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NAFTA: Deadlock on hard issues as round concludes under cloud of question marks

Last Updated Nov 22, 2017 at 9:00 am EST

In this April 21, 2008 file photo, national flags of the United States, Canada, and Mexico fly in the breeze in New Orleans. THE CANADIAN PRESS/AP/Judi Bottoni

MEXICO CITY – Another round of NAFTA talks wrapped up with all key issues still deadlocked Tuesday as negotiators prepared to leave Mexico City with a plethora of question marks lingering over the trade deal.

The negotiators made progress on a variety of technical files, nearly concluding some less-controversial chapters such as digital trade, sanitary measures, customs enforcement and telecommunications.

But on hot-button files like autos, dairy, dispute resolution, and a U.S. idea to make it easier to terminate NAFTA, they cite no real progress. Sources from host country Mexico described a lingering standoff on multiple fronts, which Foreign Affairs Minister Chrystia Freeland confirmed back in Ottawa.

”I think our approach is to hope for the best, and prepare for the worst,” Freeland said outside the House of Commons, describing the state of the talks.

”Canada is certainly prepared for any eventuality. As I’ve said, we want a good deal, not just any deal.”

Canada and Mexico spent this round taking shots at the logic of some controversial U.S. proposals — demanding details about how they would work, and delivering presentations illustrating how they would hurt the U.S., too.

That approach has frustrated the U.S. side.

The Americans say that instead of delivering lectures, the other countries should be making counter-proposals.

”I remain concerned about the lack of headway,” said U.S. trade czar Robert Lighthizer. “Thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement.

”I hope our partners will come to the table in a serious way so we can see meaningful progress before the end of the year.”

Some media reports described the dynamic of this round as Canada and Mexico teaming up against the U.S. The front-page headline Tuesday in Mexico’s Excelsior newspaper declared, “Mexico and Canada form a common front against the U.S.”

But some Mexicans vehemently rejected the idea of an organized Canada-Mexico tag-team.

They said, for instance, that there are no pre-session strategy hurdles between Canada and Mexico. They said these countries simply have mutual interests on a few important files, such as autos, dispute settlement and professional visas. ”(But) gang up on the U.S.? No, no, no,” said one Mexican source, speaking on condition of anonymity, given the sensitivity of the matter.

Mexico demonstrated at this round, however, that it’s willing to play hardball.

It showed that two can play at the game of zero-sum thinking and hostile tit-for-tat. On the issue of Buy American, the Mexicans said they could respond with equivalent Buy Mexico policies for public projects — and the biggest loser would be the U.S. That’s because American companies do more construction business in Mexico than vice-versa, they argued.

”We would all lose,” said another Mexican source familiar with the talks.

”But the U.S. loses more.”

The Mexico City round ended with uncertainty on multiple fronts. Two major question marks are: will President Donald Trump start pulling out of NAFTA as a negotiating ploy? And what happens if a deal isn’t done by the end of the current schedule of talks, now extended to March?

One thing the Mexican sources are adamant about is if Trump makes good on his threat to start the NAFTA cancellation process as a bargaining ploy, they will refuse to negotiate under that pressure — and would rather let the U.S. withdraw.

They said it’s impossible to negotiate with such a metaphorical gun to the temple; every concession would be seen as Mexico caving. They said they would simply allow the U.S. to walk away, accelerate trade talks with Brazil and Argentina and expand trade with Canada in meat, wheat and energy, where Canadian suppliers would pick up some of the U.S. slack.

”There’s the door,” one Mexican said, pointing at an actual door.

”We will send a couple of decrees to the Senate (of Mexico) saying that (from) this moment forward, U.S. goods and persons are no longer going to be traded under NAFTA preferential provisions.”

Canada has not drawn such a hard line.

The politicians leading the talks have attempted to turn down the public pressure. Freeland, Lighthizer and Ildefonso Guajardo skipped this round and will skip another round next month in Washington.

They will be back at the table in the next round in Canada, in late January, in Montreal. The politicians will review progress made, and begin assessing next steps for the February and March rounds and what happens thereafter if there’s no deal.

The Mexicans say they’re fine to keep negotiating after that — even though there are national elections there and in the U.S.