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NAFTA Round 3 in Ottawa

Canada and Mexico have said they both will pull out of NAFTA if Chapter 19 is eliminated
By The News · 22 of September 2017 09:09:56
U.S. Trade Representative Robert Lighthizer (L) shakes hands with Canadian Foreign Affairs Minister Chrystia Freeland, accompanied by Mexico's Secretary of Economy Ildefonso Guajardo Villarreal, after they spoke at a news conference, Wednesday, Aug. 16, 2017, at the start of NAFTA renegotiations in Washington, U.S. Trade Representative Robert Lighthizer (L) shakes hands with Canadian Foreign Affairs Minister Chrystia Freeland, accompanied by Mexico's Secretary of Economy Ildefonso Guajardo Villarreal, after they spoke at a news conference, Wednesday, Aug. 16, 2017, at the start of NAFTA renegotiations in Washington. (AP Photo/Jacquelyn Martin), photo: AP/Jacquelyn Martin

Round three of the North American Free Trade Agreement (NAFTA) revamping will start Saturday Sept. 23 in Ottawa.

As in the two previous rounds, the agenda of the discussions at hand remains pretty much “secret” due to several reasons. The main one is that in many of the topic discussions are not definite and proposals are being tossed around. The idea that the renegotiation is “in progress” will continue as consultations are underway with the congresses of the United States and Mexico and Canada’s Parliament, who will ultimately approve the final draft of the revamped document.

But surely some issues can’t just be swept under the carpet. A top one on the agenda is agribusiness in which the farmers of the three NAFTA participating nations have benefited greatly and indeed things are happening.

A highly meaningful one is the warning shot fired by President Enrique Peña Nieto recently by signing an agreement with Argentina and Brazil toppling all tariffs on the imports of grain, particularly yellow corn. It may have been a salvo shot, but it sent a clear message to the U.S. grain producers that if Donald Trump keeps his promise of doing away with NAFTA should he not like the outcome of renegotiations, there are alternative suppliers ready to replace them. Mexico has an ace up its sleeve as a highly profitable grain importer. Mexico buys $17.5 billion in farm products from the United States alone.

In fact, among all those involved in agribusiness in the three nations, the consensus is that it would be a gross mistake eliminating NAFTA, as indeed there have been benefits and humongous growth for them all.

During the 23 years NAFTA has been in existence, agribusiness has grown at an annual average of nine percent in Mexico alone, notwithstanding the nation’s poor infrastructure that slows down transportation. According to experts, costs produce an average of 30 percent of the produce and product value amounting to circa $12 billion a year.

Another hot issue that probably Canada will bring to the negotiating table is that of the existing wage disparity among participants. Clearly the target in this case will be low wages in Mexico but everything is interpreted according to the eye of the beholder, and for Mexican entrepreneurs what Canadian labor unions see as “low” they consider “competitive.”

Mexico Economy Secretary has also stated that this will not be a negotiable issue, as the price of labor is up to each nation’s government and allowing other nations to meddle with labor wages is “an internal affair” of each participant. Nevertheless, be sure the issue will be brought up.

On the U.S. side, U.S. Trade Representative Robert Lighthizer has yet to present his proposal to do away with Chapter 19 which allows for an independent panel to settle all tariffs and countervailing duty disputes. Up front Canada and Mexico have said they both will pull out of NAFTA if Chapter 19 is eliminated.

The good news is that in the Second Round held in Mexico City — or at least so said the joint statement issued last Sept. 5 by Canada Foreign Affairs Minister Chrystia Freeland, Lighthizer and Guajardo — the tactic they are following is “building on the progress” made in the previous round.

“Important progress was achieved in many disciplines and the parties expect more in the coming weeks. The three countries will continue their respective processes of internal consultation in preparation for the Third Round of negotiations, which will take place in Ottawa, Canada, from September 23-27,” reads the communiqué.

The main issue is that the renegotiations continue and the United States is participating. And like always, Canada and Mexico favor the continuity of NAFTA. But as usual, the main problem between Mexico and Canada is the guy in between.

Let’s hope for the best.