NAFTA round avoids big issues

WASHINGTON — The fifth round of talks among the United States, Mexico and Canada over the North American Free Trade Agreement drew to a close Tuesday with negotiators still at odds over the pact’s future.

Over a week of meetings in Mexico City, officials hammered out more technical details of the trade agreement but barely broached the yawning gaps among the three countries on the most contentious issues. Those include rules for manufacturing automobiles, resolving trade disputes and issuing government contracts, as well as a proposed “sunset clause” that would require NAFTA to automatically expire every five years unless the parties voted to continue it.

The lack of substantial progress was not unexpected. The top negotiators for each country sat out this round of talks, deciding instead to let staff work out some of the details before returning to the hot-button issues that have threatened to derail the pact.

At the last round of ne-

gotiations, in Washington in October, proposals introduced by the United States on the main areas of contention raised tensions and provoked fears of NAFTA’s demise. At the conclusion of the round, the United States called for a monthlong hiatus and extended future talks into the first quarter of next year to defuse tensions and keep lawmakers in Washington focused on a tax overhaul.

NAFTA negotiators have come close to finalizing agreement on topics including state-owned enterprises and customs procedures. But the Mexico City round did not elicit much progress on issues like “rules of origin,” which governs the amount of a product that needs to be manufactured in North America to qualify for NAFTA’s zero tariffs.

Canada and Mexico have not yet made specific counterproposals to the U.S. requests, including on automobiles, people familiar with the talks said. The United States had called for raising the auto production threshold to 85 percent, up from 62.5 percent previously, to qualify for the tariff-free treatment. And it had asked for a new requirement that 50 percent of the value of a car be manufactured solely in the United States — a provision at odds with American automakers, who fear it will drive up their costs and make them less competitive globally.

Instead of countering the proposal, Canadian and Mexican officials presented data that show the harm the U.S. provisions would inflict on the North American auto sector.

On another thorny topic, government procurement, Mexico made a proposal that a person familiar with the talks said would effectively block U.S. companies from supplying goods and services to the Mexican government.

The United States has proposed limiting the amount of American government contracts that Canadian and Mexican companies are able to win, capping the level dollar-for-dollar to the total size of Canada and Mexico’s much smaller markets.

In return, Mexico proposed linking its government contracts to the size of deals that Mexican companies have actually won under NAFTA, a person familiar with the negotiations said. Since Mexican companies have won few, if any contracts, in recent years, that would largely prevent U.S. companies from winning Mexican government contracts.