New NAFTA bombshell looming?
Negotiators braced Friday for a non-starter U.S demand on auto parts
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.”
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.