- The eighth round of talks to renegotiate the North American Free Trade Agreement (NAFTA) was replaced by two days of high-level meetings last week.
- Top ministers met in Washington, D.C., to try and reach an “agreement-in-principle,” which would outline NAFTA 2.0’s main tenets, but not its details. The reported goal was to unveil a new deal at the Summit of the Americas on April 13.
- But the timeline may still be too ambitious: Canada’s top minister said Friday much was still on the table, and President Donald Trump told supporters he was in “no rush” to conclude the deal.
Talk of an “agreement-in-principle” – whatever that means – should be taken as a sign only one piece is missing to finish NAFTA 2.0: compromise.
At the end of the last round of talks, negotiators seemed to be at an impasse. Only six of the 30 chapters had been concluded, and their time to finish any deal was running short. It seemed all too likely a new deal would not be reached until 2019, after Mexico, the U.S. and Canada’s election cycles concluded.
However, top-level ministers have maintained such is the nature of trade deals: slow at first, but “intensive” toward the end. As soon as the “poison pills” beleaguering progress were removed, deals were sure to advance in droves.
The latest NAFTA news cycle suggests that’s exactly what happened since the last round of talks.
The U.S. has reportedly backed down from its strict auto rules of origin demands, opting to accept Canada’s alternative proposal: offering “carrots” for businesses to build more in the region. In one example, credits to reach a full "tariff-free" status are accumulated through achieving set manufacturing practices, such as a $15/hour minimum wage.
But, since such a proposal may still be a hard pill to swallow for Mexico, negotiators must find a way to ensure the new deal is a “win-win-win,” or risk letting talks fall apart.
Enter the idea for an "agreement-in-principle" and why the latest round had to be exclusive – and hardly publicized – among top negotiators. Compromise means upsetting some stakeholders in every country.
If the strategy succeeds, expect a vast and joint announcement by the end of April on the outline for NAFTA 2.0. Then, each country’s top minister will likely promote their respective negotiated victories.
Most importantly, the countries can begin their respective trade deal approval processes, and use waiting periods to finalize the details.
This is pivotal in the U.S., where the administration’s Trade Promotion Authority expires July 1, (which is also the day of Mexico’s presidential election). If, before then, Congress decides the President cannot be trusted to negotiate trade deals, either house can vote to deny the administration that power. In other words: Trump needs a big win and powerful messaging by July 1, and NAFTA is the perfect candidate to deliver that.
Note: The devil is always in the details – and the three countries' legislations will vote on those details. Don’t buy into narratives of "success" until the full text is released.