov. 17 in Mexico City. Altogether, there were to be seven rounds aimed at completing the NAFTA revisions for approval by the governments by the end of the year. But given there has been so little progress to date, at least on the most controversial issues, it was expected talks may extend into 2018, if they are not ended altogether.

US negotiators tabled most of their new proposals just ahead of the fourth round of negotiations. One US proposal would require that 50 percent of the value of all cars, trucks and large engines produced in the NAFTA countries and benefiting from the pact’s provisions be derived from components manufactured in the United States. Additionally, the Trump administration would raise NAFTA’s regional automotive content requirements to 85 percent from the current 65 percent.

Another US proposal sought to limit or even eliminate independent panels that resolve disputes on trade and investments under NAFTA.

Also, the United States proposed a sunset clause that would see NAFTA expire after five years unless the three governments agree to extend it on a regular basis.

The proposals were opposed not only by Mexico and Canada but by the US Chamber of Commerce and other US business and agricultural organizations.

John Murphy, senior vice president of international policy at the US Chamber of Commerce

On Oct. 13, John Murphy, senior vice president of international policy at the US Chamber of Commerce, said the administration’s proposals had “no identifiable constituency backing them” and had sparked “a remarkable degree of unity in their rejection.”

In response to the Chamber’s sharp criticisms, Emily Davis, spokeswoman for the US Trade Representative, said, “The president has been clear that NAFTA has been a disaster for many Americans, and achieving his objectives requires substantial change. These changes of course will be opposed by entrenched Washington lobbyists and trade associations. We have always understood that draining the swamp would be controversial in Washington.”

Apparently at the 11th hour of the fourth round of negotiations, the United States put forward yet another problematic proposal that aimed to end Canada’s internal dairy supply management system by eliminating tariffs on supply-managed dairy products over 10 years.

The International Dairy Foods Association (IDFA) earlier indicated its No. 1 priority was maintaining the US dairy industry’s export market in Mexico. At the same time, the IDFA has pushed for negotiators to address problems with Canada’s use of new milk pricing policies it said undercut skim milk powder prices on the world market.

Michael
Michael Dykes, president and CEO of the IDFA

“Securing NAFTA provisions that curb these actions is the most important way we can ensure that new Canadian market access is meaningful for US dairy companies and that US dairy products can compete fairly in third-country markets,” said Michael Dykes, president and CEO of the IDFA.

Leaders of the US Grains Council, US Soybean Export Council, National Sorghum Producers, National Renderers Association and the National Corn Growers Association met with representatives of the Mexican livestock industry that are part of the Consejo Nacional Agropecuario (National Agricultural Council in Mexico) last week in Washington. They issued a joint statement at the close of the fourth round of negotiations affirming their commitment to a strong trading relationship under NAFTA.

“NAFTA has provided the trade policy basis for the most efficient and effective interregional grain and livestock value chain in the world,” the groups said. “Our organizations are committed to work together — as we have for more than 30 years — to ensure the success of the industries on both sides of the border.”

Grains and soy trade between Mexico and the United States in 2016 was valued at more than $6.6 billion dollars with more than 90 percent of these ingredients consumed by the Mexican livestock industry.

The groups said Mexico and the United States should be seen as an integrated supply chain for livestock production.

“In order to continue building on the successful relationships fostered by NAFTA, we jointly support efforts to achieve further regional economic integration and preserve and expand upon the existing benefits of our mutual cooperation,” the groups asserted. “We encourage our negotiators to continue their participation in good faith and produce an agreement that builds upon our ongoing success. We stand ready to give them any help in this endeavor in every way possible.”

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