New NAFTA bomb­shell loom­ing?

Ne­go­tia­tors braced Fri­day for a non-starter U.S de­mand on auto parts

The Hamilton Spectator - - CANADA & WORLD - ALEXAN­DER PANETTA

PEN­TAGON, UNITED STATES — The NAFTA ne­go­ti­a­tions have now en­tered their most dif­fi­cult phase with the United States be­gin­ning to drop its bomb­shell pro­pos­als on the ne­go­ti­at­ing ta­ble.

The re­al­ity was on full dis­play Thurs­day as Prime Min­is­ter Justin Trudeau ar­rived for his first state visit to Mex­ico.

U.S. of­fi­cials had fore­shad­owed that this week-long round of ne­go­ti­a­tions would be where the most con­tentious dis­cus­sions opened and that is com­ing to fruition, with the Amer­i­can side lev­el­ling one de­mand deemed a non-starter — and pre­par­ing to de­liver an­other one.

The lat­est just-de­liv­ered de­mand would cre­ate a so-called ter­mi­na­tion clause.

The clause would end NAFTA af­ter five years, if its mem­ber coun­tries fail to ex­plic­itly re­new it.

That comes af­ter the U.S. pro­posed strict Buy Amer­i­can rules.

U.S. Com­merce Sec­re­tary Wil­bur Ross con­firmed the five-year ter­mi­na­tion idea.

He shrugged off the fact that other NAFTA coun­tries are ve­he­mently op­posed to it, see­ing it as a desta­bi­liz­ing in­vest­ment-killer and un­ac­cept­able red line.

“Yes, that’s our pro­posal,” Ross said dur­ing a panel dis­cus­sion Wed­nes­day.

“Red lines, blue lines, green lines, pur­ple lines. Those are just colours in a rain­bow ... It’s a big, com­pli­cated ne­go­ti­a­tion and the key is hav­ing an over­all pack­age that works (at the end).”

How­ever, one of the most im­por­tant pro­pos­als of the en­tire ne­go­ti­a­tion — on rules for auto parts — could come as early as Fri­day.

It’s ex­pected the U.S. is pre­par­ing to level de­mands viewed as non­starters by Canada, Mex­ico and the auto in­dus­try.

One re­port said the planned de­mand would re­quire 85 per cent of a car’s parts to come from North Amer­ica, and half of them to come from the U.S.

But the in­dus­try says many of th­ese com­po­nents sim­ply aren’t made on the con­ti­nent.

And they warn that if the rules get too oner­ous they might just stop work­ing within NAFTA and start pay­ing tar­iffs.

Again, Ross con­firmed that U.S. pol­icy is headed in that di­rec­tion, and shrugged off the con­cerns: “I think you’ll find the car com­pa­nies will adapt them­selves to it,” he said.

The main thing other coun­tries are try­ing to fig­ure out about this hard­line ap­proach from the U.S. is what it sig­nals:

Flex­i­ble open­ing po­si­tions that will change with time, in­flex­i­ble de­mands, or a de­sire to poi­son the talks and do away with NAFTA.

Of­fi­cials in Canada say they’re le­git­i­mately baf­fled by where the U.S. is headed.

As for Mex­ico, the de­mands be­ing lev­elled cross sev­eral of the six so-called red lines laid out in that coun­try’s Sen­ate — which says it would refuse any deal that in­cludes a ter­mi­na­tion clause, a U.S. auto

con­tent re­quire­ment or the end of the Chap­ter 19 dis­pute-res­o­lu­tion sys­tem.

An of­fi­cial in one of those two coun­tries says it’s im­por­tant to keep ne­go­ti­at­ing calmly.

“We’re ex­pect­ing some con­tentious pro­pos­als this week,” he said.

“Hav­ing said that, no one should lose sight of the fact you have three teams of ne­go­tia­tors work­ing to make progress on the deal and they are mak­ing progress.

“If there weren’t con­tentious pro­pos­als,” the of­fi­cial con­tin­ued, “it wouldn’t be a ne­go­ti­a­tion.”

SEAN KILPATRICK, THE CANA­DIAN PRESS

For­eign Af­fairs Min­is­ter Chrys­tia Free­land, Prime Min­is­ter Justin Trudeau and Min­is­ter of In­ter­na­tional Trade Fran­cois-Philippe Cham­pagne take part in a roundtable dis­cus­sion in Mex­ico City on Thurs­day.

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