NAFTA Update: November 23, 2017


Round Five of NAFTA Negotiations Complete

The fifth round of NAFTA negotiations concluded on November 21 with the sixth round scheduled for January 23-28, 2018 in Montreal, Canada. In addition, negotiators will meet throughout mid-December in Washington, D.C. and report the results back to the Chief Negotiators.

The trilateral statement released at the close of negotiations contained little useful information, stating vaguely that “progress was made in a number of chapters.” However, Mexico’s statement claimed that “substantial progress was made in anticorruption, telecommunications, good regulatory practices, sanitary and phytosanitary measures, trade facilitation, e-commerce, technical barriers to trade, and in various sectoral annexes.” This is a very positive take on negotiations. In contrast, the statement from U.S. Trade Representative Robert Lighthizer stressed the lack of progress, questioning Canada and Mexico’s willingness to “seriously engage” on important negotiation topics.

Update to U.S. Negotiation Objectives

The U.S. updated their negotiating objectives on November 17. The new document is almost identical to the previous one, released in July. Most of the changes serve to draw attention to specific sectors. For example, the document specifically mentions eliminating Canadian tariffs on imported dairy, poultry, and egg products. It also contains a new section of objectives entitled “Procedural Fairness for Pharmaceuticals and Medical Devices” that aims to provide full market access for U.S. products.

While these changes provide slightly more information about the goals of the U.S., they still remain vague. What is important is that this update formally emphasizes the commitment of the U.S. to pursuing controversial objectives like targeting Canada’s supply management and creating a Sunset Clause. The latter can be seen in a new objective that seeks to “provide a mechanism for ensuring that the Parties assess the benefits of the Agreement on a periodic basis.”

The Canadian and Mexican Strategies

Canada and Mexico have yet to make counterproposals on auto manufacturing, where the U.S. holds an extreme position. Instead, Canada made a presentation during the fifth round of negotiations describing how the American proposal would be bad for both the U.S. and Canada. Delaying conventional engagement on contentious topics such as this may benefit Canada and Mexico by giving U.S. stakeholders a chance to speak out against the proposals. However, it could also push the U.S. towards withdrawing from NAFTA.

For now, the Canadian strategy is to ask for more information about controversial American proposals in the hopes of encouraging a fact-based discussion in the future. This strategy can be seen in the Canadian presentation mentioned above.  In addition, Foreign Affairs Minister Chrystia Freeland has stated that Canada is prepared for negotiations to fail. The official position is to “hope for the best and prepare for the worst.”

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)

Many Canadian business executives are calling on Prime Minster Justin Trudeau to move forward quickly with the CPTPP, the agreement that has replaced the TPP-11. They stress the importance of diversifying Canadian trade in light of the challenges of NAFTA renegotiation. However, Canada is continuing to push for changes to the CPTPP, delaying the process.