1-29-18 1:23 PM EST | Email Article
By Paul Vieira and William Mauldin 

MONTREAL -- The U.S., Canada and Mexico said they were tackling the most difficult issues in overhauling the North American Free Trade Agreement, senior officials said Monday, but the U.S. rejected Canada's ideas on the auto-industry rules at the heart of the pact.

Singling out Canada for criticism, U.S. Trade Representative Robert Lighthizer said Ottawa's proposal on changing auto-industry rules would reduce jobs in the bloc. He also chastised Canada for recently bringing a case to the World Trade Organization challenging the Trump administration's use of tariffs.

The comments from Mr. Lighthizer and his Mexican and Canadian counterparts marked the official end of a six-day round of Nafta negotiations in Canada's second-largest city.

"Some real headway was made here today," Mr. Lighthizer told reporters after meeting with his counterparts. "I am hopeful that progress will accelerate soon."

The stakes were high going into the sixth installment of talks, amid worry among some officials, business groups and trade watchers that a lack of progress on key U.S. demands could prompt President Donald Trump to follow through on his threat to begin America's withdrawal from the 24-year-old agreement.

Officials from the three countries have considerable work ahead of them if they hope to conclude an overhaul of the 23-year-old agreement in coming months.

Some U.S. lawmakers are worried that disagreements over Nafta or other trade issues could affect their 2018 election campaigns, and extending the talks past late March is fraught with political risk in Mexico, which holds presidential and congressional elections July 1.

Efforts by Canada and Mexico to exhibit some flexibility on the Trump administration's most contentious demands -- in particular autos -- prompted among some observers that the three countries will eventually reach a deal.

Canada, which U.S. officials had accused of being difficult at the negotiating table at prior rounds, also laid out an informal proposal seeking to address the U.S. demand for more North American content in cars. But that proposal didn't address the most controversial Trump administration demand: that light vehicles contain 50% U.S. content to cross U.S. borders duty-free.

Mr. Lighthizer, the U.S. trade czar, rejected Canada's proposal.

"We find that the automobile rules of origin idea that was presented, when analyzed, may actually lead to less regional content than we have now," he told reporters.

Significant disagreements remain among the Nafta negotiators, especially on a dispute-resolution process. That came into focus in the Montreal round as Mexico and Canada rejected a Trump administration proposal to remake a corporate arbitration system, known as the investor-state dispute settlement.

"It's going to be a long and drawn-out process, but at least there's a process," said Eric Miller, president of Washington-based trade consultancy Rideau Potomac, who was in Montreal for part of the round. "We have stepped back from the precipice. We are not out of the woods but we have avoided disaster."

Canadian union leaders and Democratic lawmakers who came to Montreal said negotiators have yet to seriously address improved labor standards, in an effort to stem the flow of manufacturing jobs from the U.S. and Canada to Mexico.

Mr. Trump has appeared to soften some of his harsh rhetoric toward Nafta in recent weeks, signaling a deadline could be extended and that talks are going well. But he has also reiterated his threat to withdraw from the trade pact if the three countries don't agree on a major overhaul that accommodates U.S. concerns, such as its trade deficit with Mexico.

Some U.S. lawmakers believe the countries shouldn't be tied to a specific deadline. "We believe it is important to get a quality agreement rather than have one tailored to a strict timeline," Rep. Dave Reichert (R., Wash.), chairman of the House of Representatives subcommittee on trade, told reporters in Montreal over the weekend.

Another Republican visiting the talks, Rep. Will Hurd of Texas, said a March deadline is "still something that can be hit."

"I am pleasantly surprised by the optimism that my friends from Canada and Mexico have shown," said Mr. Hurd, whose district borders Mexico.

In Mexico, the July vote is seen as a referendum both on President Enrique Peña Nieto's corruption-plagued ruling Institutional Revolutionary Party and on a trade-anchored economic model that critics argue has left too many Mexicans behind. Andrés Manuel López Obrador, the leftist nationalist who maintains a solid lead in opinion polls, has said he would take a tougher stance on trade and economic issues as well as on dealings with the Trump administration.

--Dudley Althaus in Mexico City contributed to this article.

Write to Paul Vieira at paul.vieira@wsj.com and William Mauldin at william.mauldin@wsj.com


(END) Dow Jones Newswires

January 29, 2018 13:23 ET (18:23 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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