The renegotiation of the North American free-trade agreement has exploded into open hostility, with Canada accusing the Trump administration of trying to "turn back the clock" by tabling illegal protectionist demands and the United States slamming Ottawa and Mexico City for taking "unfair advantage" of the world's largest economy and refusing to agree to changes to the pact.
On the most acrimonious day of talks so far, U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland publicly traded blows at a news conference closing the fourth round of negotiations.
In one glimmer of hope, however, the United States announced it would scrap its end-of-year deadline for an agreement and continue negotiating until at least the end of March – suggesting Washington may be serious about trying to reach a deal rather than pushing the entire agreement to unravel.
The standoff cranks up pressure on the three sides to break the deadlock at the next round and prove that NAFTA can be saved.
The three sides have now tabled all of their demands, including five U.S. proposals – on auto manufacturing, dispute resolution, public procurement, a sunset clause and supply management – that Ottawa has told Washington are complete non-starters.
"We are seeing proposals that would turn back the clock on 23 years of predictability, openness and collaboration under NAFTA," Ms. Freeland told reporters in an auditorium of the General Services Administration building in Washington on Tuesday afternoon, as Mr. Lighthizer stood a few feet away.
Ms. Freeland warned a deal "cannot be achieved with a winner-take-all mindset or an approach that seeks to undermine NAFTA rather than modernize it."
She said an American demand that Canadian- and Mexican-manufactured vehicles contain 50-per-cent U.S. content is "troubling" and would break World Trade Organization rules. Ms. Freeland also took aim at the Trump administration's obsession with slashing the United States' trade deficit, saying the balance of trade was "not a useful measure" of economic success.
Mr. Lighthizer hit back, accusing Canada and Mexico of intransigence at the bargaining table and describing NAFTA as a "lopsided" deal that favoured them over the United States.
"Frankly, I am surprised and disappointed by the resistance to change from our negotiating partners on both fronts," he said. "We have seen no indication that our partners are willing to make any changes that will result in a rebalancing and a reduction in these huge trade deficits. … Countries are reluctant to give up unfair advantage."
At one point, he turned toward Ms. Freeland, telling her "for us, trade deficits do matter," as she smiled uncomfortably.
Mexican Economy Minister Ildefonso Guajardo struck a softer tone, but warned that without NAFTA all three sides would suffer. "We undertook this as a win-win-win negotiation and not to be in a lose-lose-lose situation. No one wants to end this process empty-handed, and there is no reason for that," he said. Agitated Mexican officials could be seen huddling in the hallway with Mr. Guajardo after the standoff.
The three countries will slow down the negotiating schedule, with the next round convening Nov. 17 in Mexico – a change from the 10-day gaps between sessions to date. One source said Mr. Lighthizer surprised Canada and Mexico on Tuesday by proposing the longer timeline, which appeared to be a signal that there could still be a way to salvage the negotiations.
The fourth round was the most substantive to date, with the United States laying out all of its demands in detail. These include the U.S. content requirement on cars and trucks made in Canada and Mexico, severely limiting the amount of American government contracts that Canadian and Mexican companies can bid on, gutting the mechanisms for settling trade disputes under the deal, slapping on a sunset clause that would automatically kill NAFTA in five years unless all three countries agreed to keep it, and dismantling Canada's protected dairy, poultry and egg markets.
People with knowledge of the closed-door talks described tense scenes in the negotiating rooms – at a drab hotel next to an expressway in a Virginia suburb of Washington – where U.S. negotiators presented their demands only to be immediately told by their Canadian and Mexican counterparts that they will not agree to them.
Many sessions consisted of Canadian and Mexican negotiators trying to explain to the Americans why their proposals would hurt all three economies, and asking questions to clarify how the United States intended its demands to work. In many cases, the sources said, U.S. negotiators seemed uncomfortable with their own protectionist proposals and said they were merely passing on what had been handed to them by the White House.
No matter how badly things go, both Canada and Mexico have publicly vowed not to walk away from the negotiating table. One source said that, in the event of a complete impasse, Canadian negotiators will still keep showing up every day – even if it means sitting silently across the table from their U.S. counterparts.
Speaking with reporters at the Canadian embassy shortly after her showdown with Mr. Lighthizer, Ms. Freeland contemplated a doomsday scenario. "Look: Our approach to NAFTA – as to all issues – is to hope for the best and prepare for the worst."