Seventh Round of NAFTA Talks End on Sour Note
Trump’s Steel Tariffs Enter the Equation
The seventh round of NAFTA negotiations wrapped up in Mexico City last week, and, while all parties remain committed to continue talking, it’s not clear how long that will remain the case.
The Trump administration has long since set a deadline for the NAFTA talks to be completed by July 1, the date of Mexico’s presidential elections. It’s understandable why on a practical level negotiators would try to keep electoral politics out of the talks. It’s also worth noting that the United States has congressional elections upcoming in November and that Ontario and Quebec also have elections scheduled later this year.
In any event, it’s as clear as could be that the NAFTA negotiations won’t be wrapping up by July and likely not this year, if they go that long. President Donald Trump periodically threatens to end the talks and pull the US out of the accord, and that notion was recently repeated by the US Trade Representative Robert Lighthizer.
The seventh round did make some progress as the three NAFTA partners closed out three chapters: Good Regulatory Practices, Administration and Publication, and Sanitary and Phytosanitary Measures. But a new NAFTA 2.0 will require agreement on 30 chapters and so far only six have been completed.
At the end of the talks, Lighthizer reiterated the administrations two major goals in the negotiations: modernization and rebalancing.
The first point is not a problem: everyone agrees the agreement should be updated to include progress on things like technology, intellectual property, and e-commerce that have come about in the 24 years NAFTA has been in effect. But the rebalancing piece means that the US wants to lower its trade deficits with Mexico and Canada at the expense of the other two parties, by changing NAFTA rules of origin and reshaping the rules of government procurement.
“We need to make more progress on these points to conclude a new NAFTA,” said Lighthizer. “Now our time is running very short,” he added, referencing the upcoming elections.
Many economists don’t see trade deficits as a good measure for the success of trade, and neither do Canada and Mexico.
“President Trump has said his most important goal is to help American workers and to help the American middle class,” said Canada’s foreign minister Chrystia Freeland. “We in Canada have exactly the same goal for our workers and our middle class. This can and should be a shared project. That’s because trade is not a zero-sum game. In trade, we can all win.”
Expressing his frustration with the slow progress, Lighthizer also suggested that the US will try to move to bilateral trade deals with its North American partners if the NAFTA talks don’t work out. “We are prepared to move on a bilateral basis, if agreement can be made,” said Lighthizer.
Mexico’s Secretary of Economy Ildefonso Guajardo Villarreal disagrees. NAFTA “has to be a trilateral accord, given the conditions of integration in North America,” he said in an interview on Mexican television. “It must be that way.”
Clouding any potential progress on NAFTA were the steel and aluminum tariffs that Trump said he would impose globally. “As the number one customer of American steel, Canada would view any trade restrictions on Canadian steel and aluminum as absolutely unacceptable,” said Freeland.
Guajardo agrees, adding that Mexico would respond if the US pushed ahead with metals tariffs. “There’s a list of US products that we are analyzing internally,” said Guajardo. “But we won’t make it public. We’re going to wait.”
An eighth round of NAFTA talks is scheduled for Washington in April.