Canadian, American and Mexican flags stand on stage ahead of NAFTA renegotiations in Washington, D.C., U.S. (Photographer: Andrew Harrer/Bloomberg)

Trump Threat of Nafta Termination Hangs Over Round Two of Talks

(Bloomberg) -- Negotiators from the U.S., Canada and Mexico will focus on topics including e-commerce and investment as the second round of talks to update the North American Free Trade Agreement get underway in Mexico City on Friday.

Twenty-five working groups are set to discuss areas that also include the environment, anti-corruption measures and so-called rules of origin, which dictate the amount of North American content that must be included in products, Mexico’s economy ministry said in a statement. Mexico’s Economy Minister Ildefonso Guajardo will meet with U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland on the final day of the talks on Sept. 5 and then hold a joint press conference.

Discussions will take place under a cloud of President Donald Trump’s threat to withdraw from the pact. He has called Nafta the worst trade deal in history, saying it resulted in the decimation of U.S. manufacturing and the outsourcing of jobs to Mexico. Canada and Mexico largely want to defend the advantages they have enjoyed under the deal, keeping it free of tariffs while expanding its benefits to other industries.

While Mexican officials have dismissed Trump’s comments as a scare tactic that could be aimed at energizing his anti-trade supporters, the threats are a reminder of the significant leverage that a president holds to scuttle the $1.2 trillion trading area. A party can withdraw with six months’ notice.

The three countries ended the first round of discussions last month by committing to finish negotiations quickly, as 2018 elections in Mexico and the U.S. threaten to overtake the agenda. They’re expected to hold the third round of talks in Canada later in September.