Trump signals optimism about NAFTA progress

Canada, Mexico and U.S. share openness to compromise on key sticking points

OTTAWA U.S. President Donald Trump joined Canadian and Mexican officials in striking an upbeat tone on the North American Free Trade Agreement, with one country’s top negotiator saying talks have been constructive on divisive issues.

“Will it be renegotiated? We’re trying right now,” Trump said in an interview on CNBC Thursday from the World Economic Forum in Davos, Switzerland. “I think we have a good chance, but we’ll see what happens.”

Trump’s comments came as his trade representative Robert Lighthizer held a detailed NAFTA meeting at the Swiss ski resort with Canadian Foreign Minister Chrystia Freeland.

Freeland and Mexican Economy Minister Ildefonso Guajardo gave their own signals of cautious optimism during a Davos panel discussion. Freeland said talks on complex issues shouldn’t be rushed, and Canada is prepared for any eventuality on NAFTA. Guajardo reiterated a willingness to compromise on the key issue of automobiles.

“Today we are in much better standing than a year ago to try to find those creative solutions that will mean a win-win-win for the three countries,” Guajardo said.

The ministers spoke as their negotiating teams worked in Montreal during the sixth round of NAFTA talks. Lighthizer, Freeland and Guajardo will meet in Montreal on Monday to close out the round, a pivotal gathering where progress will determine the likelihood of reaching a deal to prevent Trump from abandoning the pact.

Speaking from Montreal during a break in talks on Thursday, Canada’s chief negotiator Steve Verheul said discussions “went reasonably well” with the U.S. on automotive rules of origin, which govern what share of a car must be made in the three countries to be traded freely within the zone. Canada had presented what it called “new ideas” related to how a car’s value is calculated.

“The mood is still reasonably constructive,” Verheul said.

NAFTA talks on the automotive industry revolve around the U.S. demand to hike the rules of origin. Mexico’s Guajardo said the threshold must increase gradually, to give companies time to adapt.

The U.S. also had some “positive things to say” about a Canadian idea to add a clause that would force nations to review NAFTA periodically, Verheul said. The proposal came after the U.S. pitched a so-called sunset clause that would automatically kill the pact after five years unless all three countries vote to extend it.

Lighthizer and Freeland discussed the auto rules, sunset clause and investor dispute panels during their private meeting in Davos on Thursday, according to a Canadian government official who spoke on condition of anonymity.

In her panel discussion, Freeland said NAFTA talks will be a success if they cut red tape and lead to more companies taking advantage of the accord, as 40 per cent of Canadian exporters to the U.S. don’t bother using NAFTA because of the regulatory burden. She cautioned against moving too quickly, particularly on discussions around “insanely complicated” automotive rules.

NAFTA talks began in August and are slated to run through March, with the seventh round expected in late February in Mexico City. Trump had initially wanted a deal by December 2017, though trade negotiations of this scale typically take years.

Michael Sabia, chief executive officer of Canadian investment management firm Caisse de Depot et Placement du Quebec, said negotiators should focus more on getting things right than striking a quick agreement.

“We’ve got to get the right deal, not just any deal,” he told Bloomberg TV Thursday.

We are in much better standing than a year ago to try to find those creative solutions that will mean a win-win-win for (all).