- The ninth round of talks to renegotiate NAFTA is underway, resuming in Washington after a full month of negotiations failed to produce a deal by the end of April.
- So-called poison pills — like auto rules of origin and a sunset clause — remain on the table, and are expected to be debated in the high-level session of trade ministers set for this week.
- Negotiators took a week off after their marathon of talks in April, as U.S. representatives went to China to discuss tariffs and Mexican ministers went home to develop a counter-proposal to auto rules of origin alongside the industry.
All eyes are on auto rules of origin and the sunset clause right now, but the two controversial proposals are far from the only obstacles impeding a new deal.
No new chapters were officially closed during the month-long process of negotiations in April, leaving more than two-thirds of issues still on the table. How NAFTA 2.0 will treat agriculture, intellectual property and cross-border trade remain contested — and that's just the tip of the iceberg.
The reality is ministers are now engaged in a multi-level game, balancing their country's interests against a changing political landscape, both domestically and internationally. Whether a deal is reached or not, 2018 will go down in history as a year of change in trade, and companies must hedge their bets.
In Washington we will work on autos but also on other key issues for Mexico such as Sunset, Chap 20, and seasonality, among others...— Kenneth Smith Ramos (@KenSmithramos) May 5, 2018
Negotiators, however, appear more confident than ever that a deal will be reached.
One sign is the language being used with the press. U.S. Trade Representative Robert Lighthizer is no longer talking — as he was — about a "lack of headway" or progress. Instead, he seems to be speaking directly to Congress now, as he drafts a deal he hopes will pass with flying colors.
"It’s my ambition that this not be a Republican vote,” Lighthizer said during a conference in Washington, prior to the break in talks. “It’s got to be a bipartisan vote. We want to have a big vote.”
In Mexico, leading presidential candidate Andrés Manuel López Obrador, who is known for bashing the neoliberal economic system and NAFTA, recently appointed a would-be trade negotiator if he won. Graciela Márquez, his choice, said at the end of April if the candidate won, she would not reopen negotiations.
...the goal is to obtain a balanced negotiation that addresses Mexico's priorities and allows us to modernize NAFTA #NAFTAWorks— Kenneth Smith Ramos (@KenSmithramos) May 5, 2018
The statements bode well for a new deal this month. All parties seem to recognize the political pressure they face, to reach a deal suitable for all sides.
Mexico's Congress, in addition, proved it could approve a new trade deal quickly, as it became the first nation to sign the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership last week. But an editorial in The Wall Street Journal argues the pain point for a new NAFTA may not be abroad, but at home.
"(Lighthizer) wants to present Congress with an ultimatum to approve the renegotiated agreement or watch Mr. Trump let NAFTA expire," the Journal's editorial board wrote last week. "On Tuesday Mr. Lighthizer said he expects to have a deal in a week or two and predicted that Democrats will help him pass it. These are apparently the AFL-CIO-backed Democrats who couldn't deliver a majority for trade agreements with Democrats in the White House."
If the breakdown of the Trans-Pacific Partnership taught trade reporters anything, it's that no deal is set in stone until all parties have approved it with due process. Even if a deal is reached, in practice or principle, expect little certainty until after the election cycles this year, perhaps until December 2018.