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Progress Reported in NAFTA Talks but Problems Persist

Wednesday, January 31, 2018
Sandler, Travis & Rosenberg Trade Report

U.S. Trade Representative Robert Lighthizer said Jan. 29 that the sixth round of negotiations on updating NAFTA was “a step forward” but that the talks“are progressing very slowly.” Lighthizer acknowledged that businesses are “operating in a state of uncertainty” and said negotiators “will work very hard” in hopes of achieving “major breakthroughs” before the next round, which is scheduled to run Feb. 26 to March 6 in Mexico City.

Officials said one chapter was closed at the sixth round, which was held Jan. 22-29 in Montreal, and progress was made on others. Mexican economy secretary Ildefonso Guajardo said negotiators closed the anti-corruption chapter, which “includes strong disciplines that go beyond anything that has been done in prior trade agreements,” along with an annex on information and communication technologies. The chapter on digital trade and annexes on chemicals and pharmaceuticals could be closed at the next round. Guajardo noted that the proposed new rules on customs and trade facilitation are “much more advanced” than the World Trade Organization agreement on that issue and “much stronger than what we're achieving in” the Trans-Pacific Partnership. Canadian foreign affairs minister Chrystia Freeland added that there was “good progress” on sanitary measures, telecommunications, and technical barriers to trade.

Negotiators also “finally began to discuss some of the core issues,” Lighthizer said, although disagreements are still apparent. For example, the U.S. proposed months ago to increase the NAFTA regional content requirements for automobiles from 62.5 percent to 85 percent and to add a requirement for 50 percent U.S. content. Press reports note that Canada countered with the idea of including the value of software and other high-tech equipment made in North America in the calculation of regional content. While Freeland noted that she “quite intentionally did not put a fully formed proposal on the table,” Lighthizer appeared to reject it, asserting that it “may actually lead to less regional content than we have now and fewer jobs in the United States, Canada, and likely Mexico.”

Freeland said Canada also offered “a new approach to investor-state dispute settlement … that responds directly to U.S. concerns about being subject to ISDs,” but Lighthizer suggested that this proposal is a “poison pill.” On the other hand, the U.S. seemed willing to consider Canada’s proposal to review NAFTA every five years without the automatic termination provision the U.S. has proposed.

In his closing remarks Lighthizer alluded to President Trump’s consistent threat to withdraw the U.S. from NAFTA. Referring to a challenge Canada recently filed at the World Trade Organization against U.S. trade remedy laws, which he called “a massive attack on all of our trade laws,” Lighthizer said it “does make one wonder if all parties are truly committed to mutually beneficial trade.”

Nevertheless, there was no direct mention of a withdrawal, and all three trade ministers reiterated their commitment to a successful outcome. The U.S. “views NAFTA as a very important agreement” and is “committed to moving forward,” Lighthizer said, expressing hope that progress “will accelerate soon.” Guajardo said Mexico too is “committed to intensify our engagement and will continue working constructively to solve pending issues.”

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