Nafta Nations Won’t Wrap Up Talks Before U.S. Trip to China

(Bloomberg) -- A push for a tentative Nafta deal in coming days has come up short despite progress on key issues, with ministers not meeting again until after a U.S. trade trip to China.

U.S. Trade Representative Robert Lighthizer met again Friday in Washington with Canadian Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo. After the meeting, Guajardo and Freeland stressed gains had been made and that more parts of a revised North American Free Trade Agreement are now almost done.

Guajardo said the three ministers meet next on May 7, once Lighthizer is back from China, and that technical talks with lower-level officials will continue until then. Freeland said there won’t be a deal before the next ministerial meeting.

That means Nafta talks won’t be complete before May 1, which had been a target for officials given the China trip and the expiry of a temporary exemption for Canada and Mexico from U.S. metals tariffs. The Americans had linked exclusion from its levies on steel and aluminum imports to successful completion of a Nafta deal.

Both Guajardo and Freeland downplayed the risk of being hit with metals tariffs, declining to give any indication of what assurances the Trump administration has given them. Mexico, for its part, hinted it could retaliate.

“Ambassador Lighthizer knows very clearly our position and how we have to react if any measure is imposed on Mexico,” Guajardo told reporters Friday in Washington. The North American steel sector is “strong” and “it will not be in the best interest of any country to be treated as the rest of the world,” he said.

‘Very Good Progress’

Mexico already has a list of American products it would tax in retaliation, including items it believes are politically sensitive in the U.S., according to a person familiar with the nation’s strategy, who asked not to be named discussing a plan that hasn’t been made public.

The steel and aluminum issue is “a completely separate track” from Nafta, Freeland said Friday. “There is no justification whatsoever for tariffs or quotas on Canadian steel or aluminum as a national security consideration,” she said, adding that overall “this has been a week of very solid, very positive, very good progress.”

A U.S. administration official, speaking on condition they not be identified, declined to say whether Canada and Mexico would be exempt, saying it would be the president’s decision.

Read more about the remaining sticking points to a new Nafta deal

Raymond Bachand, the lead negotiator for the Canadian province of Quebec, said Friday there’s a “bit of a bottleneck” in talks, with auto rules as the sticking point. “If they settle autos, the rest can be agreed on in three or four weeks -- as long as the Americans back down on a certain number of their demands,” he said at a Chamber of Commerce of Metropolitan Montreal event.

Running Out

Beyond the short-term obstacles of the China trip and metals tariffs, time is running out to achieve a deal in principle on Nafta. Mexico’s elections are approaching on July 1, and timelines set out in U.S. trade law mean a deal is almost certainly needed this month if it has a chance of passing in the current Congress, which is Lighthizer’s goal.

Freeland described a two-track progress before the May 7 meeting -- lower-level officials meeting in what she said is now considered “a continuous negotiation,” while political-level staff consult with industry and stakeholders over this week’s developments.

Negotiators are nearing deals on Nafta chapters including those on technical barriers to trade, state-owned enterprises, financial services and the environment, according to Guajardo. “With a little additional effort, we can finish and get them out of the way,” he said, reiterating that Mexico won’t rush to sign a bad deal. “We will have an agreement when the quality of the agreement is good for the three countries.”

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