Canada is preparing for the third round as the talks move to Ottawa.Judi Bottoni/The Associated Press
U.S. negotiators have told Canada and Mexico they expect to table full details of the Trump administration's demanded changes to the North American free-trade agreement during talks starting this weekend – in a bid to cut a deal by year end, The Globe and Mail has learned.
American officials served notice to their counterparts during the second round of talks earlier this month in Mexico City that they would present text of all their proposals by the third round, said people with knowledge of the negotiations who spoke on condition of anonymity to reveal confidential details of the discussions.
So far, the U.S. has presented few details on its most controversial demands at the table, the sources said. These include a toughening of the rules of origin that govern content in cars, trucks and other manufactured goods, including a possible U.S. content requirement; a proposal to allow Buy American provisions on U.S. public procurement while fully opening Canadian and Mexican government contracts to American firms; a loosening of Canada's supply-management system for dairy, eggs and poultry; and cutting the U.S.'s trade deficit.
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Canada is preparing for the third round as the talks move to Ottawa. Foreign Minister Chrystia Freeland will spend Friday in an intensive series of consultations in Toronto ahead of the negotiations.
Ms. Freeland will first meet with the NAFTA council, a group of business, labour and political leaders that provides advice to the government on the negotiations. She will then host a lunch with former prime minister and NAFTA architect Brian Mulroney, as well as his original group of negotiators and three former Canadian ambassadors to the United States. Finally, she will meet with members of Canada's auto-parts industry, which depends heavily on cross-border trade.
Economic Development Minister Navdeep Bains will also take part in these meetings. Environment Minister Catherine McKenna will be in on the first two meetings, then sit down separately in Ottawa with the government's environmental advisory council on NAFTA.
The three countries are renegotiating NAFTA at the behest of U.S. President Donald Trump, who blames the 23-year-old pact for moving jobs out of the United States and allowing Canada and Mexico to take advantage of his country. Mr. Trump wants a deal by the end of the year to deliver on a key election promise, while Mexico wants to get the talks out of the way before its presidential election campaign next year.
While the United States has repeatedly signalled it will demand major concessions from the deal's junior partners, it has provided negotiators with few details.
At the opening of talks in Washington last month, for instance, U.S. Trade Representative Robert Lighthizer announced that the United States would demand more stringent rules of origin, which specify the amount of NAFTA zone content that manufactured goods must contain to be traded between the three countries without paying tariffs. He signalled he would also seek to add a U.S. content requirement. But Washington has not given Ottawa and Mexico City any specifics of this proposal, such as what percentage of North American or U.S. content it wants to see.
And there is some skepticism the United States will actually present such details in Ottawa. Sources said the Americans have previously made such promises and not followed through. At one point, for instance, Washington told its negotiating partners it would have all the details on the table in Mexico City, one source said.
Some sources said the United States does not appear to have even decided what exactly it wants to ask for. Tightening rules of origin, for instance, could backfire if companies decide to pay tariffs rather than conforming to stricter rules. One source said the United States appears to be aware of this and is trying to sort out how to make the rules tougher without inadvertently driving business away. The Trump administration's central goal, the source said, is to help the U.S. steel industry.
Flavio Volpe, president of the Automotive Parts Manufacturers' Association of Canada, said he does not expect the United States to present a number for rules of origin or a figure for the amount of U.S. content it wants mandated in vehicles. What American negotiators could do, he said, is outline concepts describing how U.S. content requirements might work.
"I think we're ready to react to a number, but we should listen carefully to hear whether there are new concepts," he told The Globe on Thursday.
A report by Bank of Nova Scotia also called into question the point of toughening the rules. The bank found that vehicles in the three NAFTA countries already contain 75-per-cent North American content – far above the 62.5 per cent currently required to qualify for tariff-free trade.
"There is no need to tighten further NAFTA's rules of origin for the auto sector," wrote Carlos Gomes, a Scotiabank economist who specializes in the auto industry.
Daniel Ujczo, an Ohio-based trade lawyer who works with agricultural and automotive interests with a stake in NAFTA, said the hold-up for the Americans in presenting details largely has to do with the complicated consultation procedure in the United States' trade-negotiating system. Mr. Lighthizer's proposals are all circulated to various government departments, members of the U.S. Congress and stakeholders before they are brought to the negotiating table.
Mr. Ujczo said he did not believe all the text would be tabled in Ottawa.
"I don't think we'll see ultimately 30 chapters of text. There have been rumblings out of USTR that they won't be ready," he said in an interview, referring to the Office of the U.S. Trade Representative.
And if the partners want to finish by the end of the year, they will have to make progress soon.
"This is a seven-game World Series. We're going into Games 3, 4 and 5. This is where we have to start making ground," he said.