(Bloomberg) -- The Trump administration and its Nafta partners are stepping up efforts to reach a tentative deal in the coming days as the U.S. prepares for potentially rocky discussions with China.
U.S. Trade Representative Robert Lighthizer was expected to meet again Thursday with Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo in an effort to reach an agreement. The ministers