Round 1: Canada stakes out ground as historic NAFTA rewrite begins

Round 1: Canada stakes out ground as historic NAFTA rewrite begins
From CBC - August 13, 2017

After months of heated rhetoric and diplomatic groundwork, talks to overhaul the North American Free Trade Agreement willformally begin this week with Canada pushing for more stringent labour and environmental standards in the deal.

Canada's top diplomat, Foreign Affairs MinisterChrystiaFreeland, will travel to Washington Tuesday where the first round of formal negotiations is set to take place.

Freelandwill sit down to break bread with her U.S. and Mexican counterparts before officials get down to brass tacks in a bid to modernize the 25-year-old trade pact Wednesday.

Each side will begin to set out what it wants to see in the rewrite; in Canada's case that will include stronger environmental and labour provisions and a formal mechanism to settle thorny trade disputes.

Some interest groupsare hoping for a speedy process to keep investors calm, but some international trade expertswarn that business shouldbrace for a drawn-out series of discussions.

JeffreySchott, a trade policy analyst and senior fellow at the Washington-based Peterson Institute for International Economics, said while the goal is for expeditious rounds, the administration of U.S. President Donald Trump has laid out objectivesthat could lead to an impasse.

Those include proposed changes to government procurement,rules of origin and a goal ofeliminating the deficit.

Resistance to U.S. 'overtures'

"Those are areas where they will undercut the competitiveness of North America producers and workers and there will be resistance from Canada and Mexico to the U.S.overtures," he said.

Schottexpects talks will spill over to next year, and will thenbe constrained by next year's Mexican presidential election, followed byU.S. mid-term congressional elections. He predicted talks will continue on into 2019, when there will be other elections, including a federal election in Canada.

"I see a low probability of an agreement on a modernizedNAFTAin the near term," he told CBC News in an interview. "I think negotiators will go through what can be done that is helpful andreject efforts to try and make revisions that are counterproductive.But finding thediscreet window when the political stars align in all three countries is going to be difficult, and is unlikely to take place over thenext 18 months."

A potential 'deal breaker'

Schottexpects quick, constructiveprogress in areas like digital trade, but saidchanges to labour provisions could spark muchfriction. While the U.S. has far greater issueswith Mexico, Trump's aim to shredChapter 19 ofNAFTA, which includes provisions for a dispute resolution mechanism, could prove to be a flashpointwith Canada.

Speaking to reporters in Edmonton on Friday,Freelandcalled a dispute settlement resolution "essential" to any trade agreement.

"In the same way that good fences make good neighbours, a good dispute mechanism makes good trading partners," she said. "Canadaunderstandsthe importance of independent, objective, transparent dispute settlement withinNAFTA, and it's somethingwe will be talking about with our partners and explain it to them."

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