Mexico: 80 per cent chance of new NAFTA, as talks spread across continents

WASHINGTON – A rush to conclude a new NAFTA agreement could see negotiations spread this week across two continents and more than 5,600 kilometres in a spurt of non-stop bargaining.

Officials return to the bargaining table Tuesday in Washington, and sources say the week could end with the politicians leading the talks — Chrystia Freeland, Ildefonso Guajardo, and Robert Lighthizer — meeting Friday during the Summit of the Americas in Peru.

“It’s a permanent round,” Guajardo said, describing the non-stop negotiations, in an interview Monday with Mexico’s Televisa network.

The Peru encounter is not final, as plans evolve rapidly. The cause of this rush is a de facto deadline, about a month from now, for concluding an agreement this year, after which the talks could languish into 2019 while Mexico elects a new president and the U.S. elects a new Congress.

What are the odds of success?

Guajardo put a number on the likelihood of a deal by early May: “A very high probability — 80 per cent,” he said.

“It will depend a lot on flexibility.”

He cautioned that such an agreement will not happen this week, nor will it occur in time — as some had hoped — for Donald Trump, Justin Trudeau, and Enrique Pena Nieto to make the announcement while in Peru.

The U.S. president sounded equally optimistic: “We’re fairly close on NAFTA,” Trump said Monday. However, he continued to couch that optimism in his oft-repeated threat of terminating NAFTA should talks fail.

Guajardo warns that in the current political environment, nothing is guaranteed.

In a reference to Trump and his social-media habits, Guajardo says policy-makers sometimes find themselves scrambling to respond to the thoughts of a superior shared publicly at 6 a.m.

He says the U.S. had already shown some flexibility on autos, the top focus of the negotiations. The U.S. has dropped its demand that half of every car consist of American parts, in favour of a system that credits parts-makers who pay more than $15 an hour.

Such a system could penalize Mexico, where salaries are lower, but Guajardo noted that there are different ways to design it, including allowing a longer phase-in period: “The devil is in the details.”

His bullish prediction spurred a buoyant reaction from one auto-industry stakeholder.

“Any time the lead minister from Mexico is confident enough to put a number on it that’s equal to the percentage of dentists that recommend Colgate, we are moving in a very positive direction,” said Flavio Volpe of Canada’s Automotive Parts Manufacturers’ Association.

“(It’s) night and day different from (where negotiations were) a few months ago.”

But another trade observer offered a word of caution.

Lawyer Dan Ujczo says an agreement this month would be very preliminary — he refers to it as an “agreement in passing.”

That’s because he says it’s hard to imagine all the other sticking points like dairy, and procurement, being sorted out in sufficient detail to formally start the ratification process in the U.S. Congress by next month, in time to complete everything in 2018.

“I think that’s what they’re trying to do, (say), ‘Hey, we’re closing out what we can close out, we’ve got this auto thing and we’re going to deal with the rest later,'” said Ujczo, of the law firm Dickinson Wright.

“An agreement in principle does not start the clock (on the U.S. ratification process)… You can’t say, ‘We have like supply management (of dairy and poultry) hanging out there, or intellectual property.’ So that’s why I think you end up with this sort of NAFTA-on-ice scenario (until 2019).”

Once all three countries ratify it, the new trade pact would take effect.

Some Americans are in a hurry.

In particular, agriculture states, already battered by low crop prices and poor weather, are antsy about trade uncertainty compounding their woes, including Chinese threats of tariffs on farm goods.

A Republican senator told NBC over the weekend that he understands the U.S. targeting Chinese trade practices like the theft of intellectual property, but he says he wants to see a coherent strategy, with other trade relationships secured.

“Number 1, let’s quit fighting with Mexico and Canada,” said Sen. Mike Rounds.

“They are our allies. We’ve actually got a pretty good relationship right now with NAFTA. So, (let’s not be) going after NAFTA.”

Trump’s new economic adviser, Larry Kudlow, suggests that’s the plan.

Kudlow says good progress is happening on NAFTA. Now he’s using an old phrase, recycled from an entirely different context, to describe the current U.S. goal of building alliances against China, on issues like steel dumping.

“I call it a trade coalition of the willing,” said Kudlow, borrowing a term from the buildup to the 2003 invasion of Iraq.

Back then, Canada and most of Europe refused to join the coalition against Saddam Hussein. This time, Kudlow says, Canada, and Europe, appear to be willing partners.

— With files from Joan Bryden in Ottawa