Initial talks reveal Canada, U.S. rift on climate change

Divergence on environmental issues not insurmountable, officials in Washington say

WASHINGTON— Canada, the U.S. and Mexico are pledging to keep a “rapid pace” for the renegotiation of NAFTA, agreeing in a joint statement to keep exchanging proposals and comments on the content of a new deal ahead of the next round of talks in Mexico. The communiqué was endorsed by the three NAFTA partners at the conclusion of the first round of negotiations on Sunday, in which representatives from each country gave “detailed conceptual presentations” and discussed more than two dozen topics over five days, the statement said.

“The scope and volume of proposals during the first round of the negotiation reflects a commitment from all three countries to an ambitious outcome and reaffirms the importance of updating the rules governing the world’s largest free trade area,” the statement said.

Negotiators will return to their respective countries for consultations, having continued to engage with la- bour, private sector stakeholders and other levels of government during the talks, the statement said.

They plan to reconvene in Mexico to resume negotiations from Sept. 1 to 5, and hold a third round of discussions in Canada later that month. The renegotiations will then return to the U.S. in October, with six more rounds of talks being planned before the end of the year, the statement said.

“While a great deal of effort and negotiation will be required in the coming months, Canada, Mexico and the United States are committed to an accelerated and comprehensive negotiation process that will upgrade our agreement and establish 21st century standards to the benefit of our citizens,” the statement said.

The U.S. and Mexico have indicated that they would like negotiations to wrap up by the end of the year, with key elections in the offing for each country. A Canadian official told the Star on Sunday that the government is fine with that timeline.

All three countries have said they want to modernize NAFTA to take into account technological progress since it came into effect in 1994.

Although negotiators from the Canadian delegation did not comment as they left the discussion venue on Sunday, there are many issues of disagreement as representatives from the three countries work to change a slew of tenets in the 23-year-old trade pact.

A Canadian government official speaking on background told the Star that the U.S. and Canada are at loggerheads over the inclusion of climate change measures in a new NAFTA agreement, which is a stated priority of the Liberal government. The official added, however, that the Americans haven’t said anything to indicate the disagreement is irreconcilable at this point.

“It is a very initial conversation to understand where each side is coming from,” the official said.

“There’s nothing that we see as insurmountable.”

Other areas of divergence include an American push to create Buy American rules for government contracts in the U.S., while opening up these bids to U.S. companies in Canada and Mexico, and remove the stateto-state dispute resolution mechanism — which Canada strongly favours — from the agreement.

The U.S. has also said it wants to cut its trade deficit and update the rules of origin on products such as auto parts to ensure that more of their content is North American-made.

Confirming a report from Reuters on Saturday, a source close to the talks told the Star that the U.S. has not yet made any specific demands on how it wants to update rules of origin.

“On rules of origin, the focal point is going to be on auto,” said Laura Dawson, director of the Canada Institute at the Wilson Center in Washington. She said if the Americans try to raise the rules of origin level too high — it is currently at 62.5 per cent for auto parts — manufacturers could lose their incentive to play by the NAFTA rules, opting instead to pay tariffs or even moving factories to other jurisdictions.

“They’re really dancing on a knifeedge,” she said of the Americans’ position.

Lawrence Herman, a trade negotiation expert and fellow at the C.D. Howe Institute in Toronto, predicted in an email that more details of what is being negotiated will come out now that the closed-door talks in Washington have wrapped up.

“Since Washington is the leakiest ship on the seas, these texts will rapidly find their way into the public domain,” he said.

“This is going to make these negotiations exceedingly difficult for all governments to manage.”