Dive Brief:

• The third round of talks to renegotiate NAFTA will begin Saturday, Sept. 23 and last until Wednesday, Sept. 27 in Ottawa, and it may present the greatest challenge yet to negotiators.
• Political rhetoric since the last round of talks has only grown more inflammatory, while business groups and analysts have begun to diverge on the most pressing issues to consider in the next round of negotiations.
• The reason: talks are about to get serious, and wonky. The first two rounds were dedicated to sharing negotiating objectives and consolidating positions in a single document, respectively. Now, it's time for negotiations to begin.

Dive Insight:

One thing is clear in advance of the third round of talks: negotiations will be difficult, and an early revelation of a "loss" for any country could throw the entire talks off course.

Insofar as the rhetoric between talks has revealed, nobody is happy — or rather, every party is afraid they will lose in the negotiations. The threat of losing in an area of major importance hovers above the negotiators' heads, as do the myriad news articles noting Canada, the U.S. and Mexico are ready to walk away from the table at any point in time.

Failure is an option, and it's on the table. "We're moving at warp speed, but we don’t know whether we’re going to get to a conclusion, that’s the problem," U.S. Trade Representative Robert Lighthizer said at a CSIS event last week. "We’re running very quickly somewhere."

That's why most news sources present a mixed bag of conjectures for what to expect from Round 3. The negotiators have been mute on specific provisions, except during private consultations. However, each has been clear in "downplaying" expectations for the third round, Bloomberg reports. Major breakthroughs will likely not come until the later rounds.

Yet, the third round may be one of the most important yet to set a successful tone for the rest of the talks. El Diario de Juarez reports some business groups are expecting revised texts on areas where the three countries can agree upon, such as strengthening small and medium enterprises and logistics chains.

Early successes in easy areas will allow the countries more time to get to some of the conflict areas, such as rules of origin, environmental and labor issues, and investor dispute settlement. And, without a doubt, the negotiators will need the extra time. Just today, the Department of Commerce released a report finding the share of U.S.-made components had fallen consistently since 2011. Secretary of Commerce Wilbur Ross jumped on the opportunity to write an opinion piece in The Washington Post, arguing the U.S. had the grounds to negotiate for more strict rules.

One of the toughest parts about negotiations is agreeing on a basic set of facts. Supply chain managers contesting on-time performance or quality control with suppliers are likely well aware of this. The issue with NAFTA negotiations is that the three countries have very different philosophies on the basic tenets that define economic progress. Round 3 will expose those differences through very technical items.

Lighthizer highlighted this problem in his latest speech at CSIS, stating, "The real policy difference, I submit, is not over whether we want efficient markets, but how do we get them. What is the best thing to do in the face of market distortions to arrive at free and fair competition?" For the U.S., the solution is to be proactive, seek bilateral agreements and demand trade reciprocity. "Expect change, expect new approaches, and expect action."