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Impasse over U.S. proposals leaves fate of NAFTA uncertain

U.S. proposals for the North American Free Trade Agreement were met with harsh resistance from Canada and Mexico, leaving the future of the 23-year-old trade deal in question at the close of the latest round of trade talks that wrapped up in Washington, D.C.

Top trade negotiators from the three NAFTA partner countries exchanged verbal jabs in a fiery exchange at an Oct. 17 trilateral press conference following the fourth round of NAFTA talks.

U.S. Trade Representative Robert Lighthizer said he has seen a "refusal to accept what is clearly the best text available."

Lighthizer railed against the trade deficit the NAFTA deal has created for the U.S., which, according to the USTR office, was $63.2 billion with Mexico in 2016, and $12.1 billion with Canada in the same year. He argued that it benefits Canada and Mexico, and he suggested that could be why the two trading allies have been resistant to proposals that would correct the imbalance.

"Frankly, I am surprised and disappointed by the resistance to change from our negotiation partners on both fronts," he said. "As difficult as this has been, we have seen no indication that our partners are willing to make any changes that will result in a rebalancing and a reduction in these huge trade deficits."

Lighthizer did not specify which proposals were met with resistance, but said he hoped to have cleared chapters dealing with digital trade, telecommunications and anticorruption by this point. The U.S. has pushed for greater American content in NAFTA goods as well as a five-year sunset provision, which would require a trade deal renewal every five years. Both have been met with resistance.

In her Oct. 17 statement, Canadian Minister of Foreign Affairs Chrystia Freeland made it clear that Canada would not accept some of the proposals floated by the U.S. in the latest rounds of negotiations. Canadian Prime Minister Justin Trudeau on Oct. 11 met with U.S. President Donald Trump, who has repeatedly threatened to leave the trade deal if the U.S. cannot get the deal it seeks.

"In rounds three and four we have seen proposals that would turn back the clock ... on NAFTA," Freeland said, adding that some of the proposals run counter to World Trade Organization rules.

Specifically, she said a proposed requirement for more U.S. materials in automobiles would "severely" disrupt supply chains and put in jeopardy thousands of North American jobs.

"This cannot be achieved with a winner-take-all mindset or an approach that would undermine NAFTA rather than modernize it," she said.

In a joint statement, the three NAFTA partners said: "New proposals have created challenges and ministers discussed the significant conceptual gaps among the parties." The statement added: "Ministers have called upon all negotiators to explore creative ways to bridge these gaps."

Despite what he admitted will be a "lot of work" going forward, Mexico's Secretary of Economy Ildefonso Guajardo Villarreal stressed the benefit of working toward a modernized NAFTA.

"Despite our current differences, we must ensure that decisions we make today do not come back to haunt us tomorrow," Guajardo said. "None of us want to end this process empty-handed and there is no need for that."

Lighthizer also said the negotiations would continue into the first quarter of 2018, despite earlier hopes that the talks could be wrapped up by the end of 2017.

In a subsequent briefing with reporters Oct. 17, the USTR said there was no deeper meaning in the pushback of the timeline.

"There was never really a hard deadline and there isn't now," Lighthizer said. "The end of the year was never a hard target."

He also said the U.S. has not done any analysis of the specific effects of a withdrawal from NAFTA, but added that he is still focused on amending the current deal despite obvious hurdles. Should talks break down and the U.S. or either of the two trading partners withdraw, he said the three countries will do "just fine."

"It's always a possibility, but it's not something I'm focusing on right now," Lighthizer said of a potential U.S. withdrawal. "I'm focused on getting a good agreement and getting the trade deficit down."

Officials from both the National Retail Federation and Retail Industry Leaders Association said Oct. 17 that they were deeply concerned over the possibility of the 23-year-old trade agreement being terminated.

The fourth round of NAFTA talks, held in Arlington, Va., from Oct. 11, was extended by two days to allow for more negotiation progress. The fifth round of talks will be held in Mexico City from Nov. 17-21.