NAFTA Renegotiation

Trade officials from the United States, Mexico and Canada are gathered in Ottawa this week for the third round of negotiations to modernize the North American Free Trade Agreement (NAFTA). The first two rounds, which took place over the past month in Washington and Mexico City, covered an uncommonly comprehensive range of content for opening discussions and yielded limited progress in areas of easy convergence. Negotiators are expected to begin tackling thornier issues this week, and their differing statements on what they hope to achieve augur a difficult road ahead.

President Donald Trump made renegotiation of NAFTA a central campaign promise, appealing to widespread disillusionment with shifts in the American labor market and manufacturing landscape over the past 20 years. He has called NAFTA the “worst deal ever made by any country” and has claimed that by renegotiating or withdrawing from the agreement, his administration could bring U.S. manufacturing jobs back to pre-NAFTA levels. Setting aside campaign hyperbole, the pitch to renegotiate the United States’ first substantial trade and investment agreement appealed to many who stood to profit from it as well. Industry leaders were eager to update NAFTA with provisions on digital trade, especially after U.S. withdrawal from the Trans-Pacific Partnership (TPP) quashed prospects to set e-commerce and other digital standards with Mexico, Canada and nine other countries around the Pacific Rim. Civil society leaders have long criticized NAFTA’s side agreements on labor and the environment as weak and inadequate, and welcomed the opportunity to recast their provisions in updated and enforceable chapters of a new deal. The governments of Canada and Mexico were cautiously open to renegotiation as well – calling instead for modernization – and urged Trump to pursue this route over wholesale withdrawal.

NAFTA’s complexity and the incongruity of some of the parties’ objectives make the prospect of conclusion in 2017 unlikely. If this timeline is to be maintained, the United States, Mexico and Canada will likely have to compromise some of their more hardline negotiating positions

Trump has predicted that renegotiation will be easy, and administration officials say talks will wrap up by the end of 2017. But even though the parties are building on an existing agreement, a four-month timeline is highly, perhaps unrealistically, ambitious. The updated NAFTA is expected to contain approximately 30 chapters, and negotiators have yet to put forward proposals for several contentious areas. Canada and Mexico have pushed back against proposals from the United States that reflect key goals of the Trump administration and, for their part, have floated texts that are sure to be rejected in Washington. NAFTA’s complexity and the incongruity of some of the parties’ objectives make the prospect of conclusion in 2017 unlikely. If this timeline is to be maintained, the United States, Mexico and Canada will likely have to compromise some of their more hardline negotiating positions or settle on an agreement that is not significantly different from its current form.

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