Written on behalf of Feigenbaum Consulting
After a month away from the negotiating table, NAFTA talks resumed this week for the fifth round of deliberations. The most recent round began today in Mexico City and was focused on technical discussions, with more fulsome negotiations to begin Friday and last until November 21st.
This session is expected to review smaller elements of NAFTA but leave the most high-profile and contentious U.S. demands for later rounds. For the first time, no Cabinet-level officials from any of the three nations will be attending the talks. They plan to leave the negotiations for their teams to deal with- a possible indication that a final deal is still far away.
Positions of the Parties Entering This Round
All three members nations come into this round of discussions with entrenched positions and particular demands:
- Canada recently used a section of NAFTA that the U.S. wants to eliminate to file a legal challenge of the U.S. softwood lumber duties.
- Mexico’s Foreign Minister recently announced that Mexico is considering scaling back policing along the border with the U.S. if it didn’t like the direction the negotiations headed into.
- The U.S. Commerce Secretary warned that the Trump administration is losing patience with NAFTA proceedings. In addition, all three parties are working under the pressure of President Trump’s repeated threats to pull out of the agreement.
During the last round of negotiations, the parties agreed to extend talks to March, abandoning a previously agreed-to December deadline, following harsh proposals by the U.S. that were rejected by the other two countries. Finalizing a deal before the new deadline is important as both Mexico and the U.S have big elections scheduled for 2018- presidential elections in Mexico, and congressional midterms in the States.
Smaller Elements of the Agreement
With American legislators currently focused on tax reform, this round of NAFTA talks is not expected to dive too deeply into any major demands, including the most contentious requests previously made by the U.S. Instead, the talks are expected to make modest progress and instead focus on ways in which the agreement can be modernized.
Cabinet-level officials will not be attending this round after they met at the Asia-Pacific Economic Cooperation gathering in Vietnam last week. They are expected to be in consistent communication with their teams of negotiators who have been instructed to take steps on proposals which have already been introduced.
Negotiators have already concluded talks on competition rules and small and medium-sized enterprises. Further negotiations on some outstanding matters, including telecommunications and regulatory practices, are well on their way to reaching a final agreement, and several more issues are expected to close in this round.
Potential “Poison Pills”
To date, overall NAFTA discussions have been hampered by what some American business leaders have called “poison pills”. The most contentious U.S. demands relate to the auto sector, dairy, dispute resolution methods, and a five-year sunset/expiry clause.
All three parties have shown little evidence that they will budge from their negotiating positions, particularly on these tough issues. If the U.S. is going to raise any of these thorny issues in this round of talks, neither Canada nor Mexico intend on discussing them or proposing compromises.
We will continue to follow developments with NAFTA as the talks continue and will provide updates as they become available. In the interim, if you have begun to anticipate what impact the ultimate outcome of the negotiations will have on your business in Canada or the U.S., contact the knowledgeable team at Feigenbaum Tax Law. To make an appointment, contact us online, or call our office toll free at (877) 275-4792.