Observers Suggest Concessions From US on NAFTA Needed for Canadian Agreement

Several major issues between the U.S. and Canada remain unresolved as NAFTA negotiations proceed, Canadian and Mexican negotiators said on Sept. 20. Canada's Foreign Minister Chrystia Freeland didn't dispute a reporter's characterization that the fact that the word "progress" was missing from her description of NAFTA talks was significant. "I chose my words carefully. Today we discussed some tough issues. The conversation was constructive, we all continue to work very hard, and Canada's objective continues to be ... to achieve a deal and to achieve a deal that is good for Canada."

At the same time Freeland was speaking to reporters in Washington on Sept. 20, Kenneth Smith Ramos, the chief technical negotiator for Mexico on NAFTA, presented an update on the negotiations to an academic audience in Mexico. He said that government procurement rules, Chapter 19 dispute resolution and dairy continue to be sticking points for Canada, and said he hopes they will be solved in the next few weeks. He noted that Mexico preserved protections for investors and the state-state dispute chapter. "Chapter 19 is very important for Canada, and they're fighting for it right now," he said in Spanish. He said changes to chapters 11 and 20 that Mexico agreed to will improve the treaty.

He said that while they're working toward a trilateral deal, the Sept. 30 deadline for legal text could be for the bilateral deal. They are still working on that text, he said, including exactly how to describe the revised sunset clause, which calls for a six-year review, and a renewal of 16 years if all agree. He said they want to make sure that one country cannot unilaterally terminate at that six-year point, and that one country alone can't extend for 16 years.

Smith told the audience about wins the Mexican team secured. Mexico convinced the U.S. to drop its seasonality proposal for antidumping cases on fruits and vegetables, kept the current NAFTA compromises on cargo transport, and stopped a dollar-for-dollar government procurement proposal, he said. One of his slides said that Mexico eliminated U.S. proposals that were unacceptable: seasonality and procurement; restrictions on Mexican textiles; and language aimed at reducing the U.S.-Mexico trade deficit.

He said they also secured insurance for Mexico, that in the case of "extraordinary measures" (Section 232 tariffs on auto parts), there's "a guarantee that all our exports, plus 40 percent, will not be impacted." Smith explained that some of the factors that helped the Mexican team were that they made it clear that the U.S. needs a constructive relationship at its Southern border for security and inspection of goods; that many of the administration's proposals were against the wishes of both the American business community and many Republicans in Congress. A Canadian union leader said Sept. 20 that Section 232 tariffs on autos is the biggest hurdle to closing NAFTA, and dismissed the Mexican approach as agreeing to quotas (see 1809200045).

Meanwhile, a consultant with ties to Republicans said he expects a deal, once the U.S. makes more concessions. Tony Fratto, a partner at Hamilton Place Strategies, thinks Canada could join the agreement by Sept. 30, but even if it doesn't, he's sure Canada will be in a deal before it goes to a vote in Congress. Fratto was an assistant secretary at Treasury and a deputy spokesman for the president during the George W. Bush administration. "I think the U.S. is bluffing in its view it can get a U.S.- Mexico deal through [Congress], I don’t think that’s legal, and I don’t think the votes are there for it," he said. He said House of Representatives leaders who have put pressure on Canada to wrap up are part of the bluff (see 1809190023), but that without Canada, none of the states along the Canadian border will vote for a new NAFTA. "The Canadians aren’t stupid, and they know it’s a bluff," he said in an interview Sept. 21 with International Trade Today.

"They’ve been close for a long time in the sense that they’ve narrowed down the handful of significant disagreements that they have," Fratto said of the Canadian and U.S teams. "It will have to have some significant American concessions" to get it done, he said.