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Fears of "zombie deal" as NAFTA talks resume


May 8, 2018  


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Senior Canadian, U.S. and Mexican officials trying to rescue slow-moving talks to update the NAFTA trade pact met on Monday in a new bid to resolve key issues before regional elections complicate the process.

With time fast running out to strike some kind of deal on the North American Free Trade Agreement, the three member nations are still far apart on major points.

According to Reuters, discussions in Washington will center on one particularly contentious area: the U.S. demand for tougher rules of origin governing what percentage of a car needs to be built in the NAFTA region to avoid tariffs.

Other challenges include the future of the pact’s dispute-resolution mechanism and a U.S. proposal for a sunset clause that could automatically kill the deal after five years.

“We will be working all week on this,” Mexican Economy Minister Ildefonso Guajardo told reporters after talks with U.S. Trade Representative Robert Lighthizer.

Asked how long he would be staying in Washington, he told Reuters: “We will be here for as long as necessary.”

Sources close to the talks suggest there is a creeping feeling of pessimism going into the new round of negotiations because of gridlock on critical matters.

Guajardo earlier told El Heraldo newspaper that if a deal could not be reached, “we would be operating what some analysts have called ‘Zombie NAFTA’ … (one) that isn’t dead and isn’t modernized.”

Business executives complain that uncertainty over the future of the 1994 agreement is hurting investment.

Lighthizer said last week that if the talks took too long, approval by the Republican-controlled U.S. Congress may be on “thin ice.” The aim is to complete a vote during the “lame-duck” period before a new Congress is seated after November’s congressional elections.

Mexico holds its presidential election on July 1 and the front-runner, leftist Andres Manuel Lopez Obrador, says he wants a hand in redrafting NAFTA if he wins.

Lighthizer has raised the idea of a quick agreement in principle to cover the general outlines of a text, leaving officials to work out the exact details later.

(Reuters)