The quest to renew NAFTA is slowing to a crawl as Canada andMexico tiptoe around America's most controversial proposals,throwing into doubt the three nations' ability to reach a quickdeal.

The U.S. is frustrated with the reluctance of Canada and Mexicoto present counter-proposals on key issues such as regional contentrules for cars, which could make or break a deal. Mexico and Canadacontinue to portray key U.S. demands as unworkable, and are holdingout hope the Trump administration will bow to pressure from U.S.lawmakers and corporations to keep core elements of the dealalive.

There has been an air of technocratic calm to the talks thisweek in Mexico City as bureaucrats plug away at less explosiveissues. Trade chiefs from the three countries aren't attending thisround, which has dialed down rhetoric on the ground, but also lefta political void for overcoming some of the sticking points. Thesprint for a U.S. tax overhaul this year has overtaken the agendain Washington, diverting some attention from NAFTA.

Yet there's still no clear path to a deal on a successor to theNorth American Free Trade Agreement, which governs more than $1trillion in trade and underpins the supply chains of companies fromGeneral Motors to Caterpillar. President Donald Trump hasrepeatedly threatened to pull out of the deal if the U.S. doesn'tget what it wants, and American officials want to get an agreementby next March, before a general election in Mexico andcongressional midterms in the U.S. inject even more politics.

“The U.S. has put some extremely unique proposals on the tableand many of those are and will remain problematic for Canada andMexico,” said Robert Holleyman, who was a deputy U.S. TradeRepresentative in the Obama administration. “We have a long way togo before we're able to say there are insurmountable barriers,although it's very choppy waters.”

The fifth round of talks, which wraps up Tuesday, haslargely avoided the most divisive U.S. proposals on dairy,automotive content, dispute panels, government procurement, and asunset clause. Negotiators plan to meet next month in the U.S.,before convening again in Canada in late January.

U.S. companies and business groups, led by the U.S. Chamber ofCommerce, have been mounting a campaign to mobilize Congress andconvince the White House to back down from proposals they see asdamaging to corporate interests. The Chamber on Friday warned thatan American pullout would hit hardest some of the states that Trumptook on his road to power.

One of those states is Texas. At a Senate hearing in San Antonioon Monday, business leaders from energy to farming counteredTrump's argument that NAFTA has been a disaster, saying it hasbolstered trade and that the pact's demise would cost jobs and hitthe state's economy.

Negotiators also spent much of their time in the fifth round onrules of origin, which govern how much of a product must beproduced in North America to trade without tariffs, thoughdiscussions on that centered on mundane details such as paperworkrequirements.

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The White House has proposed major changes to NAFTA's autorequirements, introducing a stipulation that 50% of parts orvehicles be U.S.-made, and increasing the minimum amount ofregional content needed to 85% from 62.5%.

Sensing danger, the auto industry has stepped up its lobbying topreserve NAFTA. A coalition of industry associations called DrivingAmerican Jobs traveled to Mexico City to make its case. TheAlliance of Automobile Manufacturers, which represents automakersincluding Ford Motor Co. and Daimler, warned Tuesday that the U.S.proposals would increase costs for automakers and fail to reduceU.S. trade deficits with Mexico, which is a key objective forTrump.

Mexican Economy Minister Ildefonso Guajardo said last week thatMexican negotiators planned to ask the U.S. for a more detailedexplanation of the autos proposal and the reasons for it, butdidn't yet plan to present a counteroffer. A person familiar withdiscussions said Mexico views the U.S. position as completelyunworkable.

Canada was expected to respond to the U.S. auto proposal thisround by detailing why it thinks implementing the plans would harmthe sector, without formally proposing a counteroffer, one Canadianofficial said.

From: Bloomberg News

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