NAFTA talks progressing despite political pressure cooker

Despite public bluster, technical negotiations surrounding a revised North American Free Trade Agreement (NAFTA) are 60 percent complete, according to Edmundo Elias-Fernandez, a Guadalajara-based trade attorney with the firm Cacheaux, Cavazos & Newton.    The ongoing negotiations between the United States, Mexico, and Canada over a revised North American Free Agreement (NAFTA) needs to be viewed from two perspectives, according to a trade attorney from Mexico.
   “There’s the technical side of the negotiations, and the political side,” Edmundo Elias-Fernandez, a Guadalajara-based attorney with the firm Cacheaux, Cavazos & Newton, told a trade conference in Providence, R.I., Thursday. “I suggest you look at both those highways.”
   Elias-Fernandez’s contention is that the public perspective of the doesn’t mirror progress being made in the more mundane technical negotiations taking place under the radar.
   Speaking on a NAFTA panel at the Coalition of New England Companies for Trade’s (CONECT) Northeast Trade Symposium, Elias-Fernandez said one of the major differences between the United States and Mexico is that Mexico’s private sector is more closely aligned with the government in negotiations.
   He cited the fact that there were roughly 12,000 comments submitted to the U.S. Trade Representative (USTR) about the Trump Administration’s NAFTA renegotiation pillars, compared to just 700 comments in Mexico about the country’s renegotiation pillars.
   “It tells you about the organization of the private sector in Mexico versus the United States,” he said. “It doesn’t mean we don’t care about NAFTA.”
   Elias-Fernandez also said you wouldn’t see an op-ed like U.S. Chamber of Commerce President Tom Donahue penned urging the Trump Administration to avoid ripping up NAFTA in Mexico.
   “We are a bit more unified,” he said. “The Mexican government is working with the private sector with absolute synchrony.”
   The panel was designed to give attendees – a mix of shippers, liner carrier representatives, and 3PLs – an update on negotiations.
   Elias-Fernandez said he estimates the technical negotiations are around 60 percent complete at present will be closer to 75 to 80 percent complete by the end of the next round of negotiations, Nov. 17-21 in Mexico City.
   Nicolas Guzman, senior associate with the law firm Drinker Biddle & Reath, and Elias-Fernandez noted several areas of progress and contention among the various parties, focusing in particular on the Mexico-U.S. aspects of the negotiations.
   Among the remaining areas of dispute are vast differences on rules of origin, particularly with the United States pressing to up the percentage of U.S. content requirements; Chapter 19 and Chapter 11 settlement disputes; and seasonal perishable imports.
   On the rules of origin changes, which have initially focused on the automotive industry, Elias-Fernandez said he sees the U.S. position on content as a marker, more than an indication of how it will be negotiated across industries.
   “If they go negotiate rules of origin sector by sector, there’s no way they’ll finish in the next five to six years,” he said. “They have to decide on principles. Automotive is a blueprint. The rules of origin is the most sensitive part of this, because it goes to the core of why NAFTA was created.”
   Guzman said the changes to content rules being floated by U.S. negotiators would be “drastic” and, if enacted, could compel automakers to build cars for the U.S. market in the Asia-Pacific region due to a lower tariffs and a lack of manufacturing capacity in the United States.
   “This would be first FTA (free trade agreement) with a specific U.S.-content component,” he said. “It’s clear that the administration hopes to change the rules of origin, and the nature of these U.S. content rules sets a tone for the negotiations.”
   Guzman said it’s unclear whether the Trump administration keeping the option to opt out of the agreement is a negotiating ploy or an earnest threat.
   “The administration continues to use withdrawal as a tool,” he said. “It leads you to wonder to whether you get a step too far.”
   Despite noting that a potential sunset clause (after five years) and tariffs on certain seasonal vegetables from Mexico like tomatoes and avocados were non-starters for the Mexican government, Elias-Fernandez said it would take a lot to get Mexico to actually blow up the talks.
   “We won’t withdraw from the negotiation,” he said. “We’ll remain at the table.”