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Freeland, Lighthizer and Guajardo: talks extended. Freeland, Lighthizer and Guajardo: talks extended.

Contentious issues push talks into 2018

Mexico, Canada reject US proposals at NAFTA talks; growing pessimism over prospects

Investor optimism over trade talks between Mexico, the United States and Canada gave the peso a boost today after an announcement that renegotiating NAFTA would extend into 2018.

But many observers are doubtful about the prospects for the 23-year-old North American Free Trade Agreement, according to several reports today.

As expected, Mexico and Canada have rejected contentious proposals by the U.S. that have created a grim and pessimistic mood during the latest session in Washington, reported the LA Times.

The proposals include a requirement for greater U.S. content in automotive manufacturing and a sunset clause that would terminate the agreement after five years if all three partners did not agree to renew it.

Trade analysts contacted by the Times said they expected most of the U.S. proposals would be formally rejected at the fifth round of talks, scheduled for November 17-21 in Mexico City, which could trigger an end to the entire process.

Ending the agreement has been a persistent threat by U.S. President Donald Trump, who last week expressed his preference for bilateral deals with Canada and Mexico.

At a press conference today in Washington, Economy Secretary Ildefonso Guajardo said there were limits to what Mexico could accept, while Canadian Foreign Minister Chrystia Freeland some some U.S. proposals were counter to World Trade Organization rules.

U.S. Trade Representative Robert Lighthizer said he was “surprised and disappointed” by the outcome so far.

However, all three reiterated their mandate to conclude talks in a reasonable period of time, although there had been hopes that an agreement would be reached by the end of this year.

The peso gained 1% on the news that they would move into 2018.

The additional rounds will give more time between the sessions for the evaluation of proposals, the parties to the negotiations said today in a prepared statement.

A former Canadian trade negotiator wrote today in The Globe and Mail newspaper that there will likely be a “U.S.-contrived failure” of the negotiations.

Andrei Sulzenko believes that Trump’s game plan has been to make outrageous demands that if accepted would mean a huge “America First” victory and if rejected would set up a failed negotiation, leading to bilateral talks.

Both would constitute a win for Trump, he wrote, although Mexico would not likely wish to pursue a bilateral agreement with the U.S.

In a presidential election year, “it would be politically toxic in Mexico to be seen re-engaging with a country that seemed to be negotiating in bad faith.”

Source: Bloomberg (en), Los Angeles Times (en), The Globe and Mail (en)

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