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U.S. fails to deliver demands for next round of NAFTA talks

U.S. fails to deliver demands for next round of NAFTA talks

The U.S. has stated one of its key objectives is to raise the amount of North American content in automotive vehicles made and sold within the North American free trade zone, but has yet to say what number it would like to see. It also wants changes in agriculture and “rules of origin.”

By TONDA MACCHARLES
Ottawa Bureau reporter
Sat., Sept. 23, 2017

OTTAWA—The head of Canada’s autoworkers union predicted NAFTA renegotiation talks would end in failure after U.S. negotiators arrived Saturday for Round 3 without setting out precise demands for how exactly the Trump administration wants to boost the made-in-America manufacturing sector.

“I’m convinced that the U.S. doesn’t want a deal, not before Christmas,” Unifor president Jerry Dias told the Star. “It is impossible … they’re too far apart” more than a month and a half after negotiators first sat down for in-depth discussions in Washington, he said.

Steve Verheul, the chief Canadian negotiator, said it was too early to say whether significant progress overall could be made in the Ottawa round, a comment echoed by Mexico’s chief negotiator, Kenneth Smith Ramos. “We’re just starting,” Ramos told reporters. “I have no comments on the actual meetings.”

Dias predicted the deal would come together in 2018, closer to the U.S. congressional mid-term elections in November. Meanwhile, he said, the Trump administration talks tough for show, to curry political popularity, but is unlikely to get Canada or, for that matter, Mexico to “capitulate.”

Canada didn’t put higher labour standards (which would also affect Mexico as well as so-called “right-to-work” states that curb collective bargaining rights in the U.S.) on the table “just to fill time,” Dias said. And Mexico is determined not to change its rock-bottom labour and environmental standards, which underpin its low-wage non-unionized work force, he said, “so we are heading on a philosophical collision course.”

Trade lawyer Lawrence Herman disagreed that the U.S. was deliberately stalling. “These are very complex issues,” he said, and the U.S. Trade Representatives office is obliged to consult with the U.S. Congress and its “complex constituencies” along the way.

“The Americans have to show that they put, from their perspective, a serious proposition on the table on every issue, they can’t play games … I would think it’s more a question of sorting out the details of what they want to ask and ensuring they’ve lined up all the various constituencies in Washington.”

Regardless, Herman, one of Canada’s top experts on international trade, also sounded a pessimistic note about the prospect for success, given the “egregious” comments by Donald Trump about NAFTA to date. “He’s basically saying we’re going to walk if you don’t agree to our position. The other two parties are saying, ‘OK, what’s your position?’”

“At some point,” Herman said, “the Americans will put some extremely tough demands responding to an America-First agenda and that’s going to cause significant difficulty in completing these negotiations.”

“I think these will become extremely nasty and difficult negotiations as things continue.

Besides the lack of exact demands about the manufacturing sector, the U.S. team has also not presented specific demands regarding Canada’s supply-managed agricultural sectors — dairy and poultry — despite those also being high on the U.S. hit list for a new NAFTA, said Gary Stordy, a spokesperson for the Canadian Pork Council. Agriculture is on the agenda for detailed talks Tuesday and Wednesday.

Canadian government officials downplayed the significance of the lack of clarification from the U.S. side. They said with four more days remaining, there was time left for the U.S. to provide more specifics.

Verheul told reporters Saturday he did not expect the American team to lay out specific text for new “rules of origin” for the auto sector during this round. And Verheul said he was “doubtful” the three-way negotiations will close or sign off on a final version for a chapter on the environment either, despite a U.S. official’s earlier suggestion that “significant progress” had been made and could be finalized in Ottawa.

Those are two of the contentious issues on the agenda at the Ottawa round. A copy of the schedule of negotiations, obtained by the Star, shows a range of Canada’s top priorities will be dealt with this week, including digital trade, environment, labour and gender.

But there is no negotiating table devoted to another Canadian objective: a chapter to recognize Indigenous rights within a new trade agreement.

And two of the big U.S. priorities are up for detailed discussion only later in this round. Negotiators will do a deep dive on “rules of origin” and “trade remedies and dispute settlement” only on Tuesday and Wednesday.

