The main stumbling block involves a dispute over determining which automobiles are given duty-free treatment under the agreement, according to five industry and U.S. government sources.
After almost nine months of negotiations, the United States and its trading partners, Canada and Mexico, remain far apart on a host of contentious issues, including U.S. demands that the treaty must be renewed every five years.
Two weeks ago, White House officials were optimistic about prospects for a breakthrough in the talks, a senior administration official said. While U.S. officials have not abandoned hope, they acknowledge that the odds of quickly reaching a deal that fulfills President Trump’s campaign promise to return lost manufacturing jobs to the United States are growing longer, the official added.
“The moment of truth is upon us,” said Eric Miller, president of Rideau Potomac Strategy Group, a political advisory firm.
Missing next week’s deadline could have significant consequences, given the political calendars in both the United States and Mexico. Depending on what happens in the next 10 days, Trump could opt to pause the negotiations, claim a partial agreement or even withdraw from the existing accord, though that appears unlikely.
The president’s authority to negotiate trade deals that Congress must approve or reject without amendment expires July 1, coincidentally the date of Mexico’s presidential election. U.S. officials say that May 18 represents the deadline for securing congressional approval under his existing authority this year, given the various timelines specified in the legislation. (Other trade experts say that date could slip to later in the month if Congress was willing to delay its Christmas recess for the North American Free Trade Agreement.)
The front-runner in Mexico’s July 1 presidential election is leftist Andrés Manuel López Obrador, who could prove a tougher negotiating partner if the negotiations continue past this month. And Democrats appear to be well-positioned to recapture the House of Representatives, complicating prospects for winning congressional assent to the new deal.
There has been talk that the administration might try to salvage the talks with a high-risk strategy involving withdrawing from the existing agreement and presenting Congress with a choice between no deal and a partial “agreement-in-principle.”
But several influential members of Congress have warned the president not to gamble.
House Republican leaders also have made clear to the White House that they need to see an agreement on paper before they will vote on renewing the president’s trade-negotiating authority, a person familiar with the exchange said.
The United States wants 75 percent of each automobile given duty-free treatment under the agreement to consist of North American parts, up from the current 62.5 percent. The U.S. proposal would also require that 40 percent of the work making passenger cars be performed by workers making an hourly wage of at least $16 — far above Mexican factory workers’ average pay.
“If Mexico agrees to this, Mexico is agreeing to a smaller auto industry,” Miller said.
Mexico countered the U.S. plan on Tuesday, proposing a 70 percent North American content requirement, rejecting the U.S. wage figure and suggesting a 10-year phase-in period for the new rules, rather than the four years eyed by the Americans.
The lack of progress on a new NAFTA comes as the Trump administration is increasingly preoccupied with a growing trade dispute with China.
Trump has said he will decide by May 12 whether to pull out of the accord and unilaterally reimpose U.S. sanctions on Tehran. It’s unclear how quickly he would apply sanctions, however, which could buy time for further negotiations.
Trump and other critics say the accord is deficient because it lets some of the nuclear restrictions on Iran expire overtime. They also complain that the nuclear negotiations did not address Iran’s ballistic missile program or its support for militant groups elsewhere in the Middle East.
Merkel concurred that Iran has inserted itself in its neighbors’ crises with support for Hezbollah in Lebanon and for Syrian President Bashar Assad’s forces against rebel fighters, some of them allied with the U.S.
But she noted Iran had permitted frequent inspections by U.N. monitors under the nuclear accord. The critics argue that the inspectors do not have access to Iranian military bases and facilities.