NAFTA watch: Countries meet in possible final push for deal in 2018

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WASHINGTON — The NAFTA countries are making what could be one final push for an agreement this spring, before political deadlines punt the process into 2019.

The lead political ministers for Canada, the U.S. and Mexico began meeting Monday for what could be a multi-day round aimed at securing an agreement.

If an agreement doesn’t happen soon, some feel it won’t happen this year at all: Mexico and the U.S. will both be immersed in national election campaigns through most of 2018.

U.S. trade czar Robert Lighthizer has said the window for a deal may only be open for the next one or two weeks.

”I believe if we don’t get it done in the next week or two, then we’re on thin ice about whether it gets done before our (November legislative midterm) election,” Lighthizer said a few days ago.

Monday’s meetings started with an early-afternoon encounter between the lead ministers for Mexico and the U.S., in an effort to clear away the big issue separating those two countries: auto parts.

The U.S. is demanding that 40 per cent of every car be produced in a high-wage country, otherwise the car is subject to a tariff. Auto-makers could meet that threshold with up to 15 percentage points’ worth of credits for spending on research and development.

Mexico is expected to make a counter-offer Monday; it has rejected the proposal as damaging to its own industry.

But some analysts say the latest plan wouldn’t be good for any country, or its workers or consumers. Their argument is that because few companies are likely to redesign their production patterns, most will simply pay the tariff of 2.5 per cent on small vehicles and pass the cost onto customers.

Canada’s foreign minister, Chrystia Freeland, was scheduled to meet her U.S. counterpart later in the day.

A big unknown question looming over the talks is what the U.S. would do after it gets a deal on autos — and whether it would opt for a quick agreement, or keep negotiating hard.

”That … probably is the crux of what happens next,” said one person familiar with the talks. ”One does not know … how the next week will play out.”

More than a half-dozen groups have been meeting in recent days to try clearing the non-controversial issues off the table, so the ministers can focus on the hardest political trade-offs.

For example, one group met to discuss customs procedures, but avoided the toughest of all customs issues: online purchases and whether Canada will move its meagre $20 duty-free level closer to the American US$800 limit.

Alexander Panetta, The Canadian Press