Rules of origin for the auto sector — NAFTA now requires 62.5 per cent of autos and auto parts to be made in North America for tariff-free status — “will be a subject for discussion, but we’re not expecting to see anything radically new at this point,” Verheul said.

U.S. Commerce Secretary Wilbur Ross wrote an opinion column Friday in the Washington Post saying the top priority was boosting American jobs in the auto sector.

“The declining U.S. share of content in imports from Canada and Mexico puts those jobs at risk. The United States accounts for an overwhelming share of the total NAFTA auto market today — 83 percent, in fact — yet American workers are not reaping the benefits of that purchasing power,” Ross wrote.

“If we don’t fix the rules of origin, negotiations on the rest of the agreement will fail to meaningfully shift the trade imbalance. Our nation’s ballooning trade deficit has gutted American manufacturing, killed jobs and sapped our wealth. That is going to change under President Trump, and rules of origin are just the beginning.”

Flavio Volpe, of the Canadian Auto Parts Manufacturers Association, disagreed with Dias’s assessment, saying, “The longer they take the better we feel about it.” He said the U.S. Trade Representative’s office is working hard with American industry to understand the dynamics of tougher U.S. content rules, and Volpe said it will realize its own workers would suffer from them.

Dias is not a fan of NAFTA and wouldn’t shed crocodile tears over its demise because he believes it has favoured Mexico to the detriment of Canadian and U.S. autoworkers. He suggests a Canada-U.S. free trade agreement would be the default backstop if NAFTA fails, and that would provide better protection for workers.

Nevertheless, Unifor is a key stakeholder and Dias is in close consultation with the Canadian government as talks proceed.

Dias said Canadians expected more as this round got underway.

“From what I understand they (the U.S.) were supposed to drop the entire text this time around,” Dias said. “They haven’t dropped one piece of paper yet.”

“They’ll want a deal, but not before Christmas, just leading up to the (congressional) elections, so they’re going to show they were tough, they cancelled NAFTA, they walked away, and that’s all completely loaded in the U.S.’s favour. So this thing is going nowhere and if I’m the Canadian government, I’d just relax, there’s no need bargaining with themselves.”

For now, the negotiating teams are racing through talks on an accelerated schedule. Usually weeks or months can pass between rounds of international trade negotiations.

In the case of NAFTA, there are just two or three weeks scheduled between meetings.

Mexico’s lead negotiator, Ramos, said he expects successive NAFTA negotiation rounds to go ahead as scheduled despite devastating earthquakes that have hit Mexico City.

“Unfortunately, it’s been a traumatic experience for the country, but we haven’t had any impact in terms of the negotiations,” Ramos said. “Fortunately all of the negotiating teams and their families are okay and we’re working on that basis.”

“We have our schedule from now till the end of the year and that will be maintained for now.”

Ramos was part of Mexico’s negotiating team on the original NAFTA agreement.

Emily Davis, a spokesperson for the U.S. Trade Representative’s office, said “significant progress” has already been made in the areas of the environment, small and medium-size enterprise and competition.

“How many chapters will actually close is to be determined but there are areas where significant progress has been made and so that’s part of the goal of this round,” Davis said.

Here are the topics at the negotiating table at Round 3 in Ottawa.

Saturday: Customs, sanitary and phytosanitary measures, cross border trade in services, government procurement, digital trade, anti-corruption, environment, gender, and small and medium size enterprise, financial services

Sunday: customs, textiles, sanitary and phytosanitary measures, cross border trade in services, government procurement, digital trade, environment, state-owned enterprises, financial services, good regulatory practices, legal and institutional issues

Monday: textiles, goods, competition, telecoms, state owned enterprise, temporary entry rules, environment, good regulatory practices, technical barriers to trade, legal and institutional issues

Tuesday: rules of origin, goods, agriculture, energy, investment, intellectual property, telecoms, temporary entry, labour, technical barriers to trade

Wednesday: rules of origin, agriculture, investment, intellectual property, trade remedies and dispute settlement, labour, sectoral annexes

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