WASHINGTON (REUTERS) - Trade ministers from the United States, Canada and Mexico on Tuesday (Oct 17) wrapped up a contentious round of Nafta negotiations dominated by aggressive US demands, including a sunset clause on the pact that Canadian and Mexican officials say will be rejected.
The three sides agreed to carry on with talks and said they would negotiate into the first quarter of 2018, beyond the end-year framework initially envisaged to complete the negotiations to modernise the 23-year-old North American Free Trade Agreement.
The tone of closing statements implied they were far apart.
US Trade Representative Robert Lighthizer complained that Canada and Mexico were not willing to accept US proposals on some less controversial areas of the trade deal, let alone the kind of issues that the United States says would be needed to strike an agreement.
"As difficult as this has been, 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," Lighthizer said as the latest round closed out in Washington.
The Trump administration's proposals to reshape Nafta to help shrink US trade deficits have created stumbling blocks, leaving some participants and analysts wondering how an impasse can be avoided.
Washington's demands, previously identified as red lines by its neighbors, include forcing renegotiations every five years, reserving the lion's share of automotive manufacturing for the United States and making it easier to pursue import barriers against some Canadian and Mexican goods.
Mexican and Canadian officials at the talks have said those proposals are unacceptable while stressing their governments will not walk away from the table. The talks are now scheduled to resume in Mexcio City on Nov 17-21.
Describing some of the demands as "ridiculously extreme", Moises Kalach, head of the international negotiating arm of Mexico's powerful CCE business lobby, said the US government knew that it would not be able to push them through.
"The key is to remain calm and see if the American government is ready to negotiate," he told Mexican radio.
One person close to the process said there was now a possibility negotiations to modernise Nafta, which underpins some US$1.2 trillion (S$1.6 trillion) in annual trade between the three countries.
Lighthizer says his hard negotiating line reflects US President Donald Trump's desire to claw back lost manufacturing jobs and shrink US goods trade deficits amounting to US$64 billion with Mexico and US$11 billion with Canada last year.
Financial markets have taken notice of the acrimony.
Mexico's peso was trading at its lowest level in almost five months against the dollar, while the Canadian dollar hit a one-week low against the greenback on Tuesday.
Trump, who made trade a centrepiece of his 2016 presidential campaign as he promised to reinvigorate the US manufacturing sector, has continued his attacks on Nafta and repeatedly threatened to terminate the pact if Mexico and Canada will not agree to changes.
US negotiators opened a new front over the weekend with a proposal that Canada dismantle its system of protections for the dairy and poultry sectors, a move that Ottawa will reject, a source briefed on the matter said on Monday.
The Trump administration has also set out proposals that could impose fresh restrictions on long-haul trucking from Mexico, according to a person familiar with the matter. That too is likely to meet stiff resistance, Mexican officials say.
US opposition to Nafta's dispute resolution mechanisms, plans to restrict outside access to government contracts and attacks on Canadian dairy and softwood lumber producers are all causing friction behind the scenes, officials say.
In public, Mexican and Canadian officials have played up progress in areas of greater consensus such as telecommunications, financial services and digital trade, saying the initial schedule of seven rounds of talks through December will be met.
Canadian and Mexican officials are loosely allied with US industry, farm and services lobbying groups that oppose the Trump proposals and are stepping up their efforts to persuade administration officials to ease them.