Donald Trump.    Picture: REUTERS
Donald Trump. Picture: REUTERS

President Donald Trump’s trade negotiators enter the latest round of the North American Free Trade Agreement (Nafta) talks under growing pressure inside their own country to step back from a confrontational stance that has left the US isolated at the negotiating table.

The fourth round of talks to update the agreement began on Wednesday in the Washington area. Trump has maintained his threat to walk out, even amid rising opposition at home to his hardline stance. On the eve of talks, the top US business group pledged to fight to preserve the pact, while a congressional committee said it was committed to successful talks and Mexico signalled it can live without the accord.

"There is life after Nafta," Mexican Economy Minister Ildefonso Guajardo said on Tuesday in an interview with Radio Formula. Mexico could leave Nafta and have the strength to move on without any serious long-term structural damage to the economy, he said.

Canadian Prime Minister Justin Trudeau — who has steadfastly struck an optimistic tone as his foreign minister begins to dampen expectations for a quick deal — will visit the White House on Wednesday to discuss trade with Trump.

US Trade Representative Robert Lighthizer started the latest round by announcing an agreement on a chapter on competition. The countries have agreed to increased "procedural fairness in competition law enforcement", his office said in a statement. It is the second topic to be agreed on along with the chapter on small-and medium-sized businesses.

"Thus far, we have made good progress and I look forward to several days of hard work," Lighthizer said. Scheduled talks in this session have been extended by two days to October 17.

Trudeau and Canadian Foreign Minister Chrystia Freeland met members of the US house committee on ways and means in Washington on Wednesday morning, with chairman Kevin Brady saying the committee was dedicated to "successful" negotiations. "When North America wins, America wins and the American people win as well," he said.

An updated Nafta must account for the digital economy, make progress on customs rules, beef up intellectual property protections and boost market access for US dairy producers, Brady said.

Representative Richard Neal, the ranking Democrat on the committee, said he hoped Nafta would expand Canadian market access for US cultural industries and "will be an opportunity to update intellectual property rules".

An auto-parts industry executive warns that tightening the rules of origin for cars would add complexity and costs

One of the most contentious US proposals is around so-called rules of origin for vehicles, which govern what share of a car must be built within Nafta countries to receive the pact’s benefits. The US is expected to propose substantially raising the regional requirement, from 62.5% currently, and potentially add a US-specific content requirement.

Rules of origin will be discussed by negotiators on Friday, Sunday and Monday, according to an agenda obtained by Bloomberg.

An auto-parts industry executive warned on Wednesday that tightening the rules of origin for cars would add complexity and costs.

"If the required content to hit the threshold for a Nafta vehicle is too high, people may say, ‘Look, it’s just too difficult, it’s too high, so we’ll just ship the vehicles in’," Magna International CEO Don Walker said in an interview ahead of the talks. "In which case, they pay the duty, and it’s a lose-lose."

US Chamber of Commerce CEO Thomas Donohue said the rules of origin proposal would send more business overseas. Donohue pledged to fight "like hell" to defend Nafta if Trump tried to pull out, and urged Lighthizer to get a deal.

He said the 23-year-old accord is facing an "existential threat" because of the Trump administration’s hardline stance. "There are several poison pill proposals still on the table that could doom the entire deal," Donohue said.

Bloomberg

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