After Trump threats, ministers working at ‘warp speed’ claim NAFTA progress

MEXICO CITY (Reuters) – Trade Ministers from Canada, Mexico and the United States said on Tuesday they made progress in talks to update the NAFTA trade pact, a relief after a barrage of threats by U.S. President Donald Trump, although the officials did not tackle the hardest issues.

A trilateral statement issued by U.S. Trade Representative Robert Lighthizer, Canadian Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo sought to quell concerns about the U.S. commitment to the North American Free Trade Agreement in light of Trump’s recent warnings he could terminate it.

They announced a third round of talks in Ottawa for Sept 23-27. Guajardo said the more complex issues such as Mexican wages, local content rules and the U.S. trade deficit would be addressed in those sessions.

Lighthizer said no chapter of the pact was completely wrapped up, but progress was made in consolidating language about small businesses, digital trade, the environment and services, among other things.

“We feel like we’ve done as much as you can hope to do in two rounds,” he said. “This is kind of warp speed we are working at.”

The three ministers restated their goal of reaching a new NAFTA deal by the end of the year to avoid conflicts with 2018 election cycles in Mexico and the United States. Moving quickly to consolidate texts is paramount if they are to achieve that goal.

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It took five years and more than 20 negotiating rounds to negotiate the since-canceled 12-country Trans-Pacific Partnership trade deal.

Freeland gave the most upbeat message, praising the working relationship between the three countries and saying they had established a good foundation for the future rounds of talks.

Juan Pablo Castañon, head of Mexico’s influential CCE business lobby group, said negotiators had made headway on areas such as energy, telecommunications and investment, as well as improving conditions for small-and-medium-sized firms and streamlining customs procedures.

“Important progress was achieved in many disciplines and the parties expect more in the coming weeks,” the trade ministers said.

The NAFTA negotiators, however, did not make progress on difficult subjects such as rules of origin, labor standards and changes to dispute-resolution mechanisms. The United States did not make specific proposals on these issues in the five-day round in Mexico, Guajardo and Lighthizer said.

One area of concern identified by lobbyists is Lighthizer’s stated objective of incorporating a U.S.-specific automotive content requirement, which they say could prove a major obstacle that delays the talks.

Another problem is whether Trump will find the final outcome acceptable enough to stay in NAFTA. Trump used the agreement as a punching bag during his election campaign last year and has repeatedly threatened to pull out of it, even after the modernization talks began on Aug. 16.

Lighthizer said he was confident he could negotiate a deal acceptable to the U.S. president and that his goal was to negotiate a new deal, not pull out of NAFTA.

Lighthizer has adhered to Trump’s line that NAFTA must be rewritten to reduce U.S. trade deficits of about $64 billion with Mexico and $11 billion with Canada and started the talks with strong demands for major changes.

In his closing statement, Lighthizer said NAFTA must address the harm done to those in manufacturing industries and benefit all Americans.

NAFTA, first implemented in 1994, eliminates most tariffs on trade between the United States, Canada and Mexico.

Critics say it has drawn jobs from the United States and Canada to Mexico, where workers are paid far lower wages. Supporters say it has created U.S. jobs and that the loss of manufacturing from the United States has more to do with China than Mexico.

If NAFTA collapses, costs could rise for hundreds of billions of dollars in trade as tariffs are brought back.

Free-trade lobby groups say consumers would be saddled with higher prices and less availability of products ranging from avocados and berries to heavy trucks.

Additional reporting by Ana Isabel Martinez, Dave Graham and Adriana Barrera; Editing by Dan Grebler

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North Korea’s Sixth Missile Test: An Update from the Weekend

Early this morning, a North Korean diplomat described his country’s missile tests as “gift package[s],” warning the U.S. to expect more if the Trump administration continues with its “reckless provocations.”

“The recent self-defense measures by my country DPRK are gift package addressed to none other than the U.S.,” said North Korea’s ambassador to Switzerland, Han Tae Song.

Han is referring to North Korea’s hydrogen-bomb test, conducted on Sunday. Early this morning, a report published by Asia Business Daily claimed North Korea was spotted moving an ICBM, supposedly in preparation for another missile test.

After leaving church in Washington, D.C., Sunday morning, President Trump told reporters that the White House has not ruled out a military response. Defense Secretary James Mattis said the same, warning of “a massive military response” to a threat against the U.S. or its allies.

Yesterday, the U.S. began pressuring the U.N. to levy sanctions against the Kim regime. Senior Trump officials have said that cutting off oil and other fuels to North Korea is the “last best chance” to end North Korean aggression diplomatically. Russian president Vladimir Putin, however, called sanctions “useless,” again breaking with the Trump administration. Putin claimed North Korea believes Western aggression is threatening its existence, resulting in nuclear stockpiles to prevent a Saddam Hussein-style overthrow.

In a tweet, Trump suggested the U.S. has been exploring implementing sanctions against any country engaging in trade with or exporting to North Korea:

The United States is considering, in addition to other options, stopping all trade with any country doing business with North Korea.

— Donald J. Trump (@realDonaldTrump) September 3, 2017

Experts, however, have questioned whether the U.S. economy can survive such a decision: Trade with China, North Korea’s most important ally and trading partner, accounts for $650 billion of the U.S. economy. Last year, North Korean trade with China totaled $3 billion. As a comparison, the U.S. exported $11 billion in corn alone in 2016.

The U.S. could apply economic pressure to China short of suspending all trade, as the New York Times reports:

[The U.S.] could more broadly target Chinese companies that do business in North Korea. But that could prove ineffective against a Chinese government that worries that trade limits could worsen conditions in the North, making the situation there even more unpredictable.

“If it really started to send their economy into a tailspin, they could lash out in a more extreme way,” said John Delury, a professor at Yonsei University in Seoul.

North Korea’s test of a nuclear weapon on Sunday prompted White House officials to threaten new sanctions targeting businesses and countries that have continued to do business with Pyongyang. That prompted criticism from China on Monday, which called the idea of trade measures against it “unacceptable.”

Some have speculated that this weekend’s missile test may escalate tensions with China. Chinese president Xi Jinping left North Korean aggression out of his speech at the BRICS — a group of five emerging national economies (Brazil, Russia, India, China, and South Africa) — summit yesterday, but the group did issue a statement expressing concern and imploring the situation’s peaceful resolve.

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