Don't expect a new NAFTA deal this week

Despite efforts to get Canada on board with a new NAFTA deal by Sunday, negotiators are far from finalizing ...

Posted: Sep 27, 2018 6:04 AM
Updated: Sep 27, 2018 6:04 AM

Despite efforts to get Canada on board with a new NAFTA deal by Sunday, negotiators are far from finalizing a new trilateral trade agreement.

There is "still a far amount of distance between us," said US Trade Representative Robert Lighthizer on Tuesday about ongoing talks with Canadian negotiators.

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Officials from the United States and Mexico, who have already come to an agreement in principle, were rushing to sign a deal before Mexican President Enrique Peña Nieto leaves office on December 1.

To meet that deadline, US negotiators must send text of an agreement to Congress by Sunday, so that legislators have 60 days for review.

Lighthizer is expected to submit text Friday that leaves Canada out of the agreement, Bloomberg reported Wednesday. It would allow Canada to be added later, the report said.

Sticking points include opening up Canada's dairy market to US farmers, and a dispute resolution process that Canadians want to preserve.

"We're gonna go ahead with Mexico. If Canada comes along now, that would be best. If Canada comes along later, then that's what will happen," Lighthizer said at a conference in New York.

The United States may do a separate deal with Canada "as soon after as we can," he said.

Canada and Mexico are two of the biggest trading partners with the United States. A bilateral deal with one, without the other, could unravel companies' supply chains built up over the 24 years since NAFTA took effect.

The US Chamber of Commerce has said it would be "unacceptable to sideline Canada, our largest export market in the world." Vehicles, machinery, and agricultural products make up much of the goods traded.

Even if officials came to an agreement by Sunday, it must be approved by Congress and the legislative process would last long into next year, after a new Congress sits in January.

"Signing the deal is not the critical moment," said Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics.

Several members of Congress have warned that they would not support a deal without Canada. Some say that moving forward with a bilateral deal with Mexico could be challenged procedurally. It might not qualify for a fast-track legislative procedure that a trilateral deal would.

"I think the odds of getting it approved are much lower if it's a bilateral deal," said Rob Scott, a senior economist at the Economic Policy Institute.

But President Donald Trump is also looking to score a win before the midterm elections. He's promised to rip up NAFTA, which he called "the worst deal maybe ever signed."

Congress would also need to act in order to remove the United States from NAFTA entirely. Republican Senator Pat Toomey has said that "any change, such as NAFTA's termination, would require additional legislation from Congress."

Meanwhile, Mexican incoming president Andres Manuel Lopez Obrador has had representation at the negotiating table along with Peña Nieto's team. It's unlikely he would want to rewrite the whole deal, said Schott, who's also a member of two government advisory committees on trade.

"The ball is up in the air and no one knows when it's going to come down," he said.

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