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NAFTA Looks Less Likely to Die After Sixth Round of Talks

The sixth round of the North American Free Trade Agreement talks ended in much the same manner as the fifth: with a little headway and a lot of leftover uncertainty. What does appear to be different, however, is the doomsday outlook from the last round that left NAFTA’s fate seemingly hanging by a thin thread.

The U.S., Mexico and Canada are at least united in the belief that “some” progress was made.

In closing statements Tuesday, U.S. Trade Representative Robert Lighthizer said, “The United States views NAFTA as a very important agreement. We are committed to moving forward. I am hopeful progress will accelerate soon.”

His comments follow President Trump’s on Thursday in a CNBC interview on the sidelines of the World Economic Forum in Davos, Switzerland, while the NAFTA talks were ongoing, that “I may terminate NAFTA, I may not—we’ll see what happens.”

Lighthizer took first in his remarks, to clearing up chatter about the United States’ trade relationship with Canada.

“I think there is some misunderstanding here that the United States is somehow being unfair in these negotiations and that is not the case,” Lighthizer said at the end of the talks in Montreal. Using Canadian statistics, Lighthizer continued by saying Canada has a more than $87 billion dollar trade surplus with the U.S.—which, he said, amounts to roughly 5.7% of Canada’s GDP. “…is it not fair for us to wonder whether this imbalance could in part be caused by the rules of NAFTA? Would Canada not ask this same question if the situation were reversed? So we need to modernize and we need to rebalance.”

NAFTA negotiators closed the chapter on anticorruption and “finally began” to discuss some of the core issues, according to Lighthizer, who said the talks are still moving too slow for the three nations’ citizens, “who are operating in a state of uncertainty.”

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Rules of origin has been an impediment in the talks, as the U.S. has been pushing for increased American inputs on autos in particular, and Canada and Mexico have been pushing back. So far, as Lighthizer made clear, there has been no compromise on rules of origin.

“We find that the automobile rules of origin idea that was presented [by Canada], when analyzed, may actually lead to less regional content than we have now and fewer jobs in the United States, Canada and likely Mexico. So this is the opposite of what we are trying to do,” Lighthizer said.

Addressing another Canadian proposal the U.S. isn’t on board with, Lighthizer said, “Canada reserved the right to treat the United States and Mexico even worse than other countries if they enter into future agreements. Those other countries may, in fact, even include China, if there is an agreement between China and [Canada]. This proposal, I think if the United States had made it, would be dubbed a ‘poison pill.’ We did not make it, though. Obviously, this is unacceptable to us, and my guess is it is to the Mexican side also.”

Speaking on Mexico’s own behalf, the country’s secretary of economy Ildefonso Guajardo, said during a press conference Monday, “We are in a better moment in this negotiation process.”

He agreed the progress was made on the anticorruption chapter, and that other chapters on digital trade and telecommunications “registered progress of 90 percent” and should be settled during the next round of talks.

On trade, Guajardo said, “Customs and trade facilitation is also moving swiftly, and the new rules that are being crafted are more advanced than the Trade Facilitation Agreement of the WTO or what was achieved in TPP.”

Canadian foreign affairs minister Chrystia Freeland, who has called the U.S. out in recent talks for “troubling” proposals that she felt were on track to undermine the negotiations, said this time during a press conference, “We made some progress in this round. We succeeded in together addressing some of the core issues and starting to talk about the unconventional U.S. proposals—having said that, there is still a significant gap on a number of issues and we are going to be working extremely hard, extremely energetically, with our two partners to try to close those gaps.”

The seventh round of NAFTA talks is set for Feb. 26 to March 6 in Mexico.