NAFTA negotiators are settling in for the long haul after the Trump administration rejected Mexican and Canadian attempts to cut a quick deal over the past two weeks.
Minister of Foreign Affairs Chrystia Freeland left Washington on Friday without an agreement, said one source close to the discussions, a day after she led a last-ditch bid for a fast resolution.
The Mexican government, for its part, is adding opposition party observers to its negotiating team, sources said – a sign that Mexico is preparing to bargain through its presidential election in July and the start of a new administration in December.
Both Canada and Mexico had pushed for variations of a similar “skinny” deal: the North American free-trade agreement’s junior partners would agree to stricter automotive content rules demanded by the United States in exchange for the Americans dropping other contentious proposals. Both were rebuffed.
Mexican chief negotiator Kenneth Smith Ramos suggested on Friday that he was ready to hold out for a good agreement on NAFTA. “MX has been consistent in the negotiation: we will not force a deal & sacrifice quality; and we want a modern
#NAFTA that creates jobs in MX,” he tweeted.
The next hurdle to a deal is a U.S. threat to impose tariffs of 25 per cent on steel and 10 per cent on aluminium on Canada and Mexico if NAFTA is not completed by June 1. In the absence of an agreement Ottawa and Mexico City will have to persuade the White House to grant them another temporary exemption from the levies.
Mexican negotiators last week signaled they would agree to tougher auto rules, but ones less strict than demanded by the United States. Under the Mexican pitch, car companies would have had the ability to choose which of several higher standards they would meet – whether using more North American-made steel, for instance, or sourcing parts from factories paying more than US$15 an hour, sources briefed on the discussions said.
The U.S. was cool to this proposal, the sources said. But Canada continued to push for a similar auto-focused agreement in a bid to get the United States to give up on other tough areas.
As the clock counted down to a key congressional deadline for a pact Thursday, Ms. Freeland headed to the U.S. capital to meet with business and labour leaders while two of Mr. Trudeau’s top advisers, Katie Telford and Brian Clow, held tête-à-têtes with Trump administration officials.
But U.S. Trade Representative Robert Lighthizer publicly torpedoed the prospect of a speedy resolution, saying late on Thursday that the countries were “nowhere near close to a deal” and there were “gaping differences” on a slew of key issues. Mr. Lighthizer said he was ready to keep negotiating.
The developments were something of a role reversal: Previously, the Trump administration had agitated for a swift deal, threatened to tear up the pact if it didn’t get one, and complained that Canada was moving too slowly. The United States now seems to have accepted that talks will be long and complex.
“We’re no longer focused as much on the prospect of the President pulling the plug on the deal or bringing the whole process to a swift and unpleasant end,” said Laura Dawson, director of the Canada Institute at the Wilson Centre think tank in Washington. “It’s a positive element in that we have a trade negotiation that looks more like a traditional trade negotiation rather than an exercise in political one-upmanship.”
Ms. Dawson said the path forward for Canada and Mexico now is to keep negotiating in good faith but not to accept “a worse deal tomorrow than what we have today” in order to get the talks over with.
Besides autos, the countries are deadlocked on several other tough issues, including American demands for strict Buy American procurement rules, a sunset clause that would automatically terminate NAFTA in five years unless all three countries agree to keep it, the abolition of the deal’s dispute resolution provisions and a dismantling of Canada’s protectionist dairy market.