American negotiators are insisting Canada and Mexico will have to make all the concessions in the overhaul of the North American free-trade agreement while the United States will not give anything up, The Globe and Mail has learned.
A source familiar with the closed-door talks at the Hyatt Regency hotel in Mexico City, where the second round of the NAFTA renegotiation is unfolding, said the Trump administration has taken a hard line at the bargaining table.
The U.S. decision to dig in at such an early stage of discussions means there will be little fast progress, despite a packed agenda and compressed time frame: Negotiators are working on 25 different parts of the agreement, and the United States is pushing to have a deal done before the end of the year.
The United States ratcheted up the tension even further on Saturday by demanding that Canada loosen its system of supply management for dairy, eggs and poultry, said the source, who spoke on condition of anonymity in order to reveal confidential details of the discussions.
This round of discussions, which began Friday, wrap up Tuesday. According to a schedule obtained by The Globe, the final day of talks will include a second day of talks on the rules of origin.
The rules of origin govern how much content in manufactured goods must be produced within the NAFTA zone to be exported between the three countries without paying tariffs. Negotiators will also discuss environment and government procurement, a subject that could include controversial Buy American provisions.
Foreign Minister Chrystia Freeland arrived in Mexico City Monday and had dinner with her counterparts – U.S. Trade Representative Robert Lighthizer and Mexican Economy Minister Ildefonso Guajardo – before a series of meetings they will hold Tuesday. Two senior advisers from each country also attended the dinner.
The next round of talks will start later this month in Ottawa; future rounds will continue rotating between the three countries.
Despite the United States' hard stand, the country did not give its negotiating partners many specifics on what it wants, government and industry sources said.
Washington has not, for instance, said exactly what it wants Canada to do with supply management, whether to loosen the rules or allocate a larger quota for U.S. farmers.
It was a similar story on the rules of origin. The United States signalled in the opening round of talks last month that it would demand more NAFTA-zone content in autos – as well as a quota of specifically U.S.-made content – but has not yet given Canada and Mexico the details on what that would be, the sources said.
One industry source said the United States' prime imperative on rules of origin appears to be helping the domestic steel industry. But the American government is still trying to figure out how exactly to rejig the rules of origin to make that happen.
Canada's apparent strategy has been to make large demands – including that climate change be written into the deal and that the Unites States bans states from adopting so-called "right-to-work" laws accused of gutting unions – knowing they will likely be dialled back as part of the give-and-take. Mexico, meanwhile, is tabling few detailed demands, two sources said, waiting for the United States to reveal its positions before responding.
Armando Ortega, a former Mexican trade negotiator, said the United States' intransigence is unusual at the early stage of talks: Normal negotiations usually begin with all sides putting their best foot forward and trying to reach common objectives. The tough American stand, he said, might be politically motivated posturing. President Donald Trump won last year's election largely by attacking Mexico on trade and border security.
"If you are Lighthizer, you need to play to the audience. Your boss being who it is, you certainly would like to be very tough, especially if you're in the country that has been your pinata," he said in an interview.
Mr. Ortega, president of the Canadian Chamber of Commerce in Mexico, said it is ironic that the United States – which demanded the negotiations and wants them done by the end of the year – hasn't laid out all the details of its demands.
"They're the demandeur, they should be putting things on the table," he said.
Flavio Volpe, president of Canada's Automotive Parts Manufacturers' Association, said rules of origin will be the key issue for the United States in talks because they will give it something straightforward to take back to its supporters.
He said he believed the United States is still trying to sort out how much North American content the domestic industry could realistically produce to figure out what it can ask for without inadvertently driving production outside of the NAFTA zone.
"That number is the most easily analyzed success or failure point for the U.S. administration. So I think we won't see a solid number until much later in the process," Mr. Volpe told The Globe in the lobby of the Hyatt.
Mr. Volpe said the United States' hard line at the opening of the talks was likely an "on the moment tactic," and doesn't mean the negotiations are doomed.
"The waters are going to boil some times more than others," he said. "But it's just language."