WASHINGTON (AP) -
Talks to rewrite the North American Free Trade Agreement have stalled over
tough American demands, dashing hopes that a deal can be reached this year.
A fourth round of
negotiations between the U.S., Mexico and Canada ended in mutual
exasperation Tuesday. Talks will continue next month in Mexico City and will
spill over into next year.
The negotiators had
originally hoped to reach an agreement this year - before Mexico’s
presidential election and U.S. midterms turn up the political pressure in
Trump, who called NAFTA a job-killing “disaster” on the campaign trail, has
threatened to withdraw from the 23-year-old pact if he can’t get what he
Canada and Mexico
are balking at America’s demand that a revamped deal do something to reduce
America’s trade deficits.
“We have seen no
indication that our partners are willing to make any changes that will
result in a rebalancing and a reduction in these huge trade deficits,” U.S.
Trade Rep. Robert Lighthizer said.
Minister Chrystia Freeland countered that America’s “unconventional”
proposals would “turn back the clock” and warned against a “winner-take-all
NAFTA ripped down
most trade barriers between the U.S., Canada and Mexico. Trade surged within
the NAFTA bloc, benefiting American farmers who export corn and other
But many U.S.
manufacturers moved production south of the border to take advantage of
Mexico’s low labor costs, then shipped goods back to the United States. The
influx of imports swelled America’s trade deficit with Mexico, which came to
$62 billion last year. (The United States logged an $8 billion trade surplus
with Canada in 2016).
To cut the trade
deficit with Mexico, the United States is demanding that more auto
production be made in America before qualifying for NAFTA benefits.
But companies have
built complicated supply chains that straddle NAFTA borders, taking
advantage of each country’s strengths - such as cheap labor in Mexico and
skilled workers and proximity to customers in the United States and Canada.
Changing the rules, they say, would disrupt their operations.
rules would increase the cost of manufacturing and raise prices for
consumers,” said Ann Wilson, senior vice president for government affairs at
the Motor & Equipment Manufacturers Association, which represents auto
“It would just make
North America less competitive, and it would impose an indirect barrier to
trade,” said trade lawyer Miguel Noyola, a principal at Baker & McKenzie LLP.
Lighthizer is also
targeting a NAFTA provision that now allows companies to appeal to private
tribunals when they object to decisions by the government of the country
where they’re investing - perhaps a costly environmental regulation.
mean companies don’t have to worry as much about the political risks - and
account for the potential cost - when they invest in less-developed
countries. Effectively, Lighthizer argues, they put “a thumb on the scale”
in Mexico’s favor. The U.S. wants to limit companies’ ability to appeal
government decisions under NAFTA.
The U.S. is also
proposing that the new NAFTA expire unless the countries agreed every few
years to extend it. Critics say the so-called sunset clause would create too
much uncertainty for businesses.
“Who would want to
make an investment if they don’t know what is going to happen in five
years?” says former U.S. Ambassador to Mexico James Jones, now chairman of
Monarch Global Strategies.