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article imageNAFTA talks break for the weekend with no agreement as yet

By Ken Hanly     May 12, 2018 in Politics
Washington - After a week of talks there is still no deal for a new North America Free Trade Agreement (NAFTA). The only agreement was to resume negotiations soon.
A deadline has been issued to complete the agreement by next week by US House of Representatives speaker Paul Ryan.
Trump is highly critical of the pact
There is uncertainty about whether a new agreement can be reached before that time. US President Donal Trump has been highly critical of the deal calling it a horrible disaster for the US among other negative comments. Trump blames NAFTA for US manufacturing job losses to lower-cost Mexico and has threatened to leave the pact unless both Canada and Mexico agree to major changes.
Ministers return home for consultations but work goes on
After meeting for barely more than half an hour on Friday top Mexican and Canadian politicians made it clear that big differences remain. The Friday meeting was the first meeting of all three officials together since the talks resumed.
Chrystia Freeland, the Canadian Foreign Minister who heads up the Canadian negotiations, said that officials would continue work even though the ministers had returned home for consultations. Freeland said: “We plan to meet again as needed, which I think will be soon. … The negotiation will take as long as it takes to get a good deal."
However, in the US House Speaker Ryan says he needs to be notified of a deal by May 17th to give the current US Congress a chance to pass it before the November mid-term elections. Robert Lighthizer, the US Trade Representative has also said he wants to have a deal in place soon. A leftist-leaning NAFTA skeptic is in the lead for the Mexican presidency with the election coming July 1. If there is no deal by then it will probably be even more difficult to get Mexico to agree to Trump's demands.
In a statement, Lighthizer said the United States was ready to continue working with Mexico and Canada. However, he made no mention of a deadline in spite of his earlier remarks.
Still no agreement on auto issue
The US proposes to increase the North American content for autos manufactured in the NAFTA region. The Mexican minister Guajardo said that his team had tried hard all week to bridge the gap. He said: “We’re not going to sacrifice the quality of an agreement because of pressure of time."
Trump wants to ensure that more cars are made in the US to created jobs and investment in the US whereas now much production is in Mexico where wages are far lower. US demands on the auto issue have been a sticking point for some time with Canada as well rejecting the US earlier proposals. However, officials and industry sources claim that the three sides have been gradually narrowing differences on the issue.
Other issues are also not settled yet
Guajardo noted that many other issues remain to be settled. One is the US demand for a sunset clause that would see NAFTA expire if it is not renegotiated every five years. Another important issue is the elimination of trade dispute panels for settling trade disputes.
The details of the auto issue with Mexico
Harley Shaiken, a professor at the University of California Berkeley said: “You’ve got a traffic jam of significant proportions in the negotiations, and the key issue holding things up is this.”
The current NAFTA agreement allows a car exported to the US to be free of any tariff if at least 62.5 percent of its content is from North America. The U.S. wants to raise that content minimum to 75 percent. Added to this, it wants to introduce a new rule about wages paid to autoworkers. According to several news reports it wants a certain minimum percentage of a car to be made by workers earning at least $16 per hour.
While this is not a problem for Canada, it is for Mexico. The average wage for Mexican workers is under $8 per hour and even lower $4 per hour at parts plants.
Hugo Perezcano, deputy director of economic law at the Centre for International Governance Innovation who had been an official in Mexico's economic ministry for 2 decades said: “It really makes no sense to negotiate a NAFTA if the outcome is going to be less investment in the country.” He said that the government might well move somewhat on the issue but the Mexican auto industry might be concerned about the precedent it would set for other areas of the economy, which probably could not support such a rise in wages.
The Mexican government warned on Friday that it would not be rushed into a bad deal. The government is under heavy pressure from the auto sector that is benefiting from the lower labor costs in Mexico. Shaiken said: “These companies are very powerful because they’ve poured billions of dollars into Mexico and this government in particular is very reluctant to do anything that will impact investment in Mexico."
Jerry DIas, president of Unifor, a union that represents Canadian auto workers claimed that Mexican negotiators are doing the bidding of companies taking advantage of Mexico's low wages and claimed it was not necessary for the auto companies to exploit Mexican workers to be competitive. Dias said that companies that can pay their chief executives $20 million per year can afford to pay workers $16 dollars per hour.
Don Walker, CEO of the giant auto parts manufacturer Magna International told shareholders: “If we drove the labour for everything in Mexico up, even doubled it, then that means you’re not competitive anymore in a lot of the products and it all goes back to China."
Many international automakers also have plants in the US. Hurting their Mexican operations they argue could end up hurting US workers too.
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