MONTREAL—For a better sense of where the NAFTA negotiations stand, and whether the continental trade pact risks being imminently whacked by a cancellation notice from U.S. President Donald Trump, watch his trade czar Monday.
Robert Lighthizer, Canada’s Chrystia Freeland and Ildefonso Guajardo of Mexico are in Montreal for meetings and a rare group event following a week-long negotiating round that insiders hailed as producing slivers of optimism.
Lighthizer’s reaction is now key.
His negotiators have handed him the details of this past round, and sought guidance. His boss, the president of the United States, keeps lobbing the occasional threat to cancel NAFTA. And big political decisions lie ahead, with just eight weeks left in the current schedule of talks.
American lawmakers attending this round spoke with Lighthizer and offered a vague preview of what he might say. They suggested he shared others’ increased sense of optimism—but might couch it in crotchety language.
“He says he’s a curmudgeon,” Dave Reichert, the Republican chair of a congressional trade committee, told reporters Sunday.
“So when he shows optimism it may not be, you know, readily visible to the rest of us … because we have difficulty sometimes discerning that ourselves,” said Reichert.
“He recognizes there’s a great deal of work to be done, but he’s hopeful.”
Important decisions about NAFTA’s future are now in the hands of Trump’s administration. American negotiators have asked their political decision-makers how to respond after major discussions about autos, dispute resolution and a five-year review clause.
This round represented a new phase of the negotiations.
It featured a new back-and-forth dialogue on autos and other major sticking points. Sources close to the talks say lengthy conversations were prompted by ideas Canada put on the table—including about three hours of talks over two days about the autos proposal.
American negotiators asked questions, listened, and, according to sources from one country, replied: “We have to look at (these proposals) in further detail and seek political guidance.”
Earlier rounds had seen scant engagement on the most serious files. After the U.S. made proposals that shocked the other countries, those parties responded by insulting the U.S. ideas and even devoted one round to describing reasons why the American proposal on cars was so impractical.
This round was an early example of countries seeking a pathway to solutions for the difficult problems—without having the talks collapse.
“There’s an optimism,” Reichert said, echoing sentiments frequently heard in Montreal.
“I don’t want to get overly optimistic with you—but there’s just an air of optimism.”
Some developments from the week in Montreal:
- On autos, Canada suggested new ways to calculate whether a car counts as American. The new formulas would inflate U.S. numbers somewhat by including areas where the U.S. dominates, such as intellectual property and research. It did not address U.S. demands for specific numeric targets for parts production.
- On dispute resolution, the Canadians and Mexicans worked out a proposal to create a new investor-state dispute system that applies only to them. The U.S. has suggested it might want to opt out of the system, arguing that it provides assurance for investors outsourcing operations to Mexico. This proposal would prevent the U.S. from participating in or developing the rules of the new system: “We basically said to them, ‘If you want to opt out that’s fine, you’re gone,”’ one non-American said.
- On the review clause, the U.S. has proposed a rule that would terminate NAFTA every five years unless it’s maintained by all three countries. Mexico responded a few months ago by proposing a watered-down version, which would force countries to periodically review the effects of the agreement—but without an automatic-termination rule.
Canada has signed on to the Mexican approach, and proposed ways of how it might work. One involves tasking NAFTA’s central body, the Free Trade Commission, with conducting regular progress reports.
Again, the U.S. negotiating team said it would consult its political bosses.
Several people said the round had sparked some new optimism. One cautioned that many decisions are now in the hands of the political bosses, but he agreed that headway was made in Montreal.
A chapter on anti-corruption was closed, chapters on digital trade and telecommunications are more than 90 per cent done, and there’s new engagement on some hard files, he said.
“I believe that we saw some interesting things,” said the non-American.
“Do we feel optimistic? I would say cautiously so.”
There was less progress in other areas—including dairy and labour standards.
U.S. Democrats are expressing frustration labour hasn’t gained more prominence. A key goal of this whole process should be increased labour rights for Mexican workers, says Francois Laporte, president of Teamsters Canada.
“If we don’t get (changes here), we will never be able to fix NAFTA,” he said.
The round also avoided the bedevilling, politically fraught sticking point of dairy. American milk producers are demanding greater access to Canada’s supply-managed system, and the issue is certain to resurface later.
“We really want market access,” said Jaime Castaneda, vice-president of the U.S. National Milk Producers Federation.
“My goal has always been to have a true, free trade in North America for dairy…. We will keep what’s good in NAFTA, and we will fix what’s broken. And the broken part is obviously the Canadian side.”