NAFTA: First round of talks over, 'great deal of negotiation' still required

By Elliot Bullman

Mexico, the US and Canada concluded their first round of negotiations toward a new continental trade agreement earlier this week with a statement that suggested major issues needed to be sorted out in the talks ahead.

A joint statement from the three countriescouldn't actually agree what to call this process: A "modernization," which implies simple changes and is the preferred term of Canada and Mexico, or "renegotiation," the word most often used in the U.S.

Their statement acknowledged that there's considerable work ahead: While a great deal of effort and negotiation will be required in the coming months, Canada, Mexico and the United States are committed to an accelerated and comprehensive negotiation process.

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Veterans of trade negotiations say this is the most ambitious schedule they've ever seen. The countries are aiming to wrap up a trade deal within a few months, before the Mexican election heats up next spring -- because otherwise talks could drag out another year, past the U.S. congressional elections, and into 2019.

The initial round was heavy on introductory sessions and schedule-setting. But it also touched substantive issues that revealed possible irritants ahead. Among the two-dozen-plus topics discussed so far were auto-parts rules, cutting edge pharmaceuticals, and labour.

On auto parts, the U.S. surprised its allies on Day 1 by hinting it might favour a Made In America-style content quota. The statement on that from U.S. trade czar Robert Lighthizer was vague and, according to sources, was not followed up by any specific numbers being tabled by the U.S. side in the initial round.

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However, the idea was swiftly opposed by Canada, Mexico and the auto industry.

On pharmaceuticals, the U.S. has also proposed a 12-year patent-style protection for cutting-edge biologics medicines, sources say. This is significantly higher than the protections in Canada and Mexico, would drive up prices, and could be an irritant if the U.S. sticks to it.

The next round will be held in Mexico City from Sept. 1-5. The countries will in the meantime consult domestic stakeholders and prepare to table more texts that will form the backbone of a new agreement. A third round will be held in Canada in late September.

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