Trump says he’s in no hurry to finish NAFTA, that’s good because it may take a while

by David Lynch (feat. Eric Miller)

The Washington Post
April 12, 2018

Negotiators racing to reach a new North American trade deal remain far apart on several major issues, as time dwindles to secure an agreement that the current Congress could vote on, according to individuals familiar with the discussions.

Diplomats from the United States, Canada and Mexico had hoped to announce progress toward a replacement for the 24-year old North American Free Trade Agreement by Friday, when regional leaders are scheduled to meet in Peru for the Summit of the Americas. President Donald Trump’s decision to skip the meeting to monitor the Syrian situation reduced pressure to make a public statement.

“We don’t have as many concrete results as you may have expected,” said one individual familiar with the talks, who was not authorized to speak publicly.

Officials hope to cobble together an agreement-in-principle by early May so that the president can notify Congress of his intent to sign the deal - as required under legislation granting him negotiating authority - in time for a potential vote late this year.

“We’ve got a relatively short time frame within which to get this done,” said a second individual involved in the negotiations, who asked for anonymity to discuss confidential discussions.

Robert Lighthizer, the president’s chief trade negotiator, estimates that the talks are 80 percent complete, according to Senator Pat Roberts, chairman of the Senate Agriculture Committee, who spoke with him earlier this week.

“If we can just get that 20 percent. That’s what we need,” Robert told reporters.

The unfinished work includes the same contentious issues that have dogged the talks since their August inception, according to Dan Ujczo, an international trade lawyer at Dickinson Wright. U.S. proposals on automobile content, government procurement, intellectual property, investor dispute settlement, and treaty expiration - dubbed “poison pills” - remain key stumbling blocks.

“That 20 percent is not moving,” he said.

In Lima, Peru, Thomas Donohue, president of the U.S. Chamber of Commerce, told a business audience that several controversial U.S. demands were preventing an agreement, adding: “If we’re going to get a deal done this year, we’re now officially in crunchtime.”

Negotiators have finished work on only 6 of 30 treaty chapters, though several relatively noncontroversial portions of the text are all but complete. Technical experts from the three countries have been meeting in Washington all week in an unofficial negotiating round aimed at finalizing as many additional chapters as possible, potentially paving the way for Lighthizer and his Mexican and Canadian counterparts to meet soon, said Ujczo, a former Canadian foreign ministry official.

Those involved in the talks believe that if the three ministers can settle the tough core issues, the rest of the agreement can quickly fall into place, t he second individual said.

“In reality, they are a long way from having a comprehensive NAFTA,” said Eric Miller, president of Rideau Potomac Strategy. “There’s just not enough time.”

Trump long has been a vocal critic of NAFTA, which he derides as a “bad joke” and blames for siphoning manufacturing jobs from the United States. In August, Lighthizer, the U.S. trade representative, opened talks aimed at overhauling the existing treaty with Canada and Mexico.

The U.S. aimed to negotiate a new treaty much faster than the typical trade deal, which often takes years to conclude. As the president periodically threatened to withdraw from the treaty, negotiators missed their initial deadline for a deal at the end of 2017 as well as a revised target of March 31.

In recent weeks, the negotiating pace has accelerated and officials at the technical level are now meeting continuously. Officials from all sides have said that progress is being made. At the White House Thursday, before meeting with Republican governors and senators from several farm states, Trump denied hurrying to close a deal and said prolonged uncertainty was in the U.S. interest.

“Nobody is moving into Mexico, as long as NAFTA is in flux no company is going to spend a billion dollars to build an automobile plant. I told the Mexicans we can negotiate forever, as long as we have this negotiation going nobody is going to build billion dollar automobile plants,” the president said. “We’re getting pretty close to a deal, it could be two weeks it could be three months it could be five months, I don’t care.”

Trump also has exempted Mexico and Canada from tariffs of 25 percent on steel and 10 percent on aluminum until May 1, another factor affecting the pace of the talks. The White House has said that future extensions may depend upon how the negotiations fare.

“There’s been substantially no progress on the main issues,” said Laura Dawson, of the Wilson Center, who met recently with Canadian negotiators. “They’re still very far apart on that stuff.”

The U.S. last month sought to spur the talks by making a new proposal on a core demand that automobiles covered by the treaty contain more American-made components.

The existing treaty requires that 62.5 percent of a vehicle’s components originate in North America. For months, the United States has been demanding an increase to 85 percent along with a new requirement that 50 percent of the vehicle come from American plants.

In March, the U.S. proposed dropping the 50-percent provision and counting parts as North American-made if they were produced by workers making an hourly wage of at least $15. The proposal was aimed at reducing the incentive for U.S. automakers to shift work or expand operations in Mexico, where the average auto industry hourly wage hovers around $2.40.

Canadian and Mexican negotiators regarded the proposal as a creative attempt to break an impasse over the original U.S. demand, sources familiar with the talks said. But determining which parts would be covered is yet to be agreed and could pose a compliance nightmare for auto companies, which would have to track the compensation of workers who produce a multitude of components.

“It’s far from a slam dunk,” said one trade association executive briefed on the talks, who requested anonymity to discuss confidential discussions. “The companies see it as central planning, as the government telling industry how to make a car.”

An agreement-in-principle would aim to lay out the basic trade-offs that have been agreed on the core issues, with precise language left to be written by lower level officials later in May, said Lori Wallach, director of Public Citizen’s Global Trade Watch.

“It is not a high probability, but I think it is doable,” she said. “I don’t think the U.S. is going to back down on the big rebalancing demands that are essential to creating a new kind of trade agreement that can get bipartisan support.”