Thursday, June 13, 2024

NAFTA talks continue with sticking points, old and new

Talks between Mexico and the United States aimed at reaching agreement on contentious issues to pave the way for a new NAFTA deal are set to continue next week, with old and new sticking points still to be resolved.

“We’re on a path that can take us into the weekend and next week,” Economy Secretary Ildefonso Guajardo told reporters on his way into talks yesterday afternoon with U.S. Trade Representative Robert Lighthizer.

“. . . The negotiations are highly complex, we’re trying to have all the solutions that are required. We are well advanced [but] not there yet . . .” he said.

Officials from Mexico and the U.S. have been meeting in Washington D.C. for the past five weeks to try to craft new auto industry rules, especially those relating to the amount of regional content a vehicle must have in order to be given tariff-free status.

The United States has barely moved from the demand for a vehicle to have 75% regional content in order to be exempt from duties, according to auto industry officials.

Mexican and U.S. negotiators have also focused on resolving differences over United States President Donald Trump’s complaint that NAFTA has benefited Mexico to the detriment of U.S workers and that country’s manufacturing industry.

Trump has also repeatedly railed against the United States’ large trade deficit with Mexico, blaming the 24-year-old agreement for the perceived inequity and describing the pact as “the worst trade deal maybe ever signed anywhere.”

On several occasions, he has threatened to withdraw the United States from the deal and more recently has said that the U.S. could seek separate deals with its two North American neighbors.

Auto industry sources say the Trump administration wants to be able to impose national security tariffs on future Mexican output from new auto assembly and parts plants.

One anonymous source told the news agency Reuters that the demand has been a source of friction in recent talks.

The United States has also been pushing for 40% of the content of cars and 45% of the content of pickup trucks to be made by workers who are paid at least US $16 per hour. Mexico publicly accepted the proposal for the first time late last month.

Today, Guajardo said that Mexico has come “very far” in working through the outstanding issues with the United States.

However, he qualified his remark by saying that “unfortunately, even if you are extremely engaged there’s always a last-moment thing that can come between you and your goals.”

Asked whether any progress had been made on the so-called sunset clause that would see the trilateral trade pact automatically expire if it is not renegotiated every five years, Guajardo said that the issue would be dealt with once Canada rejoins the talks.

“There are trilateral issues that have to be solved in a trilateral context,” he said.

However, president-elect Andrés Manuel López Obrador’s nominee to be his chief trade representative believes that the proposal, pushed by the United States, will be discarded.

Jesús Seade, who has accompanied Guajardo and Foreign Affairs Secretary Luis Videgaray during some of the discussions in Washington, said he hadn’t personally been part of talks about the sunset clause but was adamant that “it’s going out.”

Guajardo didn’t comment on Seade’s remarks but a senior Canadian official told the news agency AFP yesterday that there had been “no indication of flexibility from the U.S. on the issue.”

Today, Bloomberg reported that according to two people familiar with the negotiations the incoming federal government’s split with the current administration over private and foreign investment in the energy sector is “emerging as a key hurdle for a bilateral agreement over NAFTA.”

Bloomberg’s sources said that Seade has asked the Trump administration to address concerns that language proposed by the United States in a new deal would place too many restrictions on how Mexico can treat foreign companies seeking to explore and drill for oil in national waters.

Lighthizer has pushed back against the request and Seade has traveled back and forth between the U.S. and Mexican capitals to “try to smooth out the issues,” the sources said.

“It’s not about touching the energy reform, but it’s touching it in the right way,” Seade told reporters in Mexico City last night.

“The U.S. has had this drafted up to the last comma for some time, so if you change a single comma, then it needs to be discussed. But we’re discussing it, and this is going to come out OK.”

Guajardo declined to comment on energy sector negotiations when asked about the issue this morning.

Mexican negotiators are aiming to reach a deal before President Enrique Peña Nieto leaves office at the end of November but any new deal will also need López Obrador’s support because it will have to pass a Senate that from September 1 will be controlled by the coalition of parties he represented in the July 1 elections.

Both Mexican and United States officials say they will push for a deal that will allow Canada to return to the talks.

Canadian Foreign Minister Chrystia Freeland told reporters yesterday that “Canada clearly has an interest in how [auto] rules are updated and we clearly will need to look at and agree to any final conclusion.”

Canadian Prime Minister Justin Trudeau later said that Ottawa had maintained regular contact with its NAFTA partners and that he was encouraged by the optimism that has been expressed.

“We’re working to achieve a good deal, not just any deal,” he said.

Source: Reuters (en), El Financiero (sp), Milenio (sp), Bloomberg (en), AFP (en)

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