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Canada, Mexico forming alliance against U.S. protectionist Strategy to NAFTA

17 Nov 17
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Canada and Mexico are working together behind the scenes to present a united front against U.S. President Donald Trump’s protectionist NAFTA needs and control the tenor of the trade discussions.

Both sides hold regular back-channel talks — from Foreign Affairs Minister Chrystia Freeland and Mexican Economy Secretary Ildefonso Guajardo down to staffers in the various authorities — to compare notes on the U.S. positions and keep one another up to speed on their individual plans, sources with knowledge of the communications stated.

Since the fifth round of the renegotiation of the North American free-trade agreement (NAFTA) opens this week at the tony Polanco area of Mexico City, the pact’s junior partners have been aligned: They intend to hold firm against U.S. requirements on autos, procurement and a sunset clause whilst seeking quick agreement on less controversial issues.

“My opinion is that there’s been a fair amount of consultation and co-ordinated strategy growing between Canada and Mexico,” said Andres Rozental, a Mexican former deputy foreign minister, that has been following the talks. “And I think that’s positive.”

However, Ottawa is playing something of a double match. Even as it broadly co-ordinates its efforts with Mexico City, sources with knowledge of the Canadian government’s thinking concede the nation would agree to some two-way discussion with the United States if NAFTA talks break down.

Under precisely which situation Canada would ditch Mexico are uncertain.

1 source insisted Canada would only consider a new bilateral deal with the United States if Washington completely pulled from NAFTA and there was no possibility of a three-way pact. A different origin, however, said Canada would consider bilateral talks if the NAFTA renegotiation reached a deadlock and the United States provided a two-way pact instead.

For the time being, however, both nations are standing shoulder to shoulder.

Mexico plans to introduce a counterproposal to the U.S. requirement for a sunset clause which would terminate NAFTA in five years unless all three nations agree to extend it. Under the Mexican program, the five-year period would just be a review with the choice for the arrangement to be upgraded. Mexico is also working on a counterproposal to Mr. Trump’s requirements on rules of origin, which included mandating a 50-per-cent U.S. content requirement for all vehicles made in Mexico and Canada. The rules-of-origin issue is set for four days of discussions, stretching from Saturday to Tuesday.

For the most part, however, the fifth round is set to focus largely on less-contentious issues in an attempt to generate progress before handling the most-difficult sticking points. The states’ respective ministers — Ms. Freeland, Mr. Guajardo and U.S. trade czar Robert Lighthizer — won’t attend this time.

Financial services, customs procedures and investment are scheduled to acquire huge chunks of time in these discussions. Some contentious measures will be mostly shunted off for future rounds: Dispute resolution is scheduled for only 1 day and procurement for 2.

John Weekes, who was Canada’s chief negotiator from the first NAFTA talks in the early 1990s, said Canada and Mexico stand a better chance of resisting the U.S. onslaught should they co-operate.

“It would be perfectly natural to be sharing information about where the Americans are coming from, and what approaches may be helpful to push back,” said Mr. Weekes, senior business adviser in Bennett Jones’s Ottawa office. “A united front makes for a much better prospect of a successful negotiation.”

Mr. Weekes stated he co-ordinated regularly during the first talks with his Mexican counterpart, Armenio Blanco, dining with him and many subordinates before each round. On one occasion, for example, Mr. Weekes clarified to Mexico the value of obtaining a cultural carve-out in NAFTA — permitting Ottawa a free hand to shield cultural businesses and enforce Canadian content requirements — and Mr. Blanco agreed not to intervene when Canada hashed out the issue with the U.S.

“We wanted to be certain each knew where each other was coming from so we did not accidentally do anything to get in the way of one another,” Mr. Weekes recalled.

Jaime Zabludovsky, a Mexican former trade negotiator that has been advising the government, said he thinks Canada is sincere in its desire to maintain Mexico from the pact. Not only have the three markets become heavily integrated — with automobile companies regularly manufacturing products between all three nations — but in Mr. Trump’s “America-first world,” he contended Canada would face the same requirements on rules of origin and dispute settlement if it negotiated alone.

“I don’t see why doing two bilateral negotiations would make anything easier,” he said. “The exact obstacles in NAFTA are there at a bilateral one.”

And Luis de la Calle, who helped negotiate the first NAFTA bargain for the Mexican government, argued that Canada wants Mexico as Mexico wants Canada: The prospects of getting any trade deal throughout the U.S. Congress are unsure, and he contended that an upgraded NAFTA stands a better chance of acceptance than two new, independent bilateral agreements.

Since the days he had been at the table, when both Democrats and Republicans worked together to get NAFTA through, the political climate at the U.S. has changed radically.

“When you negotiated the first Canada-U.S. free-trade arrangement in 1987, and then when we did NAFTA in 1993, there was a window of opportunity that allowed Canada and Mexico to reach deals with the United States,” he said. “That window of opportunity is now closed.”

Courtesy: The Globe And Mail

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