Top NAFTA Officials May Meet at Americas Summit in Lima, Peru

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By Rossella Brevetti and BJ Siekierski

Top U.S., Canadian, and Mexican officials are likely to huddle in Lima, Peru, during an upcoming hemispheric summit, to continue North American Free Trade Agreement discussions, sources close to the talks said.

U.S. Trade Representative Robert Lighthizer, Mexican Economy Secretary Ildefonso Guajardo, and Canadian Foreign Minister Chrystia Freeland will all be attending the April 13-14 Summit of the Americas, sources told Bloomberg Law.

The U.S. wanted to announce a NAFTA agreement in principle at the summit. However, an April 6 meeting among the three ministers failed to seal the deal. The summit will present another opportunity for high-level engagement, one source said.

The Office of the U.S. Trade Representative did not confirm Lighthizer’s participation, but a Peruvian official said he would attend.

Mexican negotiators view the NAFTA negotiating process as a “permanent round,” meaning that engagement and negotiations are continuous, and plan to meet in Lima with their counterparts, according to a source close to Mexican negotiators. Asked about Lima, a senior Canadian official told reporters that Canada welcomes any opportunity for further discussions on NAFTA.

Lower-level officials from all three countries are continuing to meet behind the scenes in Washington to “clean-up” NAFTA chapters nearing completion, a private-sector source told Bloomberg Law by email on condition of anonymity.

Three days of rules of origin talks are slated for April 11-13, according to an unofficial agenda obtained by Bloomberg Law.

On April 10, negotiators were scheduled to address financial services, labor, and textiles. In addition to rules of origin, topics on tap for April 11 were regulatory alignment, gender, financial services, and state- owned enterprises, according to the agenda.

Negotiators April 12 will discuss regulatory alignment, legal and institutional issues, sectoral Issues, financial services, environment and rules of origin. On April 13, their attention will turn to digital trade, legal and institutional issues, sectoral Issues, environment, rules of origin, and customs and trade facilitation.

Negotiating groups will address temporary entry of persons, medical devices, environment, and customs and trade facilitation on April 14.

The meetings are taking place at USTR headquarters in Washington, the source said.

Nearly Finished

Sen. Pat Roberts (R-Kan.) said April 10 that USTR told him NAFTA is 80 percent complete and that the deal could be finalized in the coming weeks. He spoke to reporters after the Republican caucus luncheon.

The U.S. administration wants the current Congress to vote on NAFTA 2.0. U.S. trade analysts say a deal would have to be done soon to give Congress enough time to review and approve it, and allow the administration to satisfy trade promotion authority notice (TPA) requirements. TPA stipulates that the president must give 90 days notice to Congress before signing the deal.

Mexican presidential elections on July 1 are also putting pressure on negotiators to try to wrap up soon. Leftist Andres Manuel Lopez Obrador is leading in the polls. He has said he would revisit a bad NAFTA deal if elected.

Mexico does not plan to change its position on many key disputes to get an agreement by May, according to a source close to Mexican negotiators. For example, Mexico doesn’t plan to give in on controversial U.S. demands for a $15-per-hour minimum wage in the auto sector, the removal of certain dispute resolution provisions, or calls for an 85 percent minimum regional content requirement for certain car parts, the source said.

“If the negotiations are going to result in a deal, it is not going to be under the terms that are proposed right now,” the source said. “Mexico and Canada will be flexible about the potential for a new agreement, but the ball is in the U.S. court right now.”

New Target Date?

Guajardo April 9 told the Mexican network Televisa that there is an 80 percent chance there could be a NAFTA agreement in principle by May. He confirmed reports that the U.S. has taken its demand for 50 percent American automotive content off the table, but said that the U.S. is still trying to get autoworkers’ salaries included in the rules of origin. “We are within weeks of knowing if the NAFTA talks close with success,“ Guajardo said.

The proposed $15 minimum auto wage is “unreachable in the short term,” he said. The U.S. would need to show some flexibility to reach an agreement, he said.

The sides April 6 discussed a “focused value” system under which auto components would be given different weight in counting toward a North American regional content requirement, Dan Ujczo, an Ohio-based trade lawyer at Dickinson Wright, who is close to the NAFTA talks, told Bloomberg Law.

NAFTA requires a typical vehicle to have 62.5 percent North American content to get tariff exemptions. Negotiators are expected to continue putting “flesh on the bones” of the proposals, an industry source said.

The sides made little progress on government procurement, Canadian dairy practices, and intellectual property concerns, according to Ujczo. Another issue that has yet to be resolved is the U.S. demand that Canada and Mexico raise their duty-free online shopping thresholds, he said.

Negotiators made progress on a U.S. sunset clause proposal with the sides now focusing on a review mechanism for the agreement, Ujczo said.

Welles Orr, a former assistant USTR who is now at Miller & Chevalier, told Bloomberg Law that the U.S. administration has backed off its original demands that the sunset clause contain an automatic termination mechanism that would end NAFTA after five years unless the three countries agreed to keep it.

With assistance from Cyntia Barrera Diaz (Bloomberg), Emily Pickrell (Bloomberg Law), and Len Bracken (Bloomberg Law)

To contact the reporter on this story: Rossella Brevetti in Washington at rbrevetti@bloomberglaw.com and BJ Siekierski in Ottawa at correspondents@bloomberglaw.com (Bloomberg Law)

To contact the editor responsible for this story: Jerome Ashton at jashton@bloomberglaw.com (Bloomberg Law); Giulia Camillo at gcamillo@bloomberg.net (Bloomberg)

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