STOPS AND STARTS: TALKS TO UPDATE NAFTA ARE CHUGGING ALONG / THE ECONOMIST

Stops and starts

Talks to update NAFTA are chugging along

The outlines of a revamped deal appear close to being settled




AUGUST is normally a sleepy month in Washington, DC. Not this year, especially for politicians and lawyers (and politicians’ lawyers). For trade negotiators, too, life is busier than ever. Talks to revamp the North American Free-Trade Agreement (NAFTA) are in full swing. As The Economist went to press, Mexican and American delegations were still haggling furiously, chiefly over new rules covering trade in cars. But a breakthrough looked possible.

Under NAFTA, cars from Mexico and Canada can be imported into America tariff-free as long as they meet criteria set out in the pact, known as rules of origin. By tweaking these rules, negotiators can shape supply chains.

The current agreement requires, for example, at least 62.5% of a car to come from within the region, which nudges carmakers towards North American parts. This stage of the NAFTA talks has centred on just how much more onerous the revised deal’s conditions should be. If the negotiators press too hard, they risk losing influence altogether as carmakers opt to ignore the new deal in favour of paying non-NAFTA tariffs.

As of August 22nd, the outline of the new rules had largely been settled. NAFTA-compliant cars will have to contain more North American content, made with a minimum amount of North American steel and aluminium. Some part of each car will also have to be built by workers earning a minimum wage. If a company meets two of the three criteria, the third will be relaxed. Finer details, and the speed of implementation, were still to be hashed out.




Convergence on cars would represent serious progress. It may even pave the way for a trilateral agreement in principle over the coming weeks. (A detailed final deal will take longer.) Robert Lighthizer, the United States Trade Representative, has floated a date of September 3rd, “if everybody wants to get it done”.

That they do. Mexico’s president, Enrique Peña Neto, leaves office on November 30th. Both he and his successor want Mr Peña to be the one to sign. The Canadians just want to end the uncertainty. Mr Trump’s Republican party could use a win ahead of November’s mid-term elections. But thorny issues remain unresolved, notably the American proposal for the deal to expire every five years. There is still work to be done.