New NAFTA talks aim to clear pathway to toughest issues

MEXICO CITY – Mexico and Canada aim to finish reworking less contentious chapters of the NAFTA trade deal with the United States in new talks that began on Sunday, hoping to clear the path for a breakthrough on the toughest issues before upcoming elections.

In six months, negotiators have ground out progress on the technical details of a revamped North American Free Trade Agreement, but made little advance on the most radical demands made by the administration of US President Donald Trump.

Ranging from demands for major changes to automotive content rules and dispute resolution mechanisms, to imposing a clause that could automatically kill NAFTA after five years, the chief stumbling blocks laid by the White House look unlikely to be removed in the latest Mexico City round, officials say.

But if the three negotiating teams manage to iron out remaining differences on areas of broader consensus, officials hope the political leaders will turn their attention to brokering a compromise on the trickiest US proposals.

“I think there’s going to be major progress on the technical issues and major obstacles on the critical issues,” Bosco de la Vega, head of Mexican farm lobby the National Agricultural Council, said of the talks running until March 5.

Once agreement is reached on technical chapters such as state-owned enterprises, barriers to trade and e-commerce, about 10 per cent of the modernised accord would eventually be left over for political leaders to work out, Mr de la Vega estimated.

A schedule for the round showed that the discussions would include rules of origin for the first three days, an issue at the heart of the Trump administration’s demand to raise the amount of auto content sourced from the NAFTA region.

Under NAFTA, at least 62.5 per cent of the net cost of a passenger car or light truck must originate in the region to avoid tariffs. Mr Trump wants the threshold raised to 85 per cent.

“You can’t have a successful negotiation if there’s no change to the rules of origin,” a Mexican official, speaking on condition of anonymity said, adding “it won’t be 85 per cent. We’re not sure what the number is going to be.”

Mexico’s Economy Minister Ildefonso Guajardo has said his negotiating team aims to present a proposal on rules of origin, though he has not provided details.

Any final agreement would need to be reached between Mr Trump and auto sector bosses in the United States who oversee the NAFTA region, an industry source close to the process said.

The North American auto industry has pushed back against Mr Trump’s demands, arguing it would damage competitiveness and regional supply chains.

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