Canadian Shipper


NAFTA: Deadlock on hard issues as round concludes under cloud of question marks

Mexico City, Mexico — Another round of NAFTA talks wrapped up with all key issues still deadlocked Tuesday as negotiators prepared to leave Mexico City with a plethora of question marks still lingering over the trade deal.

The negotiators made progress on a variety of technical files, nearly concluding some less-controversial chapters like digital trade, sanitary measures, telecommunications, customs enforcement, and telecommunications.

But on hot-button files like autos, dairy, dispute resolution, and a U.S. idea to make it easier to terminate NAFTA, they cite no real progress. Sources from the host country Mexico described a lingering standoff on multiple fronts, which Foreign Affairs Minister Chrystia Freeland confirmed back home in Ottawa.

“There are some areas where more extreme (U.S.) proposals have been put forward. These are proposals we simply cannot agree to,” Freeland said outside the House of Commons.

“What we’ve done in some of these areas is ask for a better understanding of those proposals. We really feel a fact-based approach is the way to get a good result… (We’re asking): ‘Do you agree with our facts, or do you disagree with our facts?”’

That approach has frustrated some on the U.S. side.

An American familiar with the talks says the other countries would be better off making counter-proposals, rather than what they did at this round: showing up with presentations about how damaging the American proposals would be to the U.S. itself.

A front-page headline in Mexico’s Excelsior newspaper described the dynamic this way: “’Mexico and Canada form a common front against the U.S.” Mexican sources vehemently rejected the idea of an organized Canada-U.S. tag-team.

They said, for instance, that there are no pre-session strategy huddles between Canada and Mexico, and said they simply have similar interests on a few important files: “(But) gang up on the U.S.? No, no, no,” said one Mexican official, speaking on condition of anonymity given the sensitivity of the matter.

Mexico demonstrated at this round, however, that it’s willing to play hardball.

It demonstrated that two can play at the game of zero-sum thinking and hostile tit-for-tat. On the issue of Buy American, the Mexicans said they could respond with Buy Mexico policies in public contracts, and the biggest loser would be the U.S. That’s because American companies do more construction business in Mexico than vice-versa, they argued.

“We would all lose,” said another Mexican source. “But the U.S. loses more.”

The Mexico City round ends with uncertainty on multiple fronts. Two major question marks: will President Donald Trump start pulling out of NAFTA as a negotiating ploy? And what happens if a deal isn’t done by the end of the current schedule of talks, now extended to March?

One thing the Mexican sources are adamant about — if Trump makes good on his threat to start the NAFTA cancellation process as a bargaining ploy, they will refuse to negotiate under that pressure and would rather let the U.S. withdraw.

They said it’s impossible to negotiate with a gun to the temple, because every concession would be seen as Mexico caving. They said they would simply allow the U.S. to walk away, accelerate trade talks with Brazil and Argentina, and expand trade with Canada in meat, wheat and energy, where Canadian suppliers would pick up some of the U.S. slack.

“There’s the door,” one Mexican said, pointing at an actual door.

“We will send a couple of decrees to the Senate (of Mexico) saying that (from) this moment forward, U.S. goods and persons are no longer going to be traded under NAFTA preferential provisions.”

Canada has not drawn such a hard line.

The politicians leading the talks have attempted to turn down the public pressure. Freeland, Robert Lighthizer, and Ildefonso Guajardo skipped this round, and will skip another round next month in Washington.

They will be back at the table in the next round in Canada, in late-January, in Montreal. The politicians will review progress made, and begin assessing next steps for the February and March rounds, and what happens thereafter if there’s no deal.

The Mexicans say they’re fine to keep negotiating after that — even though there are national elections there and in the U.S.