USTR Says NAFTA Agreement Reachable in 'Next Little Bit' as US Reportedly Abandons Contentious Proposal

An agreement in principle on NAFTA is reachable in the "next little bit," U.S. Trade Representative Robert Lighthizer said in a March 28 interview on CNBC. According to media reports from Inside U.S. Trade and from Canada, Lighthizer's team has abandoned a U.S. content requirement for rules of origin in autos, and replaced it with a proposal that an 85 percent North American content requirement can be fulfilled in part by giving credit for higher wages. Some reports pegged that wage at $15 an hour, others at somewhere in the $13 to $17 an hour range. Either would be easily met by most U.S. and Canadian auto parts and auto assembly plants.

Canadian Foreign Affairs Minister Chrystia Freeland declined to comment on the idea of using wage credits but said Lighthizer was right when he told Congress that views were converging on rules of origin (see 1803210044). After Lighthizer spoke on March 28, Canada's head negotiator, Steve Verheul, told reporters in Ottawa that Canada has not seen the kind of compromise from the U.S. that would lead to an agreement in principle. He noted that the sunset clause, the fact that the U.S. wants investor-state dispute settlement to be optional, and its position on government procurement are all big gaps. “If we’re going to achieve that, we would clearly require some considerable flexibility in the U.S. positions,” he said. Lighthizer sounded more upbeat. "I think we are making progress," he said. "All three parties want to move forward."

Freeland, speaking with reporters on a conference call later in the evening, praised the U.S.'s movement on rules of origin. "I had a very good, long meeting with [Lighthizer] in Washington a couple of weeks ago where we spent four hours together and I've been in touch with him by phone every week. I do think, as Bob has said, as has been reported, that we have now made some good progress on rules of origin, particularly in the auto sector." She called it heartening. "As we've said all along, this issue is one of the most complicated and has really been at the heart of the agreement, and some constructive ideas from the U.S. that Bob put forward at that meeting in Washington I think have been helpful, and we are working very hard and intensively to build on that progress. We are very aware of the challenges posed by the Mexican and American political calendars," she said.

"We are prepared to work 24/7 on this and we have indeed been engaging very intensively, including the Prime Minister, who has just over the past couple of days, had good phone calls with both [U.S.] President [Donald] Trump and [Mexico's] President [Enrique] Pena [Nieto]," Freeland continued. Canada is also working "intensively and closely" with Mexico, she said.

When asked about the issues Verheul raised as big gaps, Freeland replied, "No one ever said or pretended this would be easy or, you know, simple, that there would be a single answer to the NAFTA modernization effort. And as you know, and as I mentioned earlier, we are working very hard on a number, on, you now, more than two dozen tables and chapters, all at the same time. It's a very big negotiating agenda and all three countries have a lot of negotiators working on it, so we are able to push forward and advance on a number of issues at the same time. And that is what we are doing."

The Mexican government has not talked about the wage idea, but business interests in Mexico have spoken to the Mexican media, and they do not like it. ANIERM, or the National Association of Importers and Exporters of the Republic of Mexico, a Mexican trade group, said the proposal "seeks to discourage investment in Mexico." No announcement has been made for the timing of the next NAFTA round.