Updated U.S. objectives set out for the renegotiation of NAFTA will make reaching an agreement on a deal to extend the trade pact by the U.S. deadline of March 2018 difficult, the Bank of Nova Scotia says.
"The update hardens the U.S. stance with respect to several points on which Canada and Mexico have indicated that they cannot accept the current U.S. proposals," the bank said in an analysis of objectives issued by the U.S. Trade Representative on Friday.
"Other aspects of the update complicate the NAFTA talks by adding into the negotiations efforts by the U.S. to set precedents for other trade agreements and to deal with other distinct foreign-policy challenges," the bank's report said.
The report was issued Tuesday, the final day of the fifth set of negotiations in Mexico City.
The updated objectives, which follow those set by the USTR in July, specify that Canada's supply management system for dairy, poultry and egg products is a key target of the Americans and point to technical barriers to U.S. grain and alcohol beverages, which refers to two complaints it made to the World Trade Organization about how U.S. wines are displayed in B.C. grocery stores.
On rules of origin for manufactured goods, which has become one of the key sticking points in the NAFTA talks, the Americans now call for rules that "incentivize production in North America as well as specifically in the United States," the bank quoted the objectives as saying.
"The new version of this goal underscores the U.S. poison pill demand to tighten U.S. and NAFTA content requirements," the report said.
That update adheres to Commerce Secretary Wilbur Ross's focus on the auto sector, which has also been singled out by President Donald Trump as an example of how NAFTA has failed the United States, even though vehicle production in that country is now higher than it was before the agreement came into place in 1994.
Both Canada and Mexico have rejected demands on autos – 85 per cent North American content in all vehicles built in the three countries and 50 per cent U.S. content in vehicles made in Canada and Mexico – as non-starters that are not even worthy of negotiation.
The extra focus on rules of origin in the updated objectives issued Friday may be an attempt by the Americans to complicate participation by its two NAFTA partners in the Trans-Pacific Partnership, the bank's report said.
"The update puts a sharper point on many areas of disagreement that will become more difficult to resolve," the bank said.