U.S. says time running short for NAFTA talks, floats bilateral deals

MEXICO CITY, (Reuters) - The top U.S. trade envoy said yesterday that bilateral deals could replace NAFTA if the pact is not renegotiated soon, ramping up pressure on Canada and Mexico, already smarting from President Donald Trump’s plan to impose steel and aluminum tariffs.

U.S. Trade Representative Robert Lighthizer said political headwinds would increase the longer the negotiations dragged on, warning that time to rework the 1994 trade deal was running “very short.”

“We would prefer a three-way tripartite agreement. If that proves impossible, we are prepared to move on a bilateral basis,” Lighthizer said, reading from a statement in Mexico City at the end of a seventh round of talks.

He also appeared to seek to divide Mexico and Canada in the talks, saying the United States was making more headway with its southern neighbour than with Canada.

The Mexico City round of NAFTA talks was thrown into disarray after Trump announced a plan last week to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports, arguing they were needed to protect U.S. industries and jobs.

Trump tweeted earlier yesterday that “Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.”

Lighthizer said that meant Canada and Mexico would enjoy tariff exemptions once a NAFTA deal was reached, calling the tariffs an “incentive” to conclude the talks.

Canada and Mexico say they should be exempted from such moves, and have warned they could retaliate. Canadian Foreign Minister Chrystia Freeland said at the event with Lighthizer that tariffs, which have rattled financial markets, were “unacceptable.”

“We should be excluded because the most integrated steel industry in the world is the North American steel industry,” Mexican Economy Minister Ildefonso Guajardo said at a later media briefing.

Both Canada and Mexico send more than 75 percent of their goods exports to the United States.

Guajardo said there would be no concessions made in the NAFTA negotiations to placate Trump on steel and aluminum, while Freeland said the two issues were separate.

Guajardo raised the possibility, however, that Mexico might not respond to Trump’s metals tariffs, saying it was not necessarily beneficial to escalate matters.