U.S. releases list reflecting tougher NAFTA negotiating positions

The United States has published an updated list of NAFTA negotiating objectives to reflect some of its tougher-than-anticipated demands in a reminder of the difficult hoeing ahead as parties seek fertile ground for a deal.

The U.S. trade czar's office released the new list on Friday just as the three chief negotiators began meeting in Mexico City for their first encounter after an acrimonious round revealed huge differences.

Sources say Canada and Mexico will start the months-long task of probing the U.S. for signs of willingness to compromise, though they expect little progress on the toughest sticking points for another few rounds.

A new document from the American side illustrated those big gaps.

The U.S. released an updated version of a July document published before negotiations started, in keeping with transparency requirements under American trade law. The new list includes tougher language on Canadian dairy, auto parts and Buy American rules, reflecting negotiating demands adopted in recent weeks.

"(Our) objectives represent a serious effort to renegotiate the agreement to update its provisions to the best 21st century standards and rebalance the benefits of the deal so that each country succeeds. ... If these objectives are achieved, the United States will obtain more open, equitable, secure and reciprocal market access and the entire NAFTA region will benefit," says the document.

Major changes from the previous version of the document released four months ago include:

—On auto parts, ensuring that rules of origin promote production in North America as well as "specifically in the United States.'' That reflects a U.S. demand at the last round that cars must include 50 per cent U.S. content and 85 per cent content from North America overall, to avoid a tariff.

—Ensuring reciprocity in market access for public-works contracts. This reflects an American demand that would limit access to Canadian and Mexican companies to one dollar in public contracts for every dollar American companies receive in those countries.

—Eliminating Canadian tariffs on imports of dairy, poultry, and egg products. The July document did not specifically mention eliminating Canada's supply management system. But at the previous negotiating round in October, the U.S. requested supply management's elimination within 10 years.

All these demands, and some others, have been deemed non-starters by Canada and Mexico.

But those two are starting to demonstrate a willingness to seek compromises on some areas. For instance, both Canada and Mexico say they could envision some form of review mechanism every few years to provide status reports on the agreement.

That proposal falls short of the U.S. demand for a so-called five-year sunset clause. In the U.S. position, NAFTA should come with a proviso that the deal gets cancelled unless all parties endorse it after five years.

A rare hint of potential compromise from the U.S. came in the portion of Friday's document referring to that sunset clause. The new U.S. position paper avoids mentioning a five-year cancellation threat, and actually contains language much more palatable to Canada and Mexico.

The new document describes the U.S. position on the so-called sunset clause the following way: ''Provide a mechanism for ensuring that the parties assess the benefits of the agreement on a periodic basis,'' which sounds closer to the types of periodic reviews Canada and Mexico might be willing to live with.

Canada also intends to signal its willingness to review auto-parts rules. But again, it views the U.S. starting numbers to be well outside the bounds of an acceptable final compromise.

''We’re willing to talk about rules of origin,'' said one Canadian official. ''But certain figures, or certain proposals, are just not-starters ... There are certain starting points that are just unworkable.''

It's considered doubtful too much progress on the thorny issues will happen at the current round, which ends next week. Canadian officials say they anticipate progress on less-controversial issues like digital commerce, regulatory co-operation and labour and the environment.

But they expect the more intense decision-making to ramp up in the first quarter of next year, as the talks get closer to the hoped-for deadline of March. In the meantime, they will be looking for signs of potential common ground with American negotiators and watching whether the U.S. president escalates his threats to cancel NAFTA.

Canadian union leader Jerry Dias said the sides are frozen far apart. The Unifor boss met with Canada's chief negotiator at the talks, and suggested Steve Verheul and his American counterparts weren't doing much budging on the big issues.

''He's showing as much flexibility as the United States is,'' Dias said, when asked about the chat with Verheul. Dias also said there's little room for Canada to cede much ground: ''Nobody's going to capitulate to Trump. Trump is wholly unpopular in Canada and Mexico. So nobody really wants to make it look like a Donald Trump victory party.''