NAFTA: Canada still reports significant gaps on key issues

The United States needs to be more flexible in resolving key issues if it wants to reach an agreement on the North American Free Trade Agreement (NAFTA) in the spring, before several election appointments said Wednesday the Chief Negotiator of Canada.

Steve Verheul, who was in Ottawa for a roundtable on the state of Canada-US trade relations, said there were “certainly some important differences on a number of issues.”

Mr. Verheul argued that the parties were “not so far apart” on many chapters, but that on the more fundamental issues, there was still a lot of work to be done.

The Canadian negotiator reiterated the stumbling blocks: the US positions in the auto sector, the sunset clause, access to US government procurement and the US willingness to exclude from the US a chapter on a dispute settlement mechanism.

Mr. Verheul’s remarks seemed to contradict the more optimistic view expressed earlier on Wednesday by US Trade Representative Robert Lighthizer. On the CNBC network, Lighthizer said efforts and compromises could result in “soon” an agreement in principle.

The US Trade Representative explained this new eagerness to reach an agreement by the approach of the elections in Mexico in July and mid-term in the United States in November. The Trump administration is concerned that the talks will stretch until 2019, which would make it difficult to reach an agreement.

Verheul said Canada has not yet seen “what an agreement in principle can mean for the United States.”

“An agreement in principle, according to our understanding, means a certain direction on major issues, important issues. We have not seen that from the United States until now, “said the Canadian Chief Negotiator.

“To achieve this, we would certainly need considerable flexibility with respect to US positions,” he added.

Auto parts

US negotiators have proposed to drop, under certain conditions, their controversial request for rules of origin for auto parts – that at least 50% of the parts of each vehicle come from the United States.

According to sources with the latest advances, the United States would have suggested a different avenue to help the American automakers: a formula rewarding automakers who offer wages over $ 15 an hour.

Mexican mills would be at a disadvantage compared to US and Canadian facilities.

“I have good hope. I think we are making progress. All three parties want to move forward, “Lighthizer said on Wednesday. “I am hopeful that an agreement in principle can be reached shortly.”

Such an agreement in principle would allow the White House to immediately trigger the consultation process for more than six months, before final ratification of the agreement in Congress. However, it would be impossible, after next month, to hold this ratification vote before the mid-term elections in November. Subsequently, new members of Congress would be sworn in early in 2019, but both chambers could then be controlled by Democrats. In addition, the new Mexican president will be sworn in December 2018.

Lighthizer said the pressure on the political calendar on the negotiations: “Our window is narrow, given the elections and factors beyond our control,” he admitted Wednesday.

Freeland welcomes creative proposals

Foreign Minister Chrystia Freeland declined to comment on the details of the auto negotiations, but she welcomed Lighthizer and his team for putting forward creative proposals that advanced the discussions.

“Rules of origin in the automotive sector have always been the most complex single issue in the negotiations … and probably the most economically important single element of the cartel,” she said. a conference call Wednesday night from South Korea.

“That’s why I’m really encouraged by some of the progress we’ve made on rules of origin in recent weeks,” she added.

Ms. Freeland said that what was encouraging was “constructive and positive engagement at all levels of all parties”.

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