Friday, August 17, 2018

Trump administration nearing deal with Mexico on revised NAFTA — but issues with Canada remain

The Trump administration is close to striking a deal with Mexico on a revamped North American Free Trade Agreement, analysts said, but thorny issues are yet to be resolved with Canada, the third party in the trilateral pact.

Reaching an agreement with Mexico would mark a breakthrough for the administration after a year of roller-coaster talks and tension with its longtime North American trading partners. President Trump has frequently threatened to withdraw from NAFTA, linked the renegotiations to his call for a wall along the U.S.-Mexican border and slapped tariffs on Mexican and Canadian steel to apply pressure to make concessions.

But both Mexico and the U.S. have strong incentives to push through a deal quickly. Mexico wants to lock in an agreement before its new leftist president takes office, and the White House is keen on achieving a win on trade ahead of the midterm elections.

Canada, meanwhile, has shown less urgency to complete a revision of the 24-year-old pact, but is expected to return to the bargaining table once the U.S. and Mexico settle their differences.

And then the question will be “whether Canada is finally willing to reengage in the process, sign off on what has been agreed and quickly resolve any key outstanding issues of concern to Canada,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

Trump’s trade negotiators this week have been meeting with senior Mexican officials in Washington, and sources familiar with the discussions say the two sides have largely agreed to new rules on auto trade — a top priority for the White House — that could boost investment in the U.S. and curb a flight of domestic production and jobs to Mexico.

In exchange, the United States trade representative, Robert Lighthizer, appears to be showing flexibility on an earlier demand for an automatic five-year termination of NAFTA and a proposal to make it easier for the U.S. to press anti-dumping claims against seasonal produce like tomatoes from Mexico.

Multilateral trade negotiations typically include bilateral talks between nations, but the administration’s strategy to close a deal first with Mexico — without parallel discussions with Canadian officials — is unusual and could backfire.

“I think the Trump administration is playing a risky game if you have a final deal with Mexico and you present it (to Canada) as a fait accompli,” said Daniel Ujczo, an international trade lawyer who specializes in Canada-U.S. affairs at the law firm Dickinson Wright.

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