Given all the optimistic chatter from political leaders about a successful NAFTA renegotiation, one might think there would be some basis for it. Each side making concessions, for example, on weighty disagreements.
I asked one of the senior players involved in the negotiations for evidence of such. Where’s the beef? What has changed from earlier days when there was little movement?
The answer was a bit of a shocker. On the key issues, with the exception of progress on auto trade, nothing has changed. While talks are more constructive, the divide is as wide as ever.
Washington has yet to take any of its tough demands off the table, the big player said. Not with respect to dairy products, government procurement issues, a sunset clause or a dispute settlement mechanism.
As for the Canadian side, there has been no give either. “I can’t tell you where we’ve given because we haven’t yet,” the insider said. There will have to be some compromises, he allowed, but in respect to which issues, no determinations have been made. “We have to do so fairly quickly.”
Odd. Eight months of negotiations and even those decisions haven’t been taken. Trade negotiations are complex but you might expect the pace from each side to be a bit quicker than that of a three-toed sloth.
If neither side is conciliatory, why are Donald Trump and Justin Trudeau saying they’re fairly close on a new deal? Why was Mexico’s economy minister, Ildefonso Guajardo, saying there is “a very high probability, about 80 per cent” of a new deal getting done?
“I don’t know,” said the negotiator, referencing the Mexican politician’s comment. “There are huge obstacles. An awful lot that has to be done in a very short period of time if we’re going get an agreement.”
One such obstacle is Canada’s supply management system. Washington wants increased access to Canada’s diary and poultry market. But so far, Ottawa hasn’t budged and shows no sign of doing so. Said the negotiator, “That’s a tough one, right?”
Given the divisions, what is hoped for now, as opposed to a real agreement, is a preliminary accord or an agreement in principle. It would come as kind of a stop-gap measure, a time saver, a signal at least that they haven’t given up. But judging from the state of negotiations, there would be little basis for it, other than on auto trade.
One sign of encouragement is a more accommodating approach from U.S. Trade Representative Robert Lighthizer, who met for three hours last Friday with Canadian ambassador David MacNaughton and Foreign Minister Chrystia Freeland. No foreign minister has ever spent as much time in Washington as Ms. Freeland. It has become her second home.
Some officials point to the China factor as helping NAFTA’s cause. Having hit China with billions in new tariffs, and having stoked a possible trade war with that country, President Trump is catering to his nationalist political base. That creates enough instability in the markets. He doesn’t need more upheaval by igniting a trade war on his own continent. He therefore might be more inclined to compromise on NAFTA.
Mr. Trump is used to turning big business deals on real estate and development projects. Sides can be miles apart and suddenly there’s a new offer and, bingo, a deal materializes. A hope of the Canadian side is that this could happen. The President will see an auto sector redo as a prize for American workers, which might trigger a broader resolution.
The sides will continue negotiations at the Summit of the Americas in Lima later this week. No agreement will be announced there. But the Canadian negotiator said, “I can tell you that if by next week we’re not getting pretty close, then we’re not going to get there.”
There is a sense of urgency because of the coming elections in Mexico, the November midterm elections in the United States, and the time-consuming legalistic and procedural requirements that are a feature of trade pacts. Something’s got to give and the betting line is that there will be an interim agreement that punts the problems down the line.
If it happens, it will be like putting icing on a cake that isn’t even half-baked. It will be a non-deal announced as a new deal.