LDN - Business

Mexico, Canada shun NAFTA autos counteroffers: sources

[November 20, 2017] By Anthony Esposito and David Lawder

MEXICO CITY (Reuters) - Divisions over updating the NAFTA trade deal showed no sign of easing on Sunday as Mexico and Canada signaled they would not offer counterproposals to U.S. demands for far stronger automotive content rules, people with knowledge of the talks said.

The lack of movement on major issues such as autos rules of origin could put the North American Free Trade Agreement negotiations in danger of grinding to a stalemate as an early 2018 deadline for revising the pact approaches.

A source close to the negotiations said Mexico had serious problems with a number of U.S. proposals, including Washington's demand that regional content for autos be raised to 85 percent from 62.5 percent, with 50 percent coming from the United States.

The source also said that Mexico could not accept a U.S. proposal that would restrict imports of some Mexican produce at certain times to protect growers.

Mexico does not plan to make counterproposals in those areas, the source said, adding that the U.S. autos proposal was "unviable" and would "make the region less competitive."

A Canadian source with knowledge of the negotiations said Canada also intended to refrain from offering an autos counterproposal and instead make a presentation on Monday arguing that the U.S. demands would cause serious damage to both U.S. and North American automotive manufacturing.

The United States, Canada and Mexico are holding the fifth of seven planned rounds of talks to modernize NAFTA, which U.S. President Donald Trump blames for job losses and big trade deficits for his country.

"The talks are really not going anywhere," Jerry Dias, president of Unifor, the largest Canadian private-sector union, told reporters after meeting with Canada's chief negotiator on Sunday.

"As long as the United States is taking the position they are, this is a colossal waste of time," said Dias, who is advising the government and regularly meets the Canadian team.

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Flags are pictured during the fifth round of NAFTA talks involving the United States, Mexico and Canada, in Mexico City, Mexico, November 19, 2017. REUTERS/Edgard Garrido

'NO SIGNS OF FLEXIBILITY'

Hanging over the negotiations is the threat that Trump could make good on a threat to scrap NAFTA.

Canada and Mexico object to a number of demands the U.S. side unveiled during the fourth round last month, including for a five-year sunset clause that would force frequent renegotiation of the trade pact, and major changes to dispute- settlement mechanisms.

"Our internal view as of this morning is that if any progress is to be made, the United States needs to show some flexibility and a willingness to do a deal," said a Canadian source with knowledge of the talks.

"We are seeing no signs of flexibility now," added the source, who requested anonymity given the sensitivity of the situation.

U.S. officials declined to comment.

Mexico is expected to offer an alternative to the U.S. sunset clause proposal that would offer periodic reviews of the trade pact but without an automatic expiration.

U.S. negotiating objectives that were updated on Friday appeared to accommodate the Mexican proposal, saying the revised NAFTA should "provide a mechanism for ensuring that the Parties assess the benefits of the Agreement on a periodic basis."

(Additional reporting by David Ljunggren and Sharay Angulo; Editing by Cynthia Osterman and Peter Cooney)

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