Glimmers of hope after 6 rounds of NAFTA talks, but sides remain far apart

Don Lee Tribune Washington Bureau Knight Ridder

WASHINGTON — President Donald Trump’s chief trade official offered a modicum of optimism on Jan. 29 about the ongoing talks to revamp the North American Free Trade Agreement, even as he shot down two key Canadian proposals and blasted a recent trade action by Canada as a “massive attack on all of our trade laws.”

The mixed assessment and tone from U.S. Trade Representative Robert Lighthizer, following the sixth round of NAFTA talks in Montreal, reflects the arduous task ahead as U.S., Canadian and Mexican officials try to bridge big gaps that stand in the way of forging a new agreement on the 24-year-old pact.

“I think there’s a considerable distance to go,” said Rep. Sander M. Levin, D-Mich., who was in Montreal monitoring the talks and advocating for substantial changes in NAFTA’s labor provisions to address the outsourcing of U.S. manufacturing jobs to Mexico.

On one hand, the comments by Lighthizer, as well as his Canadian and Mexican counterparts, marked a notable improvement from the contentious atmosphere in the previous round, when some feared a breakdown in talks amid U.S. demands and continuing threats by Trump that he is prepared to withdraw from NAFTA.

Lighthizer said on Jan. 29 that in the last week, the three sides were able to wrap up an important section on corruption and that they had made headway on a few other areas. And the parties agreed to keep talking, although there was no official word on a seventh round, expected to be held late February in Mexico City.

But even as Lighthizer said “we finally began to discuss some of the core issues” in Canada, he described the talks as “progressing very slowly.” And he reiterated his sharp criticism of a recent action by Canada to challenge American use of anti-dumping and anti-subsidy duties before the World Trade Organization.

Speaking in Montreal, Lighthizer focused his remarks on heightened economic tensions with Canada. The historically close allies have argued over lumber, newsprint, dairy and, until Jan. 26, Boeing’s dumping complaint against Bombardier, which Boeing lost.

At the same time, Lighthizer insisted that it was only reasonable for the United States to look not only to modernize NAFTA, but to “rebalance” it in light of the U.S. trade deficit with Canada. In 2016, he said, Canada sold $87 billion more in products to the United States than the other way around.

Canadian officials have frequently noted that when two-way trade in services is included — for example licensing fees and engineering services — the United States actually enjoyed a small trade surplus with Canada in 2016. Lighthizer, like Trump, has made the balance of trade in goods the principal measure of bilateral trading relations, and the administration’s aim is to rewrite NAFTA in such a way that deficits with Canada and Mexico might be reversed.

In Montreal, there were no breakthroughs on the thorniest issues, although Canada offered proposals to address demands from the United States on two key issues. The Trump administration wants to raise to 85 percent the current requirement that 62.5 percent of an automobile’s content be made in North America before vehicles can be traded from one NAFTA country to another without paying duties. Canadian officials suggested a different way to calculate the value of cars, but Lighthizer panned the idea. And he rejected outright a Canadian proposal on a controversial provision related to investors’ rights.

The three sides also have major differences on government procurement and a desire by the Trump administration to insert language in NAFTA that would allow the United States to review NAFTA’s performance and redress trade imbalances. There was also little if any progress in Montreal on rewriting NAFTA’s labor chapter. More than 180 House Democrats sent a letter to Lighthizer recently calling on changes to address low wages and unionizing rights in Mexico that many believe are at the heart of outsourcing of U.S. jobs.

“It’s good that the parties are staying engaged, but in terms of where they’re at, they’re far apart,” said Celeste Drake, a trade and globalization policy specialist at the AFL-CIO who was briefed by U.S. trade negotiators in Montreal.

Negotiations to rewrite NAFTA began last August with the aim of concluding the talks by early this year. Then the parties said they hoped to wrap up by March, mindful that the negotiations could be complicated by the Mexican presidential election in July and later the midterm U.S. elections in November.

But with much work to be done on the most difficult issues, analysts said it was likely that the three sides would continue to talk possibly through the summer.

NAFTA hasn’t been a toxic political issue ahead of the Mexican elections as some thought it would be, said Manuel Molano, deputy director of the Mexican Institute for Competitiveness, a think tank in Mexico City.

“I think negotiations will go on,” he said, adding that he was a little more optimistic after the Montreal round. Then again, he added: “Making NAFTA predictions in 2018 is an impossible task. Mr. Trump is an unpredictable man.”