Dive Brief:
- The sixth round of talks to renegotiate the North American Free Trade Agreement (NAFTA) kicked off Sunday in Montreal, Canada, amid high tensions between the U.S., Canada and Mexico.
- The talks will conclude Jan. 29 with a trilateral statement, but various sources indicate this round could prove pivotal to the talks' ultimate success. Time is running out as elections in both Mexico and the U.S. near in 2018, and history shows electoral politics can bring any deal to an untimely and public demise.
- Despite six months of high-pace negotiations, the three countries have made little progress on resolving major issues, like auto rules of origin and the dispute settlement process. Relations were so fraught, early this month a rumor of Trump's impending NAFTA exit shook markets.
Dive Insight:
It's now or never for NAFTA talks, and negotiating parties know that.
The three countries are at an impasse. Trump's so-called "poison pills" — such as mandatory U.S. auto sourcing or a sunset clause — remain on the table while the parties' political and legal timeframe to reach a deal is running out.
A Mexican columnist notes that in March the NAFTA clocks will ring to the tune of "hallelujah," or a death bell. For legal reasons, the three parties must reach some kind of agreement by then.
If NAFTA ends, 90% of U.S. exports to Mexico are vulnerable to tariff rates above 30%. Source: @PIIE #NAFTAWorks #AMxPAC #TradeWorks pic.twitter.com/WneVcR4ose
— AMxPAC (@AMxPAC) January 19, 2018
Due to the rules set out by the Trade Promotion Authority, which expires July 1, 2018, Trump must request permission to negotiate trade deals from Congress no later than April 1. At that time, the president will have to inform the world of the progress of all pending trade projects.
As a result, all should expect talks to extend beyond a sixth round, surviving through a seventh, or even an eighth round. But the reality is much at stake in January, as progress will determine whether NAFTA will thrive or simply survive in more of a "zombie" state going forward.
All things considered, the treaty appears to be headed toward one of three conclusions:
- The three countries resolve their differences, and reach a no-harm-done deal by March's end
- Trump, or another country leader, walks away from the talks and begins the withdrawal process
- No deal is reached by March, but the countries decide to table talks until 2019 and retain the status quo
Until then, the parties must still resolve a wide range of issues and navigate an increasingly adversarial public rhetoric on NAFTA and trade relations. Here are the issues still on the table, as compiled by POLITICO:
The Montreal trade agenda, per POLITICO
| Date | Issues |
|---|---|
| Jan. 21 | Energy, investment, financial services, textiles, good regulatory practices and agriculture |
| Jan. 22 | Gender, state-owned enterprises, digital trade, temporary entry, investment, financial services, textiles, customs and trade facilitation, good regulatory practices, anti-corruption and agriculture |
| Jan. 23 | Indigenous issues, state-owned enterprises, digital trade, temporary entry, investment, financial services, customs and trade facilitation, technical barriers to trade, environment, sanitary and phytosanitary measures |
| Jan. 24 | Intellectual property, competitiveness, telecommunications, legal and institutional measures, non-conforming measures, goods, rules of origin, technical barriers to trade, environment, sanitary and phytosanitary measures |
| Jan. 25 | Intellectual property, government procurement, telecommunications, legal and institutional measures, services, goods, rules of origin, sectorals, labor, sanitary and phytosanitary measures |
| Jan. 26 | Medical devices and pharmaceuticals, government procurement, trade remedies and dispute settlement, services, rules of origin, sectorals, labor, sanitary and phytosanitary measures |
Without a doubt, negotiators will be working hard — but it may not be in their hands. The countries' leaders will define the negotiation in Davos, Switzerland this week, as they meet to speak publicly at the World Economic Forum. All eyes will be on Donald Trump's special address on Friday, as he sets the tone for how talks may go in 2018.
