The North American Free Trade Agreement (Nafta) could be renegotiated in the next few weeks, US Vice President Mike Pence and Canada’s Prime Minister said last Saturday in Peru, avoiding new political opposition that could emerge during Congressional and Mexican elections later this year.
“I’ll leave this summit very hopeful that we are very close to a renegotiated Nafta,” and “there is a real possibility that we could arrive at an agreement within the next several weeks,” Pence told reporters at the Summit of the Americas in Lima.
After the meeting with Pence, Canada’s leader Justin Trudeau said the “positive momentum” included the thorny issue of US demands around automobile production. “We would like to see a renegotiated deal land sooner rather than later,” he added.
“There is a desire and a recognition by all three Nafta partners that the time lines imposed upon us by both the upcoming, the imminent Mexican elections and the upcoming American midterms, means that we have a certain amount of pressure to try and move forward successfully in the coming weeks,” Trudeau said.
The comments restore some more optimism on Nafta after US President Donald J. Trump earlier last week canceled a trip to Peru where Nafta could have been discussed further, and said he could let trade talks go on indefinitely because it would deter companies from investing there.
Pence later tweeted that it was “great to speak” with Trudeau. “We discussed progress toward reaching an agreement on Nafta as soon as possible and that a deal must ensure FAIR and RECIPROCAL trade.”
Pence also said funding of a wall on the US-Mexico border didn’t come up during a meeting with Mexican President Enrique Peña Nieto.
“We are very close to the kind of breakthrough on issues of immigration, drug interjection” that will be of benefit to both sides, Pence said.
The Trump administration has stuck to five to six of its most controversial demands for changes to Nafta and needs to show flexibility in order to reach a final deal, according to the top representative for Mexico’s private sector.
The US has yet to present a proposal for automotive content rules that would be viable for the industry, said Moises Kalach, the trade head for the national business chamber known by its Spanish abbreviation, CCE.
Work on a revamped Nafta has the three nations ready to close nine to 10 chapters focused on modernization, including telecommunications, energy and the environment, which would leave chapters with the most contentious issues as those to resolve, he said.
“There are five or six demands that are unacceptable for Mexico and unacceptable for the Mexican private sector,” Kalach said in an interview with Bloomberg TV in Washington last Friday. “Those demands like the sunset clause, that has the sudden death to it, seasonality to limit exports on fresh products, trade remedies—those are things that the Mexican private sector is not willing to accept and those demands are still on the table. That’s what’s really holding up this negotiation.”
Negotiators last week were trying to make progress on the most contentious issues, including dispute resolution, access to US procurement deals, a proposal to require more auto manufacturing in North America, seasonal barriers to agriculture trade and a clause that would terminate Nafta after five years unless the nations agree to continue it.
Meanwhile, Canada’s minister responsible for industry, Navdeep Bains, met with carmakers last Friday and said he’s “cautiously optimistic” about progress made on the crucial auto issue.
The US push to announce a framework deal last week looks to have fallen short after Trump canceled his trip to Peru to participate in a regional summit.
Mexican Economy Minister Ildefonso Guajardo last Monday said he sees an 80-percent chance of an initial agreement by the first week of May.
On the talks for cars, one of the most contentious issues, “we haven’t seen a proposal that’s achievable up to now,” Kalach said. “That has to change in order for this to happen.”
The US has at least twice softened demands for changes to the auto sector. US negotiators are now proposing that as much as 75 percent of car parts be sourced from the three countries to quality for tariff exemptions under Nafta, down from an initial proposal of as much as 85 percent, according to three people familiar with the talks, who asked not to be named as the negotiations are private. The current Nafta level is 62.5 percent.
Bains met with Canadian automakers and auto-part makers to discuss several issues including ongoing Nafta talks.
“We’re making progress,” the minister said. He cited one-time US interests, such as a border-adjustment tax and a US-specific auto content requirement, that are no longer on the table as positive signs.
He and the auto sector representatives discussed the future of the industry, including the role artificial intelligence will play and how the country can attract auto jobs of the future, he said, warning that any sharp changes in Nafta’s rules could hurt the sector. “Any change add costs, any new rules could potentially add costs and that could undermine the ability to compete, that could raise the cost for vehicles,” Bains said.