Canadian Foreign Minister Chrystia Freeland, Mexican Economy Minister Ildefonso Guajardo and U.S. Trade Representative Robert Lighthizer pose for a photo during a joint news conference on the closing of the seventh round of NAFTA talks in Mexico City, Mexico March 5, 2018. REUTERS/Edgard GarridoEdgard Garrido/Reuters
NAFTA renegotiations remain deadlocked over the Trump administration’s demand for new rules to encourage automotive jobs in the United States at the expense of Mexico – even as Washington pushes for a deal by the end of the month.
Foreign Affairs Minister Chrystia Freeland hunkered down with U.S. trade representative Robert Lighthizer and Mexican Economy Minister Ildefonso Guajardo at Mr. Lighthizer’s office in the U.S. capital on Thursday in a bid to break the impasse. Mexican Foreign Affairs Minister Luis Videgaray also flew to Washington for talks with Jared Kushner, U.S. President Donald Trump’s son-in-law.
The United States is demanding changes to the North American free-trade agreement’s “rules of origin” governing the automotive sector, which dictate how much NAFTA-zone content vehicles must contain to qualify for tariff-free shipping between the three countries.
The toughest proposal is one that would require some auto parts to be made in factories where workers earn above a specific threshold – between US$15 and US$17 an hour, depending on the part. Mexico, where auto workers make an average of US$3 an hour, is resisting the demand.
Ms. Freeland struck a hopeful note as she emerged from Washington’s Winder Building near the White House around 3 p.m., saying the countries had made “good progress” on the auto file. But she would not put a deadline on the conclusion of talks, saying Canada was willing to negotiate for “as long as it takes.”
“I believe very strongly, and I think this is a view shared by the two other countries, that rules of origin for autos, the highly integrated automotive sector, is really at the heart of the NAFTA negotiation,” she said. “It’s important for people to appreciate this is a fiendishly complex set of issues.”
Ms. Freeland, Mr. Lighthizer and Mr. Guajardo planned to meet again on Friday.
The U.S. government wants negotiations finished by the end of April or the middle of May so it can submit a deal for ratification before the current Congress term expires early next year. Under the U.S. system, a trade deal must clear months’ worth of procedural hurdles before going to Congress, meaning the window is rapidly closing.
Mr. Guajardo insisted before coming to Washington that within “the next two or three weeks” the three countries could find a “landing zone.” He conceded, however, that “the most complex issues are still pending.”
Also still unresolved are Mr. Lighthizer’s demand for tougher Buy American rules that would limit the amount of U.S. government contracting Canadian and Mexican firms could bid on, and a U.S. demand to end Canada’s protectionist supply management system that limits competition in the milk, egg and poultry sectors to keep prices high.
The three countries believe that if they can resolve the auto file – the Trump administration’s priority – the other issues will be easier, sources with knowledge of the negotiation have said.
Mr. Lighthizer’s wage demand would require that 30 per cent of every vehicle made in North America come from a factory where workers earn the average wage associated with making that car part, a threshold that could go as high as US$17 an hour, said one person briefed on the confidential details of the proposal.
The United States is also demanding other content rules on autos, including that at least 85 per cent of some core components – such as transmissions – and 75 per cent of steel, aluminium and glass used in vehicle construction, come from North America, two insiders said.
Negotiators from all three countries have been in continuous talks in Washington for the past two weeks. They will negotiate next week, with tentative plans for Ms. Freeland and Mr. Guajardo to return.
The trio tried to ease the tension on Thursday by celebrating Mr. Guajardo’s 61st birthday: Ms. Freeland brought him a red velvet cake with a map of North America in the icing. Mr. Lighthizer presented a chocolate cake with “Modernized Ildefonso” – presumably a reference to Mexico’s insistence it wants only to “modernize,” rather than radically overhaul, NAFTA – in white icing.