MONTREAL – The NAFTA train remains on track.
U.S. trade czar Robert Lighthizer says enough progress has been made over the past week to warrant moving forward with a fresh round of talks in Mexico, but he’s also making it clear that more work needs to be done.
Lighthizer is clearly not happy with Canadian proposals aimed at breaking a logjam on autos, and he accused Canada of mounting a “massive attack” on its trading regime with a wide-ranging complaint to the World Trade Organization earlier this month.
But overall, he said the latest round of NAFTA negotiations have made progress, although Canada, the U.S. and Mexico owe it to their citizens to pick up the pace of the talks.
“Some real headway was made here today,” Lighthizer said. “We’re committed to moving forward.’
Lighthizer’s long-awaited verdict on the sixth round of marathon talks in Montreal came Monday at a public event alongside Foreign Affairs Minister Chrystia Freeland and Ildefonso Guajardo of Mexico. The three held a series of face-to-face bilateral meetings before their final closed-door, three-way huddle.
It was the first such group appearance since the trio’s memorably tense encounter in the fall.
Numerous participants in the Montreal round were sounding cautiously optimistic in the lead-up to Monday’s closing statements, calling the latest talks less negative and more constructive than recent ones, with the first true dialogue on serious sticking points – autos, dispute resolution and a five-year review clause in particular.
Lighthizer, however, panned Canada’s proposal on autos, saying it would do the reverse of what was intended.
On autos, Canada has suggested new ways to calculate whether a car counts as American, including a breakdown of its high-tech components. Lighthizer said the proposal would lead to less North American content, the “opposite” of what the trade agreement is supposed to achieve.
“We find that the automobile rules-of-origin idea that was presented when analyzed, may actually lead to less regional content than we have now, fewer jobs in the United States, Canada and most likely Mexico,” he said.
“This is the opposite of what we are trying to do.”
Freeland and Lighthizer went to great lengths to dispel the notion that the two don’t actually like each other, an impression created by frosty body language and rhetoric that last time the two shared the NAFTA stage last fall. Lighthizer offered smiles and fond memories of vacationing in the Montreal area with his family in the past.
But as he began to detail his list of complaints about Canada, Freeland pursed her lips, steeled her posture straight and appeared to fix her gaze on a point straight ahead.
One prominent stakeholder described Lighthizer’s remarks as purely tactical.
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“I think he’s a good negotiator,” said Flavio Volpe of the Canadian Auto Parts Manufacturers Association.
“I don’t really take a lot of the stuff at face value. But it’s important for us to understand the sentiment. And the sentiment is, ‘We’re not satisfied, we’re not going to put our guard down, and we’ll see you in four weeks.”‘
With just eight weeks left in the current schedule of talks – and with U.S. President Donald Trump frequently threatening to blow up the deal – all eyes were indeed on Lighthizer.
Dave Reichert, an American lawmaker who spoke with Lighthizer, said he sounded hopeful. But Reichert warned not to expect too much enthusiasm given the U.S. trade representative’s famously gruff style. Indeed, when asked by reporters how talks were going, he told his security detail to walk faster and sped away from the scrum.
Important decisions about NAFTA’s future are now in the hands of Trump’s administration. American negotiators passed the baton on Sunday to political decision-makers how to major discussions about autos, dispute resolution and a five-year review clause.
The Montreal round represented a new phase for the negotiations.
It included a first significant back-and-forth dialogue on autos and other major sticking points. Sources say there were three hours of talks over two days about the autos proposal.
Earlier rounds had effectively hit a roadblock because of scant engagement on the most serious files. After the U.S. made proposals that shocked Canada and Mexico, they responded by insulting the U.S. ideas and even devoted one round to describing reasons why the American proposal on cars was so impractical.
In Montreal, Canada brought what it billed as “creative” proposals to the talks moving forward on the other major sticking points.
On dispute resolution, the Canadians and Mexicans worked out a proposal to create a new investor-state dispute system that applies only to them, but U.S. has said it might want to opt out of the system.
On the review clause, the U.S. has proposed a rule that would terminate NAFTA every five years unless it’s maintained by all three countries. Mexico responded a few months ago by proposing a watered-down version, which would force countries to periodically review the effects of the agreement – but without an automatic-termination rule.
This round was an early example of countries seeking a pathway to solutions for the difficult problems – without having the talks collapse.
There was less progress in other areas – including dairy and labour standards – which means big hurdles moving forward.
U.S. Democrats and Canadian unions are expressing frustration labour hasn’t gained more prominence.
American milk producers are demanding greater access to Canada’s supply-managed system, and the issue is certain to resurface later.