MEXICO CITY: After three months of thorny negotiations, fears of a breakdown are hanging in the air as the US, Mexico and Canada began new talks on the North American Free Trade Agreement Friday.
The fifth round of talks on updating the 23-year-old deal will be a low-key affair, with the top trade officials from all three countries staying home to let the technical experts sift through the divisive details at a Mexico City hotel, out of the spotlight.
The previous round, held last month outside Washington, ended with US Trade Representative Robert Lighthizer trading blame with Mexican Finance Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland over frictions that have left the future of the deal in doubt.
“The tone of NAFTA’s fifth round of negotiations will be critical,” the Eurasia Group consultancy said ahead of the talks.
“The rumors that President Donald Trump would announce the US’s intent to exit the trade pact soon have subsided somewhat, but he could very well do so if there is no progress achieved in the next round of negotiations. The problem is that progress depends on the US moderating its demands.”
Trump, who has attacked the deal as the worst the United States ever signed, is pushing proposals aimed at slashing the US trade deficit, particularly with Mexico.
They include a sunset clause requiring all three countries to renew the deal every five years and minimum US content requirements for auto imports.
After the last talks, Canada’s Freeland blasted the Trump administration’s “winner-take-all” mindset and Mexico’s Guajardo suggested Mexico was being pushed to the limit of its capacity for compromise.
The three countries admitted they would not be able to reach a deal by the end of the year—the initial deadline—and extended the negotiations into 2018.
Seeking to tone things down, Lighthizer, Freeland and Guajardo announced they would stay away from the new round “so negotiators can continue to make important progress on key chapters advanced in round four.”
There will be no opening ceremony, and in reality the talks already got under way informally on Wednesday, two days ahead of schedule.
The three countries said “some negotiating groups” had started meeting early, but did not specify what issues they were working on. The talks are scheduled to wrap up Tuesday.
Life after NAFTA?
Mexico, which has become a major exporter since the deal was signed, has started contemplating a possible post-NAFTA future.
Mexican Foreign Minister Luis Videgaray said last week “there’s life after NAFTA” if the negotiations fall through.
Trade expert Alejandro Luna said Mexico—which sends some 80 percent of its exports to the United States—would feel the pain if NAFTA ends, but gradually get over it.
“We could recover, but it would have to be in the medium term. In the short term, the Mexican economy would definitely be affected for at least three and maybe even five years,” he told AFP.
Mexico’s economy has been on a roller-coaster ride since Trump was elected a year ago after a campaign heavy on anti-Mexican rhetoric.
It shrank last quarter for the first time in more than four years, and the International Monetary Fund warned Monday that uncertainty over NAFTA posed a risk to economic growth.
Trump is determined to slash the United States’s $64 billion trade deficit with Mexico.
Trade frictions with Canada have also risen under the Republican president.
On Tuesday, Canada requested that a dispute over US softwood lumber duties go to a NAFTA arbitration panel—something Trump wants to scrap.