Round 3 of NAFTA Renegotiation Talks Concludes with Progress in Some Areas; While Contentious Issues Remain

Three rounds of talks between trade negotiators have now concluded over a six week period across Washington DC, Mexico City, and Ottawa. The three countries have announced, without releasing very much detail, that progress has been made in the areas of telecommunications, competition policy, digital trade, good regulatory practices, and customs and trade facilitation, including “solid progress” on electronic border forms and harmonization of regulations, according to Canadian Foreign Minister, Chrystia Freeland. Discussions also progressed on mechanisms to help further open up foreign markets within the trading block to small and medium enterprises. The parties also exchanged initial offers in the area of market access for government procurement.

However, larger issues that still remain contentious include ‘rules of origin’, where the U.S. would like to see a higher percentage of finished products made with parts and materials originating in North America, rather than outside materials that simply become assembled in North America and still receive preferential duty treatment. Minister Freeland says the U.S. has not yet introduced a proposal on rules of origin. Another contentious issue is dispute resolution. The U.S. would like to eliminate the private arbitration panels that currently preside over trade disputes between a private entity and a foreign government, in favor of increased national sovereignty in the dispute settlement process.

Low wages in Mexico have also become an increasing point of debate. The U.S. and labor leaders in Canada would like to see those wages rise in order to make Mexico a less attractive option for U.S. and Canadian businesses to outsource manufacturing. However, there has been resistance from some in Mexico to tighten labor standards or take action to raise wages. Mexican and Canadian auto unions have said in a report that Mexican autoworkers earn about $3.95 an hour, which is about one-ninth of average wages north of the border. 
The fourth round of talks is scheduled to be held back in Washington DC from October 11th-15th.  While the parties would generally like to conclude talks before the end of 2017, it will be challenging for the current pace of negotiations to resolve all major issues before then.

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