NAFTA talks are switching gears and slowing down as keyobstacles emerge, with Canada and Mexico rejecting what they see ashard-line U.S. proposals and negotiators exchanging their strongestpublic barbs yet.

U.S. Trade Representative Robert Lighthizer, Mexican EconomyMinister Ildefonso Guajardo and Canadian Foreign Minister ChrystiaFreeland wrapped up the fourth round of North American Free TradeAgreement talks in Washington Tuesday and said negotiations willrun through the end of March 2018, abandoning a December target.They also extended the time between negotiating rounds, givingthemselves more space to consider proposals.

The ministers cast the longer timelines as a positive way to diginto tougher disputes, pledging to continue to work out a dealwhile acknowledging that strong differences remain. They next meetin Mexico Nov. 17-21.

“New proposals have created challenges and ministers discussedthe significant conceptual gaps among the parties,” Lighthizersaid, reading a joint statement at the close of the fourth round oftalks. “Ministers have called upon all negotiators to explorecreative ways to bridge these gaps.”

Their joint remarks to the press were the most heated sincetalks began in August. Lighthizer said he's “surprised anddisappointed by the resistance to change,” while Guajardo saidMexico has limits to what it can accept. Canada's Freelandcriticized a “winner-take-all mindset.”

Tuesday's joint appearance capped talks punctuated bycontroversial U.S. demands on dairy, automotive content, disputepanels, government procurement and a sunset clause, which Canadaand Mexico have rejected.

“Yes we want an agreement, yes we want to find a win-winsituation, but this won't be at the detriment to our nationalinterests,” Guajardo told reporters after the trilateral newsconference ended.

Freeland said a deal that benefits the three countries can't bereached with “an approach that seeks to undermine NAFTA rather thanmodernize it.” Still, she added that an agreement for an improvedNAFTA is “absolutely achievable.”

In her own news conference, she stressed that a longer timelineshows “a pragmatic approach and goodwill.” Later asked why she wasoptimistic given the impasses, she said in French: “I don't thinkI've used the word 'optimist.'”

The Mexican peso jumped more than 1% on news of the 2018timeframe for talks, while the Canadian dollar rose 0.2%, asinvestors bet it decreased the odds that the deal would fall apartany time soon.

'Good Agreement'

President Donald Trump has called NAFTA a disaster andrepeatedly threatened to withdraw the U.S. from the agreement, astep the White House can set into motion by giving six months'notice to its partners. At stake is the $1.2 trillion in annualtrade between the three countries, as well as the business modelsof companies such as Ford Motor and General Motors that haveadapted their supply chains to take advantage of the tradezone.

Lighthizer told reporters he's not focused on the possibility ofthe U.S. exiting the deal. “I'm focusing on trying to get a goodagreement,” he said, though he added that the three countries woulddo “just fine” without NAFTA.

“Right now, it's a great deal for the Mexicans and theCanadians, in my opinion. It's a great deal for businesses thathave decided they want to take advantage of the situation,”Lighthizer said. “Everybody has to give up a little bit of candy.That's really what this is about.”

Trump again decried “massive trade deficits” with tradingpartners on Tuesday when speaking at the White House. “I'm notgoing to be allowing that,” he said.

In the joint appearance with his negotiating partners,Lighthizer also stressed that a core U.S. objective is to shrinkits trade deficit. “We have seen no indication that our partnersare willing to make any changes that will result in a rebalancing,”he said.

Banks, Buses

Toronto-Dominion Bank—Canada's biggest bank by assets, with asignificant U.S. presence—has stress-tested its credit portfoliofor the possibility of a NAFTA collapse, CEO Bharat Masrani said,though he said it's too early to draw conclusions.

“I wouldn't start panicking or worrying at this stage; we'reearly in the process,” Masrani said in a Bloomberg Televisioninterview Tuesday. “We've done stress testing—we are a bank afterall—but my expectation would be that there would be some kind of atransition if we get to the unthinkable.”

Killing NAFTA would cause “ bedlam” in the auto industry, saidDavid White, executive vice president of supply chain for Winnipeg,Manitoba-based New Flyer Industries, the largest transit-busmanufacturer in North America. “Economically and financially, itwould make no sense.”

Following the Mexico negotiating round in November, Guajardosaid chief negotiators will meet in Washington in December, withthe next full round then returning to Canada.

From: Bloomberg News

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