Americans ease sticky NAFTA issue

U.S. procurement demand on Canada, Mexico fading from trilateral deal: sources say

OTTAWA — The United States has backed away from its contentious demands for lucrative procurement projects in the renegotiation of the North American Free Trade Agreement, The Canadian Press has learned.

Mexico and Canada are both quietly taking credit for standing firm against the controversial U.S. position that would have effectively limited their respective countries’ ability to bid on valuable American government infrastructure projects.

Multiple sources cited the competing claims as one example of the animosity between Canada and Mexico that has arisen since Mexico reached its own NAFTA deal with the Trump administration last month.

Canada and the U.S. are trying to renegotiate their portion of the three-country trade pact at the heart of the continent’s economic prosperity, but major sticking points such as dairy, dispute resolution and culture remain.

Canada has credited Mexico with making significant concessions in its deal with the U.S. on automobiles and for permitting large wage increases for Mexican auto workers — something Canada and the U.S. both wanted to stop the growing flow of automobile production into Mexico because of its cheap labour.

But Mexico believes it has also done much of the “heavy lifting” on getting America to back down on its demand to limit Canadian and Mexican firms to bid on U.S. infrastructure projects, while seeking greater access for American firms to Mexican and Canadian projects.

U.S. trade czar Robert Lighthizer floated the idea last fall during early renegotiations. The U.S. proposed a dollar-for-dollar approach that would have limited access for Canadian firms because Canada’s economy is so much smaller.

Sources say Lighthizer withdrew that demand during this summer’s one-on-one negotiation with Mexico, returning the continent’s procurement rules to the status quo.

Canada had privately expressed frustration with Mexico’s decision to strike its own deal with the U.S. last month.

But one source said Canada was informed every step of the way, noting Freeland and top negotiator Steve Verheul were kept in the loop.

The source said Canada transgressed first with a surprise auto proposal last spring that it gave directly to the U.S. Mexico still wants Canada in a three-way deal, and ensured the language in its deal with the U.S. was written to facilitate a trilateral agreement.

Mexico feels its agreement works in Canada’s favour on a number of fronts, added the source.