Momentum builds for new deal on NAFTA

Trump says it will come ‘fairly soon,’ but adds U.S. will get it right or abandon it

WASHINGTON/OTTAWA President Donald Trump said the U.S. may reach a deal soon on a revamped NAFTA while playing down expectations the announcement will come next week at a regional summit in Peru.

“We’re working very hard on NAFTA with Mexico and Canada. We’ll have something, I think, fairly soon,” Trump said Thursday at an event in West Virginia. But in response to reports the U.S., Canada and Mexico may announce a deal in principle next week at the Summit of the Americas in Peru, the president said he’s told his staff to “take it nice and easy” rather than rushing the talks.

“There’s no rush. We’ll get it done right or we’ll terminate it,” said Trump, reiterating his threat to withdraw from the North American Free Trade Agreement.

Prime Minister Justin Trudeau said earlier Thursday that NAFTA talks have picked up momentum.

“We are in a moment where we are moving forward in a significant way, hopefully there will be some good news coming,” Trudeau said in Quebec City. “Right now, we are having a very productive moment.”

Foreign Affairs Minister Chrystia Freeland is scheduled to meet Friday in Washington with U.S. trade czar Robert Lighthizer and Mexican Economy Secretary Ildefonso Guajardo, signalling that talks have bumped up to the ministerial level as the negotiations intensify.

Canadian officials believe the best chance for reaching a quick agreement in principle will occur next week when Trudeau, Trump and Mexican President Enrique Pena Nieto meet in Peru at this year’s Summit of the Americas.

The U.S. has softened a key demand on autos, according to people familiar with the negotiations.

The U.S. proposal would distinguish between different NAFTA car parts by grouping them into five categories, some of which would have a lower requirement for North American content or none at all, said the people, who spoke on condition of anonymity because they’re not authorized to discuss the negotiations publicly.

While the U.S. had been pushing for 85 per cent of a vehicle’s content to be sourced from the three NAFTA countries to be traded tariff-free, its latest proposal would apply that threshold to major components such as transmissions and engines but not to the simplest inputs like nuts and bolts, the people said.

Although it’s less arduous than the original demand, automakers would still be hard-pressed to hit the 85-per-cent threshold on critical parts, and no agreement has been reached.

NAFTA currently requires a typical vehicle to have 62.5 per cent North American content in order to benefit from tariff exemptions.

In a background briefing Thursday in advance of the Peru meeting, a White House official said: “At this point, we don’t anticipate substantive discussions on NAFTA at the summit.”

The official added that Lighthizer, whose attendance at the summit remains uncertain, “continues to lead the negotiations with our partners separate to the summit.”

Lighthizer has signalled his desire for a deal by the end of the month, before the Mexican presidential election gets underway in earnest.

Many trade experts believe an agreement in principle — which would leave many of the details on the most challenging issues to be worked out later — is the best that could be cobbled together in such a short time.

“I don’t know what an agreement in principle looks like, really,” David MacNaughton, Canada’s ambassador to the U.S., told reporters Wednesday in Toronto. “There’s still lots of issues. There’s differences of opinion and we’re going to work hard to try and narrow down the gaps and get to as much of an agreement as we possibly can.”

Freeland said Wednesday during a speech in Winnipeg there’s been “promising ” progress on the auto issue. “We’re making good progress” in NAFTA talks overall, she said. “Having said that, we’re not there yet.”

One problem with the new plan is that no cars now made in North America would meet the proposed requirement for 85 per cent of major components to come from the region, according to one of the people.

Some automakers would have particular trouble meeting the threshold as they typically build major components overseas and assemble them in North America, the person said.

Talks over autos have shifted to whether higher wages, research and development could be included in the calculation of a vehicle’s value, to encourage more of that work to be done in higherwage economies like the U.S. and Canada.