Difficult NAFTA Talks Resuming After ‘Impasse’

Talks resuming after Trump tells Asia he favors bilateral agreements.

by on Nov.14, 2017

U.S. Trade Representative Robert Lighthizer complained that officials from Mexico and Canada are reneging on parts of the deal already agreed to by all sides.

Trade representatives from the U.S., Canada and Mexico are scheduled to meet in Mexico City for another round of negotiations to update the North American Free Trade Agreement.

Last month’s discussions ended in what was described as an “impasse” that left the fate of the agreement on potentially shaky ground. Meanwhile, President Donald Trump has used his just-ended Asian tour to talk about his dislike of multilateral trade deals.

News on NAFTA!

Instead, as he traveled through Asia, Trump has talked up his preference for bilateral trade deals with trading partners, such as Japan.

At the same time one of the U.S. principal negotiators, U.S. Secretary of Commerce Wilbur Ross, has come under scrutiny for ties to Russian oligarchs through the Bank of Cyprus where he served as vice chairman. Ross has described the reports of connections between the oligarchs and Russian President Vladimir Putin as “false” and “evil.”

(Commerce Secretary Ross under fire for Russian ties. Click Here for the story.)

Against this backdrop, the auto industry, manufacturers and farmers are maneuvering to keep NAFTA intact despite the pressure for change from the Trump administration. Despite warnings from leaders in those three sectors that a failure to reach a deal would be catastrophic, Trump continues posturing that he could have the U.S. simply pull out of the pact altogether.

Commerce Secretary Wilbur Ross is under fire due to unreported ties to Russia.

Last month, U.S. Trade Representative Robert Lighthizer closed out the sessions complaining that Mexico and Canada had balked at demands by the U.S.

Mexico, which is scheduled to elect a new President next summer, said the discussions could impact cooperation with the U.S. on immigration. Lighthizer complained that Mexico and Canada aren’t agreeing to what was already settled in previous trade discussions involving the Trans Pacific Partnership — an agreement the Trump administration repudiated last January.

Welles Orr, a former assistant U.S. Trade Representative under George H.W. Bush, told Bloomberg that he expects a handful of deals “on noncontroversial items to at least keep the pace of negotiations going and so that they can at least claim they’re making progress. The goal is to keep the ball rolling.”

With major disagreements looming on areas ranging from auto rules of origin to dairy market access and a sunset provision, ministers from the three countries have agreed to extend negotiating through the first quarter of 2018 — three months beyond their initial stated goal of wrapping up by year’s end.

(Click Here for details about Trump’s warning against NAFTA talks.)

Meanwhile, automakers continue to await the outcome of the negotiations, which could re-shape the automotive business in North America for years to come.

Under one scenario, if the North American Free Trade Agreement is dissolved, trucks produced in Mexico or Canada could be subjected to the chicken tax. Were that to happen, Toyota, General Motors and Fiat Chrysler Automobiles could face immediate challenges with high import taxes on any trucks it had hoped to ship to the U.S.

Toyota is currently expanding Tacoma production in Tijuana, Mexico. By 2019, the automaker’s pickup manufacturing in Mexico will have risen to around 260,000 units per year — representing an almost billion-dollar investment between two plants. If NAFTA dissolves, every single one of those vehicles shipped north could be hit with a 25% import fee.

“That is a risky strategy,” Duncan Wood, director of the Washington-based Mexico Institute, told Automotive News. “I think there is a very real probability that the NAFTA talks will fail … There’s a great deal of pessimism at the moment here in Washington.”

Fiat Chrysler said it could wind up moving Ram production from Mexico to Michigan if NAFTA is phased out, which is probably why FCA has held off making any new product announcements about the future of Warren Truck plant.

(NAFTA talks bog down as sides take a recess. To get more detailClick Here.)

“Properly motivated, (the move) could be executed very quickly by FCA,” CEO Sergio Marchionne told analysts during a conference call from earlier this year.

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