Little progress in 7th round of NAFTA talks, 8th round in late-March/early-April could be pivotal

In the lead-up to the 7th round of talks, The Council of Canadians and allies hosted a talk by Gordon Laxer in Vancouver. He spoke on NAFTA, energy proportionality and climate change and argued it's time to end NAFTA's mandatory exporting rule. We will be releasing two reports on this issue later this month.

The 7th round of NAFTA talks will conclude on Monday (March 5) with no indication of movement on key issues, but instead a potentially huge new obstacle.

Reuters reports, "In Mexico City, negotiators discussed the broad outlines of so-called rules of origin, which would have a big impact on the automotive industry. Talks were hampered by the absence of the chief U.S. negotiator, Jason Bernstein, who was unexpectedly called to Washington on Tuesday for consultations and is unlikely to return to Mexico. The current round of talks will also focus on closing chapters related to digital trade, telecommunications, technical barriers to trade, good regulatory practices, and sanitary and phytosanitary measures, according to an official with knowledge of the talks."

The key issues of Trump's proposal to eliminate the investor state dispute settlement mechanism and put in a five-year sunset provision on the deal are not appearing in news articles on this round of talks.

Furthermore, a potentially huge new obstacle is Trump's announcement that he will impose next week a 25 per cent tariff on steel imports and 10 per cent tariff on aluminum imports into the United States.

CNN reports, "Aimed at China, it's actually going to hit our neighbor to the north particularly hard, for Canada is America's largest source of steel and steel products -- providing 16% of all imported steel -- followed by Brazil, and South Korea. China doesn't even make it into the top 10 of suppliers to the American market. Trump's sudden and utterly unanticipated steel and aluminum tariffs now [makes the task of completing NAFTA] much harder. Of course, Trump could still impose these tariffs, while choosing to exempt certain countries -- like Canada and Mexico -- from the new tariff schedules."

The Toronto Star reports, "Ken Neumann, the director of the Canada’s United Steelworkers, said a tariff on Canada could 'decimate' the Canadian industry."

The CNN article adds, "NAFTA negotiations were supposed to have concluded successfully before Mexico heads into its presidential campaign on March 30. But, as of yet, fractious issues remain unresolved."

Voting day in Mexico is on July 1, then there will be US mid-term elections on November 6, and the new Mexican president will be sworn in on December 1.

A Council on Foreign Relations blog highlights, "Upcoming elections [in Mexico] pose a profound challenge. On July 1, Mexican citizens will elect a new president and more than 3,000 officials, including every member of the House of Representatives, a third of the senators and eight governors. In this highly contested set of races, the economic model of the last 30 years, of which NAFTA is an integral part, is in effect on trial. That makes the timing of any announced compromise on NAFTA tricky. A resolution before the election opens the ruling Institutional Revolutionary Party to broadsides from every direction."

Furthermore, that blog notes that in the US, "Under current Trade Promotion Authority (which needs to be renewed in July), after reaching an accord U.S. negotiators need to wait least 90 days before officially signing. This waiting period is extended to 180 days if negotiators have made changes to how trade remedies work (which is likely). Then, before bringing it to a vote in the Congress, they need to wait up to another 105 days for an International Trade Commission study on the effects on the U.S. economy. [That could push ratification to] a Democratic-led House [that] would require significant changes before approving a Trump-led bill, pushing passage deep into 2019."

And the deeper the ratification is pushed into 2019 the closer it comes to the October 21, 2019 federal election in Canada. As such, there is a very real possibility that NAFTA could become a ballot box issue in Canada next year. That provides an opportunity for us to raise our concerns about the investor-state provision, the energy proportionality provision, and water remaining as a good, service and investment in the agreement.

The 8th round of NAFTA talks is expected to take place in late-March or early-April and will undoubtedly be pivotal given these brewing circumstances.