Prime Minister Justin Trudeau, US President Donald Trump, leading Mexican presidential candidate Andres Manuel Lopez Obrador
The Globe and Mail reports, “The Trump administration has dropped a contentious demand that all vehicles made in Canada and Mexico for export to the United States contain at least 50 per cent U.S. content, removing a key roadblock to a deal for a new North American free-trade agreement.”
That article adds, “[Canada’s ambassador to the US David] MacNaughton said [US Trade Representative Robert] Lighthizer and his team came to the table [last week] with a series of ‘constructive’ compromise proposals aimed at reaching a deal on autos. He would not say exactly what the United States’ ideas are, but said that if adopted they would address President Donald Trump’s desire for more American content in cars without adopting a hard-and-fast U.S. content rule.”
The Canadian Press adds, “This comes as the United States appears increasingly keen on securing a quick agreement, with an upcoming round in Washington expected to feature a final push to obtain a deal before election campaigns in Mexico and in the U.S. Congress punt the process into 2019.”
This is leading to increased speculation that a deal could be reached by April 30. The next round of NAFTA talks is expected to start on April 8 in Washington, DC and run for 10 to 14 days – and that is shaping up to be a critical political moment.
What might be the end game on other issues?
Supply management – The Canadian Press also reported this past weekend, “The U.S. has also demanded an end to Canada’s supply management system, which limits imports on milk, cheese and poultry, and sets minimum prices. Some trade experts suspect the Trudeau government may be willing to accept a small increase in U.S. dairy imports, similar to what was agreed to in the original Trans-Pacific Partnership, before Trump withdrew the U.S. from that trade deal.”
Sunset clause – In November 2017, the Canadian Press reported, “The termination clause could be turned into a review clause, meaning the agreement would still undergo assessments at regular intervals – without creating a climate of constant uncertainty, in which the deal could be cancelled by default. The Mexican government has publicly and explicitly acknowledged its willingness to discuss this revised version. Now Canadian officials are saying similar things privately.”
Procurement – The Trump administration wants to prohibit Canadian and Mexican companies receiving more in US government contracts than American companies in those countries. In September 2017, Foreign Affairs minister Chrystia Freeland commented, “I have to note, and I say this with some pride, that mutual access to government procurement contracts was one of the great achievements of CETA. I think we should be able to achieve at least as much with our closest neighbours.”
Dispute settlement – Trump wants to opt out of the Chapter 11 investor-state dispute settlement provision, strike Chapter 19 dispute panels from the deal, and make Chapter 20 state-to-state panels advisory. On Chapter 11, the Canadian Press reported this past January, “A series of options are beginning to crystallize behind closed doors, including: Canada and Mexico could sign a side-letter or annex to cover their co-operation on the subject in the agreement; Canada and Mexico could abandon Chapter 11’s dispute resolution section altogether and rely on other forums, including using the dispute resolution provisions of the revamped Trans-Pacific Partnership.”
Energy proportionality – This has not been a controversial issue among the three countries. In September 2017, the Canadian Press reported, “When NAFTA was originally signed 23 years ago, Mexico rejected parts of the energy chapter because its oil industry was entirely owned and operated by the government. However, President Enrique Pena Nieto is looking to solidify the reforms he started in 2013, opening up the Mexican oil industry to international investment and participation. As such, Mexico has asked to sign Article 605, which limits government interference in oil exports to any of the participating NAFTA countries.”
Where does this lead us? Yesterday, Mexican presidential front runner Andres Manuel Lopez Obrador said, “I hope nothing is signed until after the elections and that we don’t rush into making the mistake of signing something that could be bad for us.” And just three days ago, Reuters reported, “Speaking in Mexico City on the 80th anniversary of the nationalization of the country’s oil industry, Lopez Obrador also said that within three years of his possible six-year term, Mexico would stop buying foreign fuel, following extensive upgrades of the country’s refining sector.”
As such, with the rush by Trudeau, Trump and Pena Nieto to sign NAFTA before the end of next month, and Lopez Obrador’s opposition to Mexican energy ‘reforms’ that would be locked in under a new NAFTA, it may be the Mexican election and energy proportionality that become central issues over the coming weeks.
