By Paul Vieira in Ottawa, William Mauldin in Washington and Juan Montes in Mexico City
OTTAWA -- Canadian and Mexican trade officials in Montreal on
Sunday will begin laying out proposals aimed at convincing their
U.S. counterparts not to put an end to the North American Free
Trade Agreement.
Delegations from Canada and Mexico will present an array of
responses to some of the Trump administration's most hard-line
demands for changing the trade pact, in what many observers believe
could be a make-or-break round of talks. Negotiators' initial focus
will be on Washington's demands for increased U.S.-made content for
cars made in North America.
The goal in the Montreal talks, according to Canadian and
Mexican officials and people briefed on the matter, is to make
enough progress that U.S. President Donald Trump won't be tempted
to pull the plug on negotiations. If they don't, "the Americans
will conclude the Nafta talks are pointless," said Sarah Goldfeder,
a former U.S. diplomat once posted in Mexico and Canada who is now
principal at Ottawa-based Earnscliffe Strategy Group.
Since August, the three countries have been locked in
negotiations to renegotiate the 24-year-old trade pact, after Trump
called it the "worst trade deal ever made" and threatened to pull
out if sweeping changes weren't made.
Even as Mr. Trump this week tweeted that the deal is a "bad
joke," his administration has recently softened its tone regarding
the talks. Mr. Trump told The Wall Street Journal this month that
he was willing to be "a little bit flexible" on Nafta talks given
Mexico's upcoming presidential election, scheduled for July.
"The president does want to improve the agreement," a White
House official said Friday. "He's made clear he will go in a
different direction if that can't be done, but that doesn't mean he
doesn't want to improve it."
Despite the recent positive comments from the White House, many
U.S. lawmakers and business groups who support Nafta continue to
worry Mr. Trump could eventually take steps to exit from the
pact.
Tensions flared earlier this month when Canada filed a sweeping
complaint with the World Trade Organization against the U.S. trade
regime and how it applies tariffs. Imports of Canadian lumber,
airplanes and newsprint now face steep U.S. tariffs under the Trump
administration, which says Canadian producers benefit from unfair
government subsidies.
U.S. Trade Representative Robert Lighthizer, Washington's chief
Nafta negotiator, condemned Canada's move, saying it could
undermine the Trump administration's confidence in Canada's
commitment to "mutually beneficial trade."
Late Friday, Canada took another step that could further roil
U.S. trade officials when it requested Nafta dispute-resolution
panels hear Canada's case against the Commerce Department's tariffs
on softwood lumber and Bombardier Inc.'s commercial jets.
The talks start Sunday with a focus on agriculture and energy,
and ramp up Tuesday with the arrival of chief negotiators. They are
scheduled to end Monday, Jan. 29, with a meeting of top U.S.,
Canadian and Mexican ministers.
Mexico has previously made efforts to meet the U.S. halfway on
Mr. Trump's most polarizing demands, including automobiles. The
Trump administration has proposed regional content of light
vehicles made in North America be increased to 85% from the current
62.5%, and half the vehicle's parts be U.S. made, to qualify for
duty-free trade among the countries.
"We agree with the position of strengthening regional content,"
Mexican Economy Minister Ildefonso Guajardo said in a recent
interview.
One senior Mexican official said raising regional content closer
to 70% could be achievable and that enhanced tracing -- tracking
precisely where parts come from -- is being considered.
Rather than offering a formal counterproposal to the U.S.
demands in Montreal, Mexican negotiators would seek to nail down
the specifics of strengthening the content rules and get a "road
map" for further talks on the issue, officials say.
For Canada, whose chief negotiator last year called some U.S.
demands "wholly unworkable," the recent decision to introduce
counterproposals marks a shift. U.S. officials have criticized
Canada for inflexibility, including an unwillingness to consider
opening up its borders to more U.S. dairy products and poultry.
U.S. Agriculture Secretary Sonny Perdue urged his Canadian
counterpart to "get his negotiators in the game" at a recent
farmers' convention that Mr. Trump attended.
"When it comes to the more unconventional U.S. proposals, we
have been doing some creative thinking," Chrystia Freeland,
Canada's foreign minister, said at a recent cabinet retreat. "We
have some new ideas that we look forward to talking to our U.S. and
Mexican counterparts about them in Montreal."
Among the proposals Canada will introduce is broadening the
definition of what counts as North American content in automobiles,
according to four people briefed on talks. Canada will propose
counting North American-produced steel and aluminum toward regional
content, these people said. They said Canada would also propose
that research and development in North America for car software
should count toward the threshold required for duty-free trade.
Canada and Mexico remain opposed to more specifically U.S.
content in cars, according to three people familiar with the
matter.
Mr. Lighthizer declined to answer a question about Nafta's
prospects after leaving a meeting with U.S. senators last week, but
some lawmakers expressed optimism.
"I am hopeful" on Nafta, said Sen. Joni Ernst, an Iowa
Republican who has met with Mr. Trump to dissuade him from exiting
the trade agreement. "We would love to see the United States come
out a winner on this."
Even if there is progress on autos, significant differences
remain, most notably between the U.S. and Canada on how trade
disputes are resolved. Canada has been adamant that independent
panels of trade experts should rule on tariff disputes. Mr.
Lighthizer, in contrast, wants the system scrapped because he feels
it erodes U.S. sovereignty.
--Dudley Althaus and Santiago Perez contributed to this
article.
(END) Dow Jones Newswires
January 21, 2018 07:14 ET (12:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.