US, Canada and Mexico talks on NAFTA trade stall on trade deficit issues | News | DW | 17.10.2017
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US, Canada and Mexico talks on NAFTA trade stall on trade deficit issues

Talks on the NAFTA trade agreement between the US, Mexico and Canada have stalled over the US insistence a rewritten deal reduces the US trade deficits. Washington has vowed to withdraw unless its demands are met.

NAFTA negotiators Ildefonso Villarreal, Chrystia Freeland of Canada and Robert Lighthizer of the US

NAFTA negotiators Ildefonso Villarreal of Mexico, Chrystia Freeland of Canada and Robert Lighthizer of the US

US President Donald Trump's top trade official, Robert Lighthizer, along with his counterparts from Canada and Mexico, had been scheduled to unveil the end of the fourth round of negotiations on the North American Free Trade Agreement (NAFTA) on Tuesday afternoon in Washington after a week of talks.

In public, Mexican and Canadian officials have pointed to progress in areas like telecommunications, financial services and digital trade. But Mexico's Economy Minister Ildefonso Guajardo said on Tuesday that the three countries had not found common ground and that the talks would not be concluded until 2018.

Canada later accused the US of sabotaging renegotiations with Foreign Minister Chrystia Freeland saying the US was pursuing a "winner take all" approach.

Deliberate sabotage?

Lighthizer said on he was "not focused on terminating NAFTA" and was trying to negotiate an update that "rebalances" the pact to reduce US trade deficits. He said other countries were struggling to accept that the US wanted to rebalance its trade agreements.

"We don't really have a plan beyond trying to get a good agreement," Lighthizer told reporters, adding, "If we end up not having an agreement, my guess is all three countries would do just fine. We have a lot of trade, a lot of reasons to trade."

"As difficult as this has been, we have seen no indication that our partners are willing to make any changes that will result in a rebalancing and a reduction in these huge trade deficits," Lighthizer said.

Describing some of the US's demands as "ridiculously extreme," Moises Kalach, head of the international negotiating arm of Mexico's CCE business lobby, told Reuters that the US government knew it would not be able to push them through.

"The key is to remain calm and see if the American government is ready to negotiate," Kalach told Mexican radio.

"The US administration has now taken an extremely tough stance with respect to NAFTA," Monica de Bolle, a Senior Fellow at the Peterson Institute for International Economics, told DW.

"The introduction of a sunset clause, tighter rules of origin that would include a US content requirement and diluting the dispute settlement system are non-starters for Mexico and Canada. Consequently, NAFTA's prospects do not look good. The only positive thing to say at this juncture is that at least there will be a fifth round of negotiations.

"Ending NAFTA would have a severe impact on the Mexican economy, and would undoubtedly hurt various sectors and companies both in Canada, and in the US," de Bolle said.

See you in November

The parties are expected to reconvene in Mexico City on November 17, three weeks later than the planned October 27 start date, to work towards an agreement. Most observers expect Canada and Mexico to reject US efforts to weaken NAFTA.

Guajardo said Mexico's position on the US's proposals had been "very firm,” although he believed there was a way of finding "creative solutions” that would allow North America to expand trade.

Sticking points

The most contentious issue is the US proposal to allow NAFTA to expire after five years unless all three countries agree to renew it: the so-called "sunset provision."

The US also wants new rules governing how vehicles are traded among the three countries. Vehicles that are manufactured with at least 62.5 percent of materials from any combination of the three countries can currently be shipped from one NAFTA nation, free of duties. The Trump administration has proposed that at least 50 percent of the cars must be constructed in the US for vehicles from Mexico and Canada to enter the US duty-free.

The US has also proposed weakening access for Canada and Mexico to US government procurement contracts and to eliminate a NAFTA chapter that has allowed Mexico and Canada to contest US anti-dumping and government-subsidy tariff decisions by turning to a special panel of judges.

Watch video 01:53

Trump warns NAFTA could be 'terminated'

jbh/jm (Reuters, dpa)

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