By: Maria Camila Hernandez
On March 5, 2018, the Seventh Round of the NAFTA negotiations concluded in Mexico City. The discussion finished with Robert Lighthizer, a United States Trade Representative. He indicated that the United States is ready to step back from NAFTA and take the other approach of replacing it with separate bilateral agreements. He pressed the parties to close out the deal quickly: “Now our time is running very short…I fear the longer we proceed, the more political headwinds we will feel.” He also suggested that many “political headwinds” such as the presidential election in Mexico, provincial elections in Ontario and Quebec, and the US midterm elections, could certainly have an effect on future negotiations.
The discussions were affected immediately midweek after President Trump announced that his Administration would impose tariffs on aluminum and steel imports. The tariff, if enacted, would be 10% for aluminum imports and 25% for steel imports. This tariff immediately sparked debate within the Administration and the Republican Party. Even US House Speaker Paul Ryan, who is supported by many Republicans in favor of the President, has insisted President Trump to drop the whole idea of the imposed tax to prevent the possibility of a trade war. The 107 House Republicans wrote a letter to President Trump urging him to “reconsider the idea of broad tariffs to avoid unintended consequences to the U.S. economy and its workers.” The day after the seventh round of negotiations, President Trump’s economic advisor, Gary Cohn resigned.
The tariffs ultimately excluded Canada and Mexico “for now,” announced President Trump. The threat of tariffs proposal came up in discussion during the remainder of the negotiations. Apparently, the proposed tariff was the opening topic for several discussions and was frequently referred to as “the elephant in the room.” When President Trump associated the tariffs to the NAFTA negotiations, the tariff proposal affected the negotiations. President Trump tweeted on March 5, “Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.” Chrystia Freeland, the Canadian Trade Minister, reacted to this in her closing remarks stating, “Canada would view any trade restrictions on Canadian steel or aluminum as absolutely unacceptable.” This was not the only response President Trump received. Ildefonso Guajardo, Mexican Economy Minister Ildefonso Guajardo, through a tweet saying, “Mexico shouldn’t be included in steel & aluminum tariffs. It is the wrong way to incentivize the creation of a new and modern #NAFTA.” Shortly after, on March 7, President Trump announced that he would first exclude Mexico and Canada from the proposed tariff. Yet, the exemption could be withdrawn if Canada and Mexico do not agree to an updated NAFTA.
Despite the short-term exemption on steel, which is supported by Speaker Ryan and the Steelworkers, President Trump tweeted again on March 5 regarding the Canadian farm system and how Canada “must treat [US] farmers much better.” While Canada does not stop to defend its agricultural sector, such as the supply management system, US agricultural demands continue to be discussed. The issue here is how negotiators will patch this dilemma.
Very minor progress was made in the rules of origin provisions and other areas. Negotiations came to a pause on February 26 because the U.S. negotiator for rules of origin, Jason Bernstein, was asked back to Washington to discuss with U.S. industry representatives. In the next round of negotiations, discussions between technical experts have been rescheduled. Additionally, other discussions were not highlighted in this round such as the proposed sunset clause and investor state dispute mechanisms.
However, negotiators were able to close several chapters such as telecommunications, regulatory practices, and sanitary and phytosanitary measures. It was also mentioned by Canada’s chief negotiator, Steve Verheul, Canada’s chief negotiator, that the parties would soon close the sections on technical barriers. He also commented that more time was needed regarding the environment related sections.
Reportedly, half of the chapters are around 80-90% settled. Additionally, Lighthizer mentioned that 6 of the 30 NAFTA chapters are officially closed. Regarding the chapter that governs food safety, the sanitary and phytosanitary chapter, negotiators have decided on a “fast-track system” that prioritizes requests between Mexico, Canada, and the U.S.
The eighth round of NAFTA talks is expected to be held in Washington in April.