September 6, 2017

NAFTA Talks Round Two, More of the Same

 |  By: Anna-Lisa Laca

Canada, Mexico and the U.S. are holding 7 rounds of meetings to “modernize” the North American Free Trade Agreement (NAFTA). Each round will be held in one of the three countries. This week round 2 of discussion wrapped up in Mexico City. While negotiators from all three countries said renegotiation of the trade agreement would be quick and likely finish before the end of the year, that’s not looking promising.

“What we’ve seen so far at the negotiating table is a much slower pace,” says Darci Vetter former ag negotiator for the U.S. Trade Representative. “This second round that just finished in Mexico City was more of a continuation of the first.”

She says all three countries continued to feel out issues and engage in discussion, but the U.S. government decided not to table text on a lot of controversial issues and instead is continuing to work those through in Washington D.C.

“I think the expectation is that the third round will be a much more substantive round,” she says. “But we’re moving slowly at this point.”

The elephant in the room during discussions in Mexico City was President Trump’s threat to pull out of NAFTA at a rally in Arizona last month. The president has been all over the board in regards to the trade agreement; pledging to withdrawal from it while on the campaign trail, then focusing on renegotiation, next, a message about modernization, and finally his most recent series of comments on withdraw.

“I think that’s a very dangerous comment to make,” Vetter says. “It certainly casts a shadow on the negotiations themselves.”

Some analysts say threatening to withdraw is a good negotiation tactic and will give the U.S. power over the discussion. However, Vetter says the opposite is true.

“We heard from the Mexican delegation, it is hard to prepare if you’re trying to be productive at the table but your partner might walk away halfway through,” she explains.

Mexican trade leadership has made it clear that if the U.S. starts the withdrawal process they will walk away from the negotiating table.

“They will not negotiation with a gun to their head,” she says. “I think those threats of withdrawal are not productive.”

Do No Harm

The main concern for the president in regards to pulling out of the agreement is the trade deficit in manufacturing, says John Dillard of OFW law.

“The thing that gets lost by politicians on both sides is the fact that manufacturing jobs have been trending down since the 1970s, before NAFTA,” he says. “We are still the world’s leader in manufacturing, we just have fewer people doing it.”

Agriculture leaders from all three countries are encouraging negotiators to “do no harm.”

“Our stand is that we do no harm, this has been a good trade treaty for North American agriculture and we want to make sure we have our voices heard loud and clear,” says Zippy Duval, president of the American Farm Bureau.

According to Vetter, doing no harm means more than just leaving agriculture tariffs alone.

“It’s making sure that the other elements you negotiate don’t create such an imbalance that you provide an incentive for Canada and Mexico to retaliate against the agricultural products we ship to them,” she says.

Retaliations might include anti-dumping duties and other types of restrictions our neighbors could implement at the border because they feel so disadvantaged by the agreement in other parts of the economy.

Chapter 19

One of the most controversial issues in the discussion is called Chapter 19. According to Jim Wiesemeyer, Pro Farmer’s Washington policy analyst, it’s a tool that ensures U.S. law could not be applied to trade remedy disputes in a protectionist manner to block fairly traded goods.

“Chapter 19 was a major tool that Canada and Mexico insisted on when NAFTA was initially negotiated,” he explains. “Canada threatened to walk away if Chapter 19 was eliminated from the initial NAFTA.”

Today getting rid of Chapter 19 is one of the Trump administration’s main objectives.

It is important to remember that NAFTA was negotiated before there was a process to challenge some of those things in the WTO,” Vetter says. “This is one of those areas of controversy where the U.S. has said they will table some text and they haven’t.”

Round three of NAFTA talks will take place in Ottowa, Canada at the end of September.