Mexico City, Mexico, Feb 24 – Negotiators from the United States, Mexico and Canada open a new round of talks Sunday on overhauling the North American Free Trade Agreement, with the Mexican hosts already warning of turbulence.
Mexican Economy Minister Ildefonso Guajardo said the renegotiation of the 24-year-old trade deal is entering a critical phase as the three countries head to their seventh round of talks, scheduled to run through March 5.
“It’s going to be a difficult meeting, because the more you advance in the negotiations and wrap up work on the constructive issues… what you’re left with are the highly complex issues,” Guajardo told journalists.
“That’s why, as of this round, there won’t be any more easy rounds.”
After the last round of talks, in Montreal, US Trade Representative Robert Lighthizer said the three sides were making progress, but “very slowly.”
The uncertainty looming over the deal is only increasing as the clock ticks on.
Mexico, which sends some 80 percent of its exports to the United States, is gearing up for elections on July 1.
The presidential frontrunner, the fiery leftist Andres Manuel Lopez Obrador, has sent mixed signals on NAFTA. At one point, he said he would start the negotiations over and “make Donald Trump see reason” — though his campaign has sought to strike a more moderate tone.
Washington has also sent mixed signals since Trump triggered the renegotiation of what he has described as the worst trade deal in history.
While his message that NAFTA costs American jobs has played well with his base, the US business sector and many big players in his own Republican party are opposed to sweeping changes.
Trump told The Wall Street Journal last month he would be “a little bit flexible” on his threat to withdraw from NAFTA because he understood the Mexican elections were complicating the negotiations.
– Battle over car parts –
A series of thorny issues will be on the table in Mexico City.
One is rules of origin for the auto sector — the amount of a car’s content that must be produced in the region for it to qualify for duty-free status.
The United States wants to increase the North American content requirement from 62.5 percent to 85 percent, and add a new requirement for a minimum of 50 percent US-made content.
Mexico, Canada and the automakers all reject that proposal.
At the last round of talks, Canada made a counter-proposal that would accept the new content requirement but change the way “content” is counted, including intellectual property and new technology in the calculation.
Lighthizer bluntly rejected the idea.
Guajardo has said Mexico is working on a compromise solution.
However, the head of Mexico’s automobile manufacturers’ association, Eduardo Solis, played down expectations of a Mexican-led breakthrough.
“The Mexican auto industry has no particular stance in this round. We aren’t proposing anything different than what we have already said, which is that the rules of origin in the original NAFTA should be maintained,” he told Mexican newspaper Reforma.
Still, analysts are generally optimistic the deal will survive.
“We still think the most likely scenario is a successful renegotiation, due to the fact that the agreement is positive for all three economies and the supply chains are tightly linked,” Santander bank said in a note.