Grim reality of NAFTA talks sets in after tough US demands
Grim reality of NAFTA talks sets in after tough US demands
Some downcast participants said the demands, unveiled this week in line with Trump’s “America First” agenda, have increased the odds of NAFTA’s demise. At the very least, they could make it impossible to reach a deal renewing the treaty before a year-end deadline.
“The atmosphere is complicated,” one trade official told reporters, adding that his fears about some “pretty harsh, pretty horrible” demands from the US side of the negotiating table were coming true.
Speaking on condition of anonymity because the talks are confidential, the official added the US stance “has a clear protectionist bias, a bias that is trying to eradicate, minimize, eliminate the mechanisms that existed in NAFTA in the last 20 years.”
Trump, who blamed NAFTA for shifting US manufacturing jobs to Mexico during his election campaign last year, has repeatedly vowed to scrap the treaty unless it can be renegotiated on more favorable terms.
At the mid-point of seven scheduled negotiating rounds, many of the US proposals appear aimed at turning back the clock on changes in the global economy since NAFTA took effect 23 years ago. Collapse of the deal could reverberate well beyond North America, where trade between the United States, Canada and Mexico has more than quadrupled since 1994.
Former Mexican Trade Minister Jaime Serra, who was responsible for negotiating the original trade pact, said there was no economic logic to the US demands.
“Issues are being put on the table that are practically absurd,” he told Reuters. “I don’t know if these are poison pills, or whether it’s a negotiating position or whether they really believe they’re putting forward sensible things.”
Some officials from NAFTA governments said they knew all along the negotiations would be tough, but vowed to soldier on through the three remaining scheduled rounds of talks.
“We said from the beginning that this was never going to be easy,” Canadian Trade Minister Francois-Philippe Champagne told CBC radio. “We want to be at the table, be constructive, offering alternative proposals.”
One of the US proposals unveiled this week would require that 50 percent of the value of all NAFTA-produced cars, trucks and large engines come from the United States, people briefed on the negotiations said.
The same proposal calls for a sharp increase in NAFTA’s regional automotive content requirement, boosting it to 85 percent from the current 62.5 percent. The existing level is already the highest local content requirement of any trading bloc in the world.
Meanwhile, the Trump administration’s call for a so-called NAFTA sunset clause would effectively trigger a renegotiation of the pact every five years. Serra said the US content requirements would distort NAFTA trade with “pure protectionism” while the sunset clause would choke off investment decisions with uncertainty.
US negotiators also want to end a trade dispute settlement system that has deterred US anti-dumping cases while erecting new protective barriers for seasonal fruit and vegetable growers. And though Canada and Mexico had sought more access to US government procurement contracts, they were met this week with a proposal that would effectively grant them less.
Even before the current round of negotiations got underway in a suburban Washington hotel, US Trade Representative Robert Lighthizer said NAFTA was “lopsided” in favor of Mexico and Canada and needed major changes to rebalance it.
“The president has vowed to bring jobs and investment back to the United States,” Lighthizer said. “We will do no less.”
One of Lighthizer’s predecessors, Robert Zoellick, said he thought there was a 50-50 chance Trump would quit NAFTA.
“He’s trying to go back to make trade agreements fix the bilateral trade deficit. I don’t believe he can be successful in doing that,” Zoellick, now non-executive chairman of AllianceBernstein, told a banking conference in Washington on Saturday.
Abu Dhabi, Shanghai plan exchange focusing on China trade
DUBAI: The emirate’s international financial center, has agreed in principle with the Shanghai Stock Exchange to cooperate in establishing an exchange focusing on China’s foreign trade and investment, ADGM said on Monday.
The partners signed a memorandum of understanding to develop the exchange in Abu Dhabi. It would cater to companies and investors involved in China’s Belt and Road initiative, a Beijing-backed drive to win trade and investment deals along routes linking China to Europe.
“At ADGM, we have the international platform to serve different kinds of enterprises and investors — global, regional and local — seeking exposure to the Middle East and North Africa and Belt and Road projects,” said Richard Teng, chief executive of ADGM’s Financial Services Regulatory Authority.
Teng said he could not give specifics of which instruments the new exchange would trade or when it might open, saying this would depend on demand among stakeholders in both ADGM and Shanghai.
Chinese financial institutions have approached ADGM to discuss the financial environment in Abu Dhabi and their development needs in the six-nation Gulf Cooperation Council (GCC), he added.
Trade and investment ties between China and the GCC have been growing rapidly. The region is a big oil supplier to China, and Sino-United Arab Emirates trade exceeded $46 billion in 2016, according to Beijing’s official Xinhua news agency.
Ultimately, the new exchange will support not only the Belt and Road initiative but also the internationalization of the Chinese yuan in the region, Teng said.
Abu Dhabi is trying to build up ADGM, which opened in October 2015 and is smaller than the international financial center in neighboring Dubai, as part of a drive to develop its economy beyond oil exports.