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Nafta negotiators give up on 2017 deadline

17 Oct 2017, 8.36 pm GMT

Nafta negotiators give up on 2017 deadline

Washington, 17 October (Argus) — Canada, Mexico and the US no longer expect ongoing talks to update the North American Free Trade Agreement (Nafta) will conclude this year, as negotiators struggle to find common ground on a number of overarching issues.

Only two out of roughly two dozen chapters in Nafta have been substantively completed as the fourth negotiating round ended in Washington today. The next round will take place in Mexico a month from now and more sessions will be scheduled in the first quarter of 2018, negotiators said.

Proposals advanced by the US administration have created serious disagreements with Canada and Mexico. One main complication is US president Donald Trump's demand that a new agreement reduce the size of US trade deficits, US trade representative Robert Lighthizer said today.

"Trade deficits matter to us. I am surprised and disappointed to the resistance" to US proposals from Canada and Mexico, Lighthizer said. "We have seen no indication that our partners want to see any changes to address the unbalances and reduce trade deficits."

All three parties for the first time since the start of the talks acknowledged that difficulties have mounted as the talks progressed.

"We have seen a series of unconventional proposals that make our work challenging," Canada's foreign minister Chrystia Freeland said.

A US insistence on sunset clauses in the revised text and on higher US content requirements in the trade for automobiles and parts are among provisions that raised objections from Canada and Mexico. US Chamber of Commerce president Tom Donohue called those provisions "poison pills" — clauses guaranteed to raise conflicts that lead the talks to collapse.

Energy accounts for just under 10pc of Nafta trade flows of more than $1.1 trillion annually. The North American energy industry is especially attuned to another controversial proposal to abolish or substantially revise Nafta's investor-state dispute settlement. US energy companies want to preserve the dispute settlement provision out of concern that Mexico's legal system is yet to catch up to the liberalization of Mexico's energy sector.

The revised text should provide the same certainty to investors and maintain or increase protection for the private sector, Mexico's economy minister Ildefonso Guajardo said.

The US wants Canada and Mexico to agree to incorporate the text from the Trans-Pacific Partnership (TPP) agreement negotiated by former president Barack Obama's administration, which was meant to address long-standing US concerns over Nafta.

"I have seen a refusal to accept what is clearly the best text available," Lighthizer said. The refusal to accept TPP text, which Trump revoked among his first actions in office, shows that Canada and Mexico want to preserve "unfair trade preferences" against their US competitors, according to Lighthizer.

Freeland said the US proposals reflect a "winner-takes-all mindset."

The EU is concerned about a potentially negative outcome of Nafta talks because of significant European investments in North America, EU competitiveness commissioner Jyrki Katainen said today during a discussion at Washington-based think tank the Atlantic Council.

"If you want to replace existing agreements with those where you keep all benefits to yourself, you will not get any results," Katainen said, a day after meeting with US secretary of commerce Wilbur Ross.

The EU has received contradictory messages from the administration both on the future of Nafta and of the proposed US-EU free trade agreement, called Transatlantic Trade and Investment Partnership, Katainen said.

"From our point of view, [the US-EU agreement] is frozen — we know that it is not on the agenda of the administration," Katainen said. The EU will instead negotiate with Washington on trade issues affecting specific industries, although energy is not an immediate priority, according to Katainen.


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