By Jacob M. Schlesinger and William Mauldin
WASHINGTON -- Senior U.S., Canadian and Mexican officials,
citing "significant conceptual gaps" in talks to update the North
American Free Trade Agreement, say they won't meet their
end-of-year deadline for the negotiations.
U.S. Trade Representative Robert Lighthizer, reading from a
joint statement Tuesday in Washington, said the next round of talks
will start in Mexico City on Nov. 17, instead of later this month
as expected.
The three countries expect talks to continue through the first
quarter of 2018, Mr. Lighthizer said. Previously U.S. and Mexican
officials had sought to wrap up talks around the end of the
year.
Mr. Lighthizer cited some progress in less controversial parts
of the talks, saying officials "substantively competed discussions
on the competition chapter" of the agreement. Officials also
notched some agreement in customs, trade facilitation, digital
trade, regulatory practices, and Nafta annexes related to specific
sectors, he said.
"The agreement has become very lopsided and needs to be
rebalanced," Mr. Lighthizer said in a joint event with his Mexican
and Canadian counterparts. President Donald Trump has repeatedly
threatened to exit Nafta if trading partners don't agree to new
provision to balance trade, a position Mr. Lighthizer echoed
Tuesday.
But in recent weeks Mexican and Canadian officials -- joined by
major American business groups -- have objected to "America first"
language proposed by the Trump administration that could make it
harder to trade auto parts and other goods in the trade bloc, for
example.
"Proposed new U.S. national content requirements would severely
disrupt these supply chains," Canadian Foreign Minister Chrystia
Freeland said Tuesday. She said some proposals would violate
commitments nearly all trading nations have made through the World
Trade Organization.
Ms. Freeland said she hopes officials can come together next
month in Mexico City with "fresh creative perspective."
"None of us wants to leave this process empty-handed," Mexico's
economy minister, Ildefonso Guajardo, said.
The round of talks that concluded Tuesday offered the most
detailed look at the U.S.'s proposals for overhauling a pact Mr.
Trump has labeled a disaster for Americans.
The administration's broad goal is to weaken the force of an
agreement they argue has done more to help Mexico than the U.S.,
and to reorient it in a way that would do more to "incentivize
production in the U.S.," as one U.S. official told a gathering of
business lobbyists Sunday.
Specific proposals the U.S. floated this round included: a
"sunset" clause that would terminate Nafta after a few years unless
all three parties agreed to renew it; measures to dilute the pact's
three provisions governing disputes among the countries and
companies based in them; and a demand that half the content of
automotive products be made in the U.S. to qualify for Nafta's
tariff-free benefits.
The U.S. had in the earlier round proposed to slash by about 90%
the amount of U.S. government procurement available to Canada and
Mexico, to a level that, one Canadian negotiator said, would put
the country the same level of access as Bahrain.
Mexican and Canadian officials have branded all of those
concepts unacceptable, but they haven't declared the proposals
fatal to the talks.
Still, the just-concluded session has stoked a growing fear
among Nafta supporters -- business groups, members of Congress, as
well as officials from Mexico and Canada -- that the gaps are so
wide the discussions may ultimately prove futile, and the end
result could be the death of the 23-year-old pact.
Mr. Trump has done nothing to quell those anxieties, talking
repeatedly -- as he did during a White House meeting on Wednesday
with Canadian Prime Minister Justin Trudeau -- about pulling the
plug on Nafta if the other countries won't accept his vision for
scaling it back and making it more U.S.-centric, or breaking it
into separate bilateral deals.
What remains unclear is whether Mr. Trump, whose pre-political
career was defined by hard-nosed real-estate negotiations, is
seriously willing to walk away from an agreement that has nearly
universal support from the American business community, the
congressional leadership, and members of his own cabinet -- or
whether that threat is just a bargaining strategy.
That is the question to be assessed over the coming weeks, now
that concrete proposals have been put forth. The Mexicans and
Canadians are weighing whether the ideas can serve in any way as
the basis for creative negotiating, and whether the administration
is showing any flexibility on any of the points.
Indeed, for all the grim talk of collapsing talks, experienced
negotiators caution against dire predictions rooted in opening
demands. "I don't think one should look at the strength of the
proposals and draw conclusions -- this is the beginning of the
negotiation over issues," Michael Froman, the Obama
administration's chief trade official, said at a Council on Foreign
Relations conference Monday. "Now is when the real conversation
begins," he added. "Where is their flexibility on these issues?
What can be sold domestically in each of these economies?"
People familiar with the negotiations say the just-completed
round didn't yet broach the question of just how much bargaining
room there is over those issues. The U.S. negotiators made their
demands clear, but their counterparts declined to provide detailed
responses. One person briefed on the talks summarized the Mexican
and Canadian reaction as: "This is not what we're used to, and we
will really have to think about that." The person elaborated that
the U.S. trade negotiators said in briefings that "no one has
welcomed these proposals," but their reaction varied by
proposal.
While much of the public focus has been on Trump
administration's proposals to redefine Nafta's core principles,
that is one of just of the three different types of negotiations
that U.S. officials have described in briefing people on the
progress of the talks, where separate teams are simultaneously
working on 28 separate chapters.
While the first category of talks centers on new and difficult
U.S. proposals, the second is focused on what U.S. officials refer
to as easy and technical matters that the three countries seem able
to agree on fairly quickly. The language for some of those issues
is being lifted directly from the 12-nation Trans-Pacific
Partnership pact that all three countries had joined during the
Obama administration, but which Mr. Trump pulled out of shortly
after taking office. For example, the three countries have already
announced they have completed one chapter setting rules for small
businesses, and another aimed at ensuring effective policies on
antitrust and other competition issues.
The third category covers what U.S. officials have called
ambitious but conventional U.S. trade positions -- ones that track
closely positions staked out by the Obama administration -- in
areas like creating rules for digital trade that didn't exist when
Nafta was written in the early 1990s.
While talks in the second and third areas appeared to be
proceeding smoothly in the early rounds, some officials said
progress even in those areas slowed over the past week. They said
Mexicans and Canadians appeared hesitant to move quickly on any
subjects, perhaps looking for bargaining chips they could use to
get the U.S. to compromise.
During one briefing, a U.S. negotiator said while the third
round in Ottawa last month deserved a grade of "B" in terms of
progress made, the fourth might be given a "C-plus."
--Miguel Gonzalez contributed to this article.
Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com and
William Mauldin at william.mauldin@wsj.com
(END) Dow Jones Newswires
October 17, 2017 16:17 ET (20:17 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.