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article imageOp-Ed: Canadian & U.S. negotiators disagree on NAFTA negotiations

By Ken Hanly     Mar 29, 2018 in Politics
Although the Trump administration sounds upbeat about the progress of NAFTA negotiations and the chances of reaching an agreement the chief Canadian negotiator claimed that the US had yet to make compromises necessary for an agreement to be reached.
US and Canadian negotiators gave quite different assessments of the situation.
Trump's chief negotiator Robert Lighthizer, who has publicly criticized both Mexico and Canada said that he was optimistic that an agreement "in principle" in the next little while is possible with some effort and compromise. In contrast the Canadian chief negotiator Steve Verheul said that significant gaps remain and that Canada is not sure what the US means by an agreement "in principle". He also complained that the US had yet to make the necessary compromises to reach a deal.
Verheul told reporters in Ottawa: “An agreement in principle, to our understanding, means some sense of direction on the big issues, the important issues. We’ve not seen that from the U.S. so far. We’ve not seen any proposals in that regard. If we’re going to achieve that, we would fairly require some considerable flexibility in U.S. positions.”
Canada's large Unifor union also criticized the US assessment
President of Unifor union, Jerry DIas, representing autoworkers was quite blunt in an interview: “I don’t know what Lighthizer is smoking, but he should stop it.” Dias said that at most the three countries could complete negotiations on a number of smaller issues by the end of April. On bigger issues they still remain far apart.
Auto manufacturing issue still not solved
Verneul played down recent reports of a breakthrough on the auto manufacturing issue that had been a source of tension. Lighthizer had said last week that the countries were "starting to converge" on the issue. David MacNaughton the Canadian ambassador to the US said that the talks took a positive turn when the US had placed a compromise proposal to its earlier demands that were rejected by both Canada and Mexico. Nevertheless, Verheul claimed that the auto manufacturing issue was still not close to being resolved saying: “We welcome that signal, but ... we are still quite a distance away from any kind of agreement on the approach to auto rules of origin."
The earlier US demand was that 50 percent of a car had to be made in the US in order to qualify for tariff-free treatment plus there would be an increase from 62.5 percent to 85 percent in the amount of a car that would be required to be made in North America.
Factfile on NAFTA. US President Donald Trump has denounced NAFTA as a "disaster" and the w...
Factfile on NAFTA. US President Donald Trump has denounced NAFTA as a "disaster" and the worst agreement ever signed by the United States, blaming it for a $64 billion trade gap with Mexico and loss of countless jobs
The new proposal
The publication Inside US Trade reported on Tuesday that the US would drop its US content proposal if Canada and Mexico agree to count autoworker's wages toward the North American content requirement. Mexico could avoid tariffs by paying their auto workers higher wages. However, the qualifying wage for this is thought to be around 15 dollars per hour. This is more than three times higher than the average current Mexican wage.
This could be a boon for Mexican workers but big automakers no doubt would reject it, as one of the main reasons for moving production to Mexico is the lower wages. The Mexican government might reject it as well since there would be no motive for automakers to increase production in Mexico and some production might even move back to the US. No doubt this is part of the aim of the proposal.
Horacio Lopez-Portillo, a trade lawyer with Vazquez Tercero and Zepeda in Mexico said that fifteen dollars as a cutoff was not workable. Lopez-Portillo claimed: “There is no way it’s going to happen. Can the Mexican government be pressured to increase wages in the auto industry higher than they currently are? Maybe. But it won’t be much higher than where they actually stand.”
In contrast to this rejection of the new proposal Canadian PM Justin Trudeau said on March 21st that there was a certain momentum in negotiation. The US confirmed that there had been a breakthrough in negotiations over the auto sector. In Mexico Trudeau said: “There is very strong resistance to including this. Having said that, will it happen? Maybe. And I say maybe because we’re trying to reach common ground ... so Mexico might actually cede a little bit here. How much, I don’t know.”
US wants a deal soon
From time to time Trump threatens to simply terminate NAFTA but in March his administration has struck a more positive tone, indeed more positive than that of Canada or Mexico. The Inside US Trade reports that US trade representative Lighthizer wants a deal by May 1. However, the three countries have yet to even agree to a calendar for the next round of negotiations that are expected to take place in Washington DC in April.
The Mexican presidential election is on July 1 and Andres Obrador the front runner is left-leaning NAFTA skeptic. Obrador is sure to drive a harder bargain that Enrique Nieto the present president.
The last talks were in Mexico in early March. At that time Trump announced that exemption of Mexico and Canada from steel and aluminum tariffs would depend on the completion of successful NAFTA renegotiations. In effect he is using the tariff threats to drive a harder bargain.
NAFTA is basically a trade agreement meant to increase the power of global corporations in North America and foster their interests. Trump wants to change the agreement so that more jobs are created in the US and have the terms align more closely with US national interests and national corporations in line with his America First policy.
Canada continues to take the perspective of global corporate interests. Basic imperfections in NAFTA such as the proportionality clause are not even opened and the press for the most part does not even talk about it. The issue is discussed in a in August of last year.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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