NAFTA talks getting stickier
Officials from the U.S., Canada and Mexico will start to tackle some of the tougher issues in the North American Free Trade Agreement as they discuss labor, dispute resolution and rules of origin for products at a negotiating session in Mexico City, according to two people familiar with the schedule.
U.S. and Canadian teams are pushing for better conditions for Mexican workers as a way to boost wages and reduce incentives for companies to relocate manufacturing jobs to the developing economy.
The Trump administration wants to stop U.S. companies from moving to Mexico, where workers earn a quarter of what their U.S. counterparts make.
Auto sector a focus
The labor rules discussion Sunday will be followed by talks about rules of origin, which govern the percentage of components in a product that must be from the three nations in order for it to qualify as duty free, according to the people, who asked not to be identified discussing the private negotiations. That debate, set to begin Monday, is particularly focused on the auto sector, in which a car needs 62.5 percent of the vehicle’s value to be sourced from North America to qualify for tariff exemptions.
Along with rules of origin, the nations will discuss government procurement, intellectual property, the environment, digital issues and trade in services Monday and Tuesday, according to schedule obtained by Bloomberg News. Procurement, including so-called Buy American clauses, are one sticking point in the talks.
Trade remedies and dispute resolution — a sensitive issue for Canada — are also up for discussion Monday. The U.S. wants to kill Nafta’s Chapter 19 dispute settlement mechanism.
Jerry Dias, president of Canada’s largest privatesector labor union, told reporters Friday that his group proposed a 70 percent minimum for rules of origin and that U.S. Commerce Secretary Wilbur Ross told him that he wants an even higher level.
Energy commitment
Mexico is also seeking to add President Enrique Pena Nieto’s landmark energy-industry opening to an updated NAFTA, said Kenneth Smith Ramos, the nation’s chief negotiator. It’s a step that would provide extra legal certainty for private and foreign investors.
“We’re working in that direction, analyzing all of the elements of the energy reform that should be included, of course to reflect the reform that Mexico established,” Smith Ramos told reporters in Mexico City on Saturday.
Mexico’s oil industry was largely left out of the original agreement because at the time it was closed to foreign investment. The nation began allowing private and foreign investment under a 2013 overhaul. Lately, investors have become concerned that leftist candidate Andres Manuel Lopez Obrador, the early front-runner for next year’s presidential election, will seek to undo parts of the overhaul. Incorporating it into Nafta and making it subject to international obligations would add an extra layer of reassurance.
The talks in Mexico City, which began on Friday, are the second round of formal negotiations for reworking the pact, which was established among the three nations in 1994.
President Donald Trump criticized the trade pact while running for president last year, and then threatened to exit the deal unless the other two nations agreed to the renegotiation.
U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland are scheduled to meet and hold a news conference on Tuesday, the final day of this round of talks. The negotiations are expected to shift to Canada later this month and rotate among the countries, with the goal of reaching an agreement by year-end.