Mexico pushes for imminent NAFTA framework

Open this photo in gallery:

NAFTA negotiators are hunkering down in Washington later this week in a bid to crack the key issue − automobiles − as the three countries work toward a goal of a preliminary deal by the end of the month.

After a meeting of top officials on the file failed to produce an agreement on Friday, the sides spent the weekend regrouping, sources with knowledge of the talks said, and negotiations will move forward in the next two days.

Mexican Economy Minister Ildefonso Guajardo said on Monday that negotiators will be in “permanent talks” with the aim of finishing discussions on renegotiating the North American free-trade agreement (NAFTA) by the start of May.

“There’s a very high probability of reaching an agreement in principle. An 80-per-cent chance,” he said on the Mexican station Televisa. “We are within weeks of knowing if the NAFTA talks close with success.”

Mr. Guajardo met for three days in Washington last week with U.S. Trade Representative Robert Lighthizer. Canadian Foreign Affairs Minister Chrystia Freeland joined them for the final day. While they did not cut a deal, the trio agreed to have negotiators keep meeting and to stay in regular contact.

One person with knowledge of the discussions said Mexican negotiators were in Washington on Monday, ready to continue talks. Another said Canadian officials were set to join them later in the week, when autos will be on the table. If there is enough movement on autos, the three ministers could meet again to seal the deal, the source said.

The first source said the United States would like to have something for U.S. President Donald Trump to announce at the Summit of the Americas in Peru by the end of the week, but an agreement by then looks unlikely.

The United States wants to finish renegotiating NAFTA with enough time to submit it for approval to the current Congress, while Mexico wants to get it out of the way before the campaign for its July 1 presidential election gears up.

Mr. Trump told a cabinet meeting on Monday that negotiators were “fairly close” to a NAFTA deal, but that he still might pull the United States out of the pact.

“NAFTA was a horrible deal. We’re renegotiating it. We’ll see what happens. But we’re strongly renegotiating NAFTA,” he said. “We’re fairly close on NAFTA, and if we don’t make the right deal, we’ll terminate NAFTA and we’ll make the right deal after that.”

Transportation Minister Marc Garneau, who was in Washington on Monday for unrelated meetings, told reporters “there is a full-court press between the three countries” to get a NAFTA pact.

A key hold-up to a deal is a U.S. demand that auto companies be required to source some of their parts from factories that pay workers at least US$15 an hour – a move that would discourage companies in the industry from putting jobs in Mexico, where workers’ wages are closer to US$3.

Mr. Guajardo said the higher wage levels would be “unreachable for Mexico in the short-term,” and blasted the proposal, arguing that not even the U.S. auto industry supports it.

But two insiders with knowledge of the Mexicans’ thinking said the country is likely to agree to the provision – it is mostly a matter of sorting out the details.

What exactly a preliminary deal would cover is still undecided, sources involved with the talks said. One scenario could entail an agreement on autos and several smaller matters, while punting other difficult subjects to future talks. Another possibility is that it will cover every NAFTA issue at a high level, but leave some details to be worked out.

Sources said Canada and the United States remain far apart on procurement. Mr. Lighthizer is holding the line on his demand for tight caps on how much U.S. government contracting Canadian and Mexican firms can bid on.

There has so far been little discussion of supply management, Canada’s protectionist system for eggs, dairy and poultry, which the United States wants dismantled.

Mr. Trump said on Monday that the hit that U.S. farmers are likely to take from sanctions China has announced on U.S. agricultural products will be made up to them.

That could mean he will insist on a win for U.S. farmers in the NAFTA talks, but simply keeping the Mexican market open for their products through a renewed NAFTA would be a victory for U.S. farmers, Christopher Sands, director of the Center for Canadian Studies at Johns Hopkins University in Baltimore, said on Monday.

Mexico is a net importer of corn and has increased its purchases of U.S. meat so “that market has become a great boost for American food production across the board,” Mr. Sands said.

In a note to clients on Monday, Dickinson Wright, a law firm that advises companies doing business across the Canada-U.S. border, warned that an agreement in principle might not have enough detail to be submitted to the U.S. Congress yet. The firm said it was more likely that any deal would not be passed until the next Congress takes office in January, 2019.

Canada’s largest private-sector union cautioned on Monday that Canada should not sign an agreement in principle. Accepting a deal without the full details would be like a homeowner agreeing to sell his house without negotiating a price until after the buyer has moved, Unifor president Jerry Dias said in an interview.

“It defies logic to commit without knowing the ramifications on auto and other major industries,” said Mr. Dias, whose union represents tens of thousands of auto workers.