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Trump says open to bilateral Canada, Mexico pacts if NAFTA talks fail

[October 12, 2017] By Roberta Rampton and David Ljunggren

WASHINGTON (Reuters) - U.S. President Donald Trump said on Wednesday he was open to bilateral trade pacts with either Canada or Mexico if a three-way deal cannot be reached to substantially revise the North American Free Trade Agreement.

Asked by a reporter if he could envision maintaining free trade with Canada if NAFTA talks sour with Mexico, Trump said: "Oh sure, absolutely. It's possible we won't be able to reach a deal with one or the other, but in the meantime we'll make a deal with one."

Trump added that a "very creative" deal was still possible to benefit all three countries.

Trump's comments came at a White House meeting with Canadian Prime Minister Justin Trudeau, who was in Washington to promote NAFTA's benefits as a new round of renegotiations began near Washington.

Asked about Trump's comments at a news conference later, Trudeau said he was still optimistic about the chances of modernizing the 1994 trade pact.

"I continue to believe in NAFTA ... so saying, we are ready for anything, and we will continue to work diligently to protect Canadian interests,” Trudeau said.

Trudeau added that Canada was "very much aware of and very braced for" Trump's unpredictability, but his government would work in a "thoughtful, meaningful way towards getting a good deal."

Mexican Economy Minister Ildefonso Guajardo, speaking on Mexican radio, praised Trump's comments as "very balanced" to include the possibility of a deal with either country and hold out hope for a creative solution.

The U.S. Chamber of Commerce on Tuesday accused Trump's administration of trying to sabotage the talks with "poison pill proposals," including demands for more favorable treatment for the U.S. side on car production, and a "sunset clause" to force regular negotiations.

In his appearance with Trudeau, Trump said: "We'll see what happens" when asked whether NAFTA was doomed.

"It's possible we won't be able to make a deal, and it's possible that we will," he said. "We'll see if we can do the kind of changes that we need. We have to protect our workers, and in all fairness, the prime minister wants to protect Canada and his people also."

U.S. Commerce Secretary Wilbur Ross, one of Trump's top trade advisers, downplayed the chances that a NAFTA termination would become necessary.

"We don't hope it will, we don't desire that it will, we don't believe that it will, but it is at least a conceptual possibility as we go forward," Ross said.

But U.S. and Mexican corporate chief executives gathered in Mexico City said they would be better off with no NAFTA than be saddled with a "bad agreement."

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President Donald Trump welcomes Canada's Prime Minister Justin Trudeau on the South Lawn before their meeting about the NAFTA trade agreement at the White House in Washington, U.S. October 11, 2017. REUTERS/Jonathan Ernst

AGGRESSIVE PROPOSALS

Trade experts said the NAFTA talks were likely to stall in the face of aggressive U.S. attempts to sharply increase content requirements for autos and auto parts.

People briefed on U.S. proposals to be presented this week said Washington was seeking to sharply lift North American content threshold in car manufacturing.

The proposals call for North American content overall to rise to 85 percent from the current 62.5 percent. In addition, the United States wants to add a new 50 percent U.S.-specific content requirement, something that was not in the earlier agreements.

"These will be met with widespread opposition from Canada and Mexico. I think it's just a bridge too far," said Wendy Cutler, the Asia Society's Washington policy director and former chief U.S. negotiator for the Trans-Pacific Partnership trade deal canceled by Trump.

The U.S. side sees strengthening the rules of origin for the auto industry as a way to bring back some auto parts production, including electronics, from Asia. But Mexico strongly opposes a U.S.-specific content requirement, which would limit the growth of its own car industry.

The difficult issue of rules of origin will be addressed mostly at the end of the current talks, according to a schedule obtained by Reuters. The negotiations were extended on Wednesday by two days to Oct 17.

Other U.S. proposals opposed by Canada, Mexico and U.S. business interests include the five-year sunset provision, radical changes to NAFTA's dispute arbitration systems, changes to intellectual property provisions and new protections for U.S. seasonal produce growers.

U.S. Trade Representative Robert Lighthizer said on Wednesday the three nations had completed their negotiations on company competition policy, reaching an agreement that goes beyond previous U.S. trade deals to ensure "certain rights and transparency under each nation's competition laws."

(Additional reporting by David Lawder, Ginger Gibson, Makini Brice and Susan Heavey in Washington and Ana Isabel Martinez and Dave Graham in Mexico City; Writing by Alistair Bell; Editing by Tom Brown and Peter Cooney)

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