Ther fifth round of NAFTA renegotiation talks are set to begin this week in Mexico City as U.S., Canadian and Mexican negotiators hope to make modest progress despite sparse signs of compromise on key sticking points.
However, U.S. negotiating tactics threaten to torpedo President Donald Trump's demanded reworking of the North American Free Trade Agreement, which he has mocked as the “worst trade deal in the history of the world” and “the greatest disaster trade deal in the history of the world.”
U.S. trade negotiators have shown scant regard for the interests of Canada or Mexico, offering proposals that even U.S. business leaders have labeled “poison pills” to the process.
A series of leaks to various media outlets have revealed how U.S. negotiators have ham-fistedly made steep demands for unacceptable conditions. From demands that the deal establishes minimum U.S. limits in NAFTA auto content to scrapping a key dispute mechanism and adding an automatic expiry clause that would kill the accord every five years, U.S. measures soured the mood in the previous round of talks in Virginia last month.
The cavalier U.S. approach to the talks has raised the fear that Trump could suddenly decide to kill the talks with a 5 a.m. tweet.
However, any attempt to repeal NAFTA's enacting legislation would require the consent of the U.S. Congress. Lawmakers could well drag their heels, blocking Trump’s withdrawal without a vote, former U.S. Trade Representative Michael Froman told Bloomberg. A move to terminate the accord could stoke conflict with free trade advocates in the Republican Party whose support he wants for his planned tax cuts.
Paltry evidence exists that the different sides are willing to give ground in the talks. Indeed, Mexican and Canadian officials are revealing that they don't plan to budge in this round of talks, Mexican and Canadian officials said.
“There’s been no movement on the tough stuff,” said Bosco de la Vega, head of Mexico’s National Agricultural Council (CNA), the main farming lobby, which is resisting another U.S. proposal that could restrict trade in seasonal foodstuffs.
The Mexican government stands to lose from a collapse of NAFTA talks. On Monday, the International Monetary Fund said uncertainty over the NAFTA trade agreement poses a risk to economic growth in Mexico.
The 1994 trade deal turned Mexico into a major exporter by giving it duty-free access to the United States, the destination for about 80 percent of its exports.
“U.S. direct foreign investment in Mexico in 1994 was US$17 billion. In 2012 it was US$104 billion, that's quite a considerable increase,” journalist and author David Bacon told teleSUR.
“One of the things that NAFTA encouraged was investments by big Mexican capital into the U.S.,” he added. “Mexican capital directly invested in the U.S. is about US$16 billion as of the most recent data which – the same amount the U.S. had invested in Mexico when the treaty went into effect.”
Bacon doubts that the U.S. will pull out of the deal, which has been beneficial for businesses on all sides of the border.
“The economic bedrock of the relations between the U.S. and Mexico – this imperial relationship – it's not going to change at all, not one bit,” he said.
NAFTA working groups are due to begin meeting from Wednesday in Mexico to discuss issues ranging from textiles and services to labor and intellectual property. On Friday, talks will formally get underway through Nov. 21.
Should the U.S. side raise so-called “poison pills,” Mexico and Canada do not intend to discuss them or propose compromises to dilute them, two officials from the countries said on condition of anonymity due to the sensitivity of the negotiations.
“We reject anything to do with national (auto) content,” said one Mexican official involved in the NAFTA discussions, calling the U.S. attitude to the process “short-sighted.”
U.S. business groups have spoken out against the national content proposal but many officials close to the talks believe that Trump is paying little heed to their concerns. That has fueled fears that whatever concessions Mexico and Canada might eventually make, it would “never be enough,” said one in Mexico.