U.S. trade negotiators offered no reassurances during a recent invitation-only briefing for industry and public interest stakeholders that the North American Free Trade Agreement (NAFTA) would survive increasingly contentious talks.
The U.S. Trade Representative's Office provided the update Oct. 15 as the fourth round of negotiations to revamp the 23-year-old trade pact with Canada and Mexico continued at a hotel in Arlington, outside Washington.
Lobbyists from a variety of trade associations said after exiting the meeting room, which was closed to the press, that the U.S. delegation provided no new details about the direction of the talks or specific proposals on the table.
Several talked on condition of anonymity and expressed concern that extreme U.S. positions could make a deal impossible, with the potential that mutually beneficial trading benefits for industries in all three countries could end.
U.S. negotiating experts, led by John Melle, the U.S. Trade Representative's Western Hemisphere chief, and taking cues from the Trump administration, said the give-and-take among the parties is normal for a trade agreement and that talks still were scheduled to conclude in December, according to people present at the meeting.
Hard-line U.S. proposals are casting increasing doubt on whether an agreement can be reached in such a short time frame. The proposal that would most directly affect the auto industry is a change to the regional content requirement for rules of origin, to 85 percent from 62.5 percent, and adding a domestic U.S. content requirement of 50 percent to qualify imports for zero duty.
Administration officials also want to eliminate perceived tariff loopholes that allow components from Asia to be counted toward the regional content requirement and to tighten administrative procedures for tracing the origin of such components, according to auto industry officials and press accounts.
Other controversial proposals include an automatic five-year termination unless the agreement is renewed by all parties, preferences for U.S. fresh produce and companies seeking government contracts, and eliminating or changing two types of dispute settlement mechanisms.
President Donald Trump and close advisers argue that NAFTA has allowed Mexico, and Canada to a lesser degree, to take economic advantage of the U.S., primarily by siphoning jobs and manufacturing across the border.
No progress
One person who was briefed suggested that no progress will be made on the most sensitive issues until the year-end, when they get pushed to political leaders to hash out.
An auto industry official, who did not want to be identified, said there is growing worry that the administration's proposals may be a "poison pill" designed to make a deal so unpalatable that Mexico and Canada walk away, opening the door for the U.S. to terminate NAFTA.
The Trump administration, according to Reuters, also wants to require greater use of U.S. steel and other raw materials in cars. Some see that as a potential area of compromise because auto makers already source a huge amount of those materials from the U.S., but they are not included on the tracing list used to verify the regional content level of vehicles and parts.
"We're going to continue working with the administration in a manner that will address their needs and protect the North American supply chain," Ann Wilson, senior vice president of government affairs at the Motor & Equipment Manufacturers Association, toldAutomotive News over the weekend. "The ability to get to a landing zone is going to be difficult, but we're committed to doing it."
Unrealistic positions
Another source familiar with negotiations said the administration's proposals were so unrealistic that it would take more than tweaking to reach common ground.
The business community favors changes that modernize NAFTA, but many representatives express worry that a return to restrictive policies will create inefficiency and increase costs at the expense of consumers and economic growth.
"We want a 21st century agreement that recognizes today's economy as that of the future, not a 1950s economy," said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation.
