May 18, 2018 11:00 AM, EDT

US Dashes Hopes for Quick NAFTA Deal Amid ‘Gaping’ Differences

Olivier Douliery/Abaca Press/TNS

President Donald Trump’s chief NAFTA negotiator said the United States, Canada and Mexico are “nowhere near close to a deal” to update the region’s 24-year-old free-trade pact as U.S. lawmakers warn that time is almost up to reach a agreement that can pass the current Congress.

“There are gaping differences on intellectual property, agricultural market access, de minimis levels, energy, labor, rules of origin, geographical indications, and much more,” U.S. Trade Representative Robert Lighthizer said May 17 in an e-mail statement. “We, of course, will continue to engage in negotiations, and I look forward to working with my counterparts to secure the best possible deal for American farmers, ranchers, workers and businesses.”

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The Mexican peso and Canadian dollar weakened after Lighthizer’s comments. The three countries have been negotiating for nine months to modernize NAFTA, and midterm congressional elections in the United States and a Mexican presidential campaign this year have raised the urgency for a quick resolution. Trump has threatened to withdraw from the pact if he can’t rework it to shrink America’s trade deficit and boost manufacturing jobs.

Lighthizer’s doubts dashed hopes for a quick resolution after Canadian Prime Minister Justin Trudeau earlier May 17 in New York expressed optimism about reaching an agreement soon, while noting that differences remain. U.S. House Speaker Paul Ryan said earlier in the day there could be a week or two left to reach a deal that American lawmakers could support this year.

‘Feeling Positive’

NAFTA partners in recent days have been holding high-level meetings to assess if a new trade agreement is within reach.

“We’re down to the point where a good deal is on the table,” Trudeau said. “We know that those last conversations in any deal are extremely important, so I’m feeling positive about this, but it won’t be done until it’s done.”

The issues specifically identified by Lighthizer in his comments as areas of difference include a U.S. proposal to open Canada’s dairy market and establish seasonal barriers for Mexican agricultural exports; efforts to get Mexico and Canada to raise the threshold at which duties are applied to goods imported from the United States; and the rules for regional content in cars built and traded within North America.

David MacNaughton, Canada’s ambassador to the United States, said earlier May 17 that Canadian and American officials would gather in Washington to discuss NAFTA. He didn’t say who would attend, but Foreign Affairs Minister Chrystia Freeland planned to be in the U.S. capital May 17 for unspecified meetings, according to three people familiar with talks and one Canadian government official who spoke on condition of anonymity.

Talks Scheduled

Mexico will send part of its NAFTA team to Washington on May 14, and another contingent already is there, Economy Minister Ildefonso Guajardo said May 17. There’s no date for him to meet with Lighthizer and Freeland, Guajardo said. The three cabinet-level officials have been leading the talks.

MacNaughton said Canadian and Mexican officials plan to hold discussions in Washington, without saying when.

With attention focused on the contentious issues of cars, Trudeau said that Mexico had made proposals that “will go a long way towards reducing the trade deficit the U.S. has with Mexico and indeed even bringing back some auto jobs from Mexico to the United States.”

Guajardo quickly responded on Twitter, congratulating Trudeau for his remarks. “But a clarification is necessary: Any renegotiated NAFTA that implies losses of existing Mexican jobs is unacceptable,” he said.

The United States is pushing to tighten the rules of origin, which govern how much regional content a car must have to qualify for NAFTA’s duty-free benefits. Trudeau said there’s a proposal that is “broadly acceptable” to the three countries, though MacNaughton said some work remains.

“We’re that close on autos,” the ambassador said, showing a small gap between his index finger and thumb.

Canada and Mexico expressed continued resistance May 17 to the U.S. proposal for a so-called sunset clause that would kill NAFTA after five years unless all parties agree to extend it. Trudeau said the idea is still a sticking point, while Guajardo said it was out of the question.

“There’s still some tough issues,” MacNaughton said. “But do we really want to kick this down the road and miss the opportunity to pull all that good work together and get something formally done?”