The gloom and doom started to really set in around the NAFTA talks on Tuesday evening. U.S. negotiators had started to put forward proposals that were so aggressive that some observers were calling them poison pills.
This was more than the everyday anxiety over the future of the North American free-trade agreement that Canadian and Mexican officials have got used to since Donald Trump became U.S. President. They have responded to that by putting on their game faces and talking about making a deal. Away from cameras, the faces are longer now.
If you watched Wednesday's closing statements to the media after the third round of negotiations, and looked past Foreign Affairs Minister Chrystia Freeland's celebratory announcement that a chapter on small business had been completed, you could glimpse trouble.
U.S. Trade Representative Robert Lighthizer insisted the Americans want a deal that undoes their trade deficits. Mexican Economy Secretary Ildefonso Guajardo said countries need the "will" to table workable proposals, stated that the next round will have "substantial challenges" and warned Mexico wants a deal that increases rather than diminishes trade opportunities. Ms. Freeland said she would not comment on Mexico-U.S. issues as she skirted questions about whether the United States was deliberately proposing non-starters: "I do not have the superpower that allows me to look into the hearts of a counterparty and divine their true intention," she said.
But many among the hundreds who stick close to these talks now believe there will be no deal – and even that the negotiating positions the United States put forward this week are really setting the ground for Mr. Trump to trigger a withdrawal from NAFTA.
"The prevailing view is it's coming. Probably late 2017, early 2018," said Dan Ujczo, an international trade lawyer with cross-border law firm Dickinson Wright, who was in Ottawa to keep tabs on the talks. "The mood [on Tuesday] night was clearly despondent."
The information dribbling out of the talks did not bode well. The U.S. proposal on labour, initially described as being like the rules Mexico and Canada accepted in the now-dead Trans-Pacific Partnership, also calls for Mexico to increase its minimum wage sharply. Mr. Ujczo said the Mexicans told him that what the U.S. team was talking about could work out to an eight-fold increase. The United States also made aggressive demands regarding seasonal growers, poking a pointy stick into a long-running trade war between Mexico and Florida tomato growers that is something like the Canada-U.S. softwood dispute.
NAFTA could face "death by a thousand cuts," Mr. Ujczo said.
The United States has yet to put forward its proposals on key contentious issues, such as rules of origin for autos that determine whether a vehicle is North American enough to cross borders duty-free, but fears are now that they'll be ugly.
Unworkable demands might be dismissed as a tactic, and a very Trumpian one, too. Even triggering the six-month process for withdrawal from NAFTA could be a way to press for a better deal later. But letting the talks run into mid-2018 is dangerous, too.
The three countries have said they want a deal by February – and that's not just to suit Mr. Trump's impatience.
Mexico's presidential election will be held next July, and some fear that if NAFTA isn't signed and sealed by then, the candidates won't be able to resist capitalizing on anti-Trump sentiment and opposition to doing a NAFTA deal with the U.S. President.
"I call it the pinata effect," said Moises Kalach, head of trade negotiations for Mexico's business lobby, the Consejo Coordinador Empresarial. "Put it out there, and it will be very popular to hit it."
And the U.S. Congress has mid-term elections in November, 2018 – so if a renegotiated NAFTA is going to the Congress for approval, it's going to be a political football. Even if the February deadline is met, it will be controversial in primary campaigns; if not, it will be debated in election races. Most politicians in the U.S. Congress don't want to have to say how they would vote on a NAFTA 2.0 – that is, except those that want to kill it. And around the talks this week, there has been more gloom about whether the United States will ever negotiate a new NAFTA anyway.