The three NAFTA countries are making a full-court press to reach a deal on overhauling the 24-year-old pact, with the U.S. pushing for a conclusion to the eight-month-old talks as soon as this week.
In the most intensive flurry of negotiations so far, Foreign Affairs Minister Chrystia Freeland hunkered down Tuesday with U.S. Trade Representative Robert Lighthizer in Washington. She was joined by Prime Minister Justin Trudeau’s chief of staff, Katie Telford, and the head of the North American free-trade agreement unit in Mr. Trudeau’s office, Brian Clow – signalling the increasing earnestness of the talks.
Negotiators have been in near-continuous talks for the last month, and Ms. Freeland has made three trips to the U.S. capital. She is scheduled to stay until Thursday. In recent days, sources with knowledge of the confidential negotiations have expressed increasing optimism that a deal can be reached.
Ms. Freeland told reporters talks are in “a very crucial moment” and “everyone is working 24/7” toward a deal.
“We are going to be working hard, late into the night, based on some of the points that were raised today,” she said as she left the Winder Building near the White House after a three-hour tête-à-tête with Mr. Lighthizer on Tuesday.
On the U.S. side, President Donald Trump’s son-in-law, Jared Kushner, joined the negotiations. Mexico sent both Economy Minister Ildefonso Guajardo and Foreign Minister Luis Videgaray.
Talks Tuesday focused on the “rules of origin” governing the content of autos made in the NAFTA zone – expected to be the centrepiece of the revised pact. Currently, 62.5 per cent of all content in NAFTA zone vehicles must be made in North America. Mr. Lighthizer wants this raised to at least 75 per cent, with several other rules added to drive more auto jobs to the United States.
Mexico has been resisting an American demand to force auto companies to source roughly a third of their content from factories that pay at least US$15 to US$17 an hour – a move that would discourage companies from investing in Mexican auto plants, where workers make an average of US$3.
One source briefed on the discussions said talks have focused on writing the content rules to give some advantages to the U.S. without hurting Mexico too badly. Mexican negotiators are pushing the U.S. hard to compromise for the sake of a quick deal, the person said.
“It depends on the commitment and flexibilities around the table,” Mr. Guajardo said as he arrived at talks Tuesday.
Another source of heated disagreement between the three countries is how long a transition will be permitted before auto makers have to comply with the new rules of origin. The U.S. is pushing for a two-year phase-in, while Canada is proposing a five-to-seven-year time frame and Mexico seeks a 10-year horizon, sources familiar with the negotiations said.
That’s a key issue for the auto sector, noted Flavio Volpe, president of the Automotive Parts Manufacturers Association in Canada, because new and redesigned vehicles typically contain supplier contracts that last at least four years.
“If you change the rules to count more things and then change the way you count them and then require a whole bunch of those parts to have a majority of North American steel in them, you really need to give people five to seven years [transition],” he said.
Ms. Freeland said the three countries will move on to other contentious matters on Wednesday.
Among the sticking points are U.S. demands for tougher Buy American procurement rules that would cap the amount of U.S. government contracts Canadian and Mexican firms could bid on; Mr. Lighthizer’s desire to abolish the Chapter 19 dispute settlement system, which Canada is refusing to give up; and Washington’s proposal to dismantle Ottawa’s protectionist system of supply management for milk, eggs and poultry.
Mr. Trump on Tuesday said talks were going well.
“NAFTA, as you know, is moving along,” he said before a White House meeting with French President Emmanuel Macron.