NAFTA: U.S. negotiators take Canadian proposals to political decision-makers

MONTREAL — Important decisions about NAFTA’s future are now in the hands of Trump’s administration, as American negotiators turn to their political masters for guidance.

After major discussions about autos, dispute resolution and a five-year review clause, American negotiators have asked their political decision-makers how to respond.

More clarity could come Monday: the politicians leading the process for all three countries will be in Montreal to close the round, and will make public statements.

The nearly concluded round in Montreal featured a new back-and-forth dialogue on autos and other major sticking points.

Sources close to the talks say lengthy conversations were prompted by ideas Canada put on the table — including about three hours of talks over two days about the autos proposal.

“(The Americans) engage, they listen … They take (these ideas) and they say, ‘We have to look at them in further detail and seek political guidance,’” according to one official with close knowledge of the talks.

“It was not … ‘Thank you for your proposal, I’m leaving.’ Let’s just say we spoke about the (auto) issue twice, for about an hour and a half each time. So this is the type of engagement we’re having, which I think is positive. It hadn’t happened before.”

The round represented a new phase of the negotiations.

Earlier rounds had seen scant engagement on the most serious files — with the U.S. dropping proposals that shocked the other countries, the other countries insulting the U.S. ideas and devoting one round to describing reasons why the American proposal on cars was so impractical.

This round was an early example of countries seeking a pathway to solutions for the difficult problems — without having the talks collapse.

—On autos, the Canadians suggested new ways to calculate whether a car counts as American. The new formulas would inflate U.S. numbers somewhat by including areas where the U.S. dominates, such as intellectual property and research.

—On dispute resolution, the Canadians and Mexicans worked out a proposal to create a new investor-state dispute system that applies only to them. The U.S. has suggested it might want to opt out of the system, arguing that it provides assurance for investors outsourcing operations to Mexico. Under the Canadian counter-proposal, developed with Mexico, the U.S. would be prevented from participating in or developing the rules of the new system: “We basically said to them, ‘If you want to opt out that’s fine, you’re gone,’” one non-American said. “You can imagine that the U.S. negotiators didn’t like it.”

—On the review clause, the U.S. has proposed a rule that would terminate NAFTA every five years unless it’s maintained by all three countries. Mexico responded a few months ago by proposing a watered-down version, which would force countries to periodically review the effects of the agreement — but without an automatic-termination rule.

Canada has signed on to the Mexican approach, and proposed ways of how it might work. One involves tasking NAFTA’s central body, the Free Trade Commission, with conducting regular progress reports.

Again, the U.S. negotiating team said it would consult its political bosses.

Several people said the round had sparked some new optimism. One cautioned that many decisions are now in the hands of the political bosses, but he agreed that headway was made in Montreal.

A chapter on anti-coruption was closed, chapters on digital trade and telecommunications are more than 90 per cent done, and there’s new engagement on some hard files, he said.

“I believe that we saw some interesting things,” said the non-American.

“(We are) proving inaccurate … (those saying), ‘Talks are struggling.’”

“Do we feel optimistic? I would say cautiously so.”

Alexander Panetta, The Canadian Press