Updated U.S. List Highlights Tougher NAFTA Demands

MEXICO CITY — The United States has published an updated list of NAFTA negotiating objectives to reflect some of its tougher-than-anticipated demands in a reminder of the difficult hoeing ahead as parties seek fertile ground for a deal.

The U.S. trade czar’s office released the new list on Friday just as the three chief negotiators began meeting in Mexico City for their first encounter after an acrimonious round revealed huge differences.

Sources say Canada and Mexico will start the months-long task of probing the U.S. for signs of willingness to compromise, though they expect little progress on the toughest sticking points for another few rounds.

A new document from the American side illustrated those big gaps.

The U.S. released an updated version of a July document published before negotiations started, in keeping with transparency requirements under American trade law. The new list includes tougher language on Canadian dairy, auto parts and Buy American rules, reflecting negotiating demands adopted in recent weeks.

“(Our) objectives represent a serious effort to renegotiate the agreement to update its provisions to the best 21st century standards and rebalance the benefits of the deal so that each country succeeds. … If these objectives are achieved, the United States will obtain more open, equitable, secure and reciprocal market access and the entire NAFTA region will benefit,” says the document.

Many changes

Major changes from the previous version of the document released four months ago include:

—On auto parts, ensuring that rules of origin promote production in North America as well as “specifically in the United States.” That reflects a U.S. demand at the last round that cars must include 50 per cent U.S. content and 85 per cent content from North America overall, to avoid a tariff.

—Ensuring reciprocity in market access for public-works contracts. This reflects an American demand that would limit access to Canadian and Mexican companies to one dollar in public contracts for every dollar American companies receive in those countries.

—Eliminating Canadian tariffs on imports of dairy, poultry, and egg products. The July document did not specifically mention eliminating Canada’s supply management system. But at the previous negotiating round in October, the U.S. requested supply management’s elimination within 10 years.

All these demands, and some others, have been deemed non-starters by Canada and Mexico.

Canada and Mexico willing to compromise

But those two are starting to demonstrate a willingness to seek compromises on some areas. For instance, both Canada and Mexico say they could envision some form of review mechanism every few years to provide status reports on the agreement.

That proposal falls short of the U.S. demand for a so-called five-year sunset clause. In the U.S. position, NAFTA should come with a proviso that the deal gets cancelled unless all parties endorse it after five years.

A rare hint of potential compromise from the U.S. came in the portion of Friday’s document referring to that sunset clause. The new U.S. position paper avoids mentioning a five-year cancellation threat, and actually contains language much more palatable to Canada and Mexico.

The new document describes the U.S. position on the so-called sunset clause the following way: ”Provide a mechanism for ensuring that the parties assess the benefits of the agreement on a periodic basis,” which sounds closer to the types of periodic reviews Canada and Mexico might be willing to live with.

Certain figures, or certain proposals, are just not-starters … There are certain starting points that are just unworkable.

Canada also intends to signal its willingness to review auto-parts rules. But again, it views the U.S. starting numbers to be well outside the bounds of an acceptable final compromise.

”We’re willing to talk about rules of origin,” said one Canadian official. ”But certain figures, or certain proposals, are just not-starters … There are certain starting points that are just unworkable.”

It’s considered doubtful too much progress on the thorny issues will happen at the current round, which ends next week. Canadian officials say they anticipate progress on less-controversial issues like digital commerce, regulatory co-operation and labour and the environment.

Bigger decisions will likely happen next year

But they expect the more intense decision-making to ramp up in the first quarter of next year, as the talks get closer to the hoped-for deadline of March. In the meantime, they will be looking for signs of potential common ground with American negotiators and watching whether the U.S. president escalates his threats to cancel NAFTA.

Canadian union leader Jerry Dias said the sides are frozen far apart. The Unifor boss met with Canada’s chief negotiator at the talks, and suggested Steve Verheul and his American counterparts weren’t doing much budging on the big issues.

”He’s showing as much flexibility as the United States is,” Dias said, when asked about the chat with Verheul. Dias also said there’s little room for Canada to cede much ground: ”Nobody’s going to capitulate to Trump. Trump is wholly unpopular in Canada and Mexico. So nobody really wants to make it look like a Donald Trump victory party.”

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Most Canadians Rate Justin Trudeau’s Economic Performance Rated As Poor, Very Poor, Or Average: Poll

More than a third of Canadians — 36 per cent — would rate Justin Trudeau's economic performance as poor or very poor.

Canada may have the fastest-growing economy in the G7, but that doesn’t mean Prime Minister Justin Trudeau and his government will get the credit, according to a recent poll.

Just one-quarter of Canadians would describe Trudeau’s economic performance as good or or very good, according to a Nanos Research poll conducted for Bloomberg News.

More than a third of Canadians — 36 per cent — would rate his performance as poor or very poor. Another 36 per cent would mark it as average.

Concerns about housing, rising interest rates, and income inequality may be to blame. More than eight in 10 Canadians are concerned or somewhat concerned about the impact of higher interest rates on their ability to pay down their debts.

About 84 per cent of Canadians are also concerned or very concerned about the widening gap between the rich and poor, and another 88 per cent are concerned or very concerned about housing affordability.

When asked what the federal government should be spending tax revenues on, Canadians were somewhat split, with 21 per cent saying it should be investing in social programs, 19 per cent on infrastructure, and 18 per cent on reducing personal income taxes.

But an overwhelming forty per cent of respondents believe Trudeau’s top fiscal priority should be reducing the federal deficit, which the government expects to hit $28.5 billion this fiscal year, or about 0.9 per cent of GDP.

Pollster Nik Nanos told Bloomberg News the survey shows there’s a “fundamental disconnect” between Canada’s macroeconomic reality and the “micro opinion” of Canadians.

“For all intents and purposes, there’s quite a small minority of Canadians not concerned about housing and interest rates,” he said.

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“It’s a large, dark cloud that looms over the psychology of Canadians.”

Provinces were somewhat split on Trudeau’s economic performance. In areas hardest hit by the oil-price collapse — the prairies and Atlantic Canada — Trudeau was given a “poor” or “very poor” rating by 40 per cent or more of the population. Men were also more likely to look at Trudeau’s performance unfavourably — 40.1 per cent, compared to 32.8 per cent of women.

Nanos conducted the survey of 1,000 Canadians 18 years of age or older over the phone and online Nov. 4-7, 2017. The margin of error for a random survey of 1,000 Canadians is +/- 3.1 percentage points, 19 times out of 20.

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