NAFTA talks resume amid fears of ‘zombie’ deal

WASHINGTON: Senior Canadian, US and Mexican officials trying to rescue slow-moving talks to update the NAFTA trade pact met on Monday in a new bid to resolve key issues before regional elections complicate the process.

With time fast running out to strike some kind of deal on the North American Free Trade Agreement, the three member nations are still far apart on major points.

Discussions in Washington will center on one particularly contentious area – the US demand for tougher rules of origin governing what per centage of a car needs to be built in the NAFTA region to avoid tariffs.

Other challenges include the future of the pact’s disputeresolution mechanism and a US proposal for a sunset clause that could automatically kill the deal after five years.

“We will be working all week on this,” Mexican Economy Minister Ildefonso Guajardo told reporters after talks with US Trade Representative Robert Lighthizer.

Asked how long he would be staying in Washington, he replied: “We will be here for as long as necessary”.

Sources close to the talks suggest there is a creeping feeling of pessimism going into the new round of negotiations because of gridlock on critical matters.

Guajardo earlier told El Heraldo newspaper that if a deal could not be reached, “we would be operating what some analysts have called ‘Zombie NAFTA’ ... (one) that isn’t dead and isn’t modernised”.

Business executives complain that uncertainty over the future of the 1994 agreement is hurting investment.

Lighthizer said last week that if the talks took too long, approval by the Republican-controlled US Congress may be on ‘thin ice.’

The aim is to complete a vote during the ‘lame-duck’ period before a new Congress is seated after November’s congressional elections.

Mexico holds its presidential election on July 1 and the frontrunner, leftist Andres Manuel Lopez Obrador, says he wants a hand in redrafting NAFTA if he wins.

Lighthizer has raised the idea of a quick agreement in principle to cover the general outlines of a text, leaving officials to work out the exact details later.

Guajardo though said he wanted “to make the best possible effort to try to land a complete deal”, adding it made no sense to go for “a partial result”.

At the heart of the NAFTA revamp is US President Donald Trump’s desire to retool rules for the automotive sector in order to try to bring jobs and investment back north from lower-cost Mexico.

Mexico’s main auto sector lobby has described the latest US demands, which include raising the North American content to 75 per cent from the current 62.5 per cent over a period of four years for light vehicles, as “not acceptable.”

The US proposal also would require that 40 per cent of the value of light-duty passenger vehicles and 45 per cent for pickup trucks be built in areas with wages of US$16 per hour or higher.

That could be a challenge for Mexico, where the Ann Arbor, Michigan-based Center for Automotive Research has estimated auto assembly workers on average earn under US$6 an hour, and workers at auto parts plants on average earn less than US$3 an hour.

Critics also say it would create a bureaucratic nightmare of paperwork.

Talks to renegotiate NAFTA started last August to fulfil a campaign pledge by Trump to bring manufacturing jobs back to the United States.

Nine months later, the most troublesome issues remain open.

“What the US government seeks is not to modernize the old NAFTA but rather to get an agreement that would destroy trade and investment among the three North American partners,” former Mexican president Ernesto Zedillo wrote in the Washington Post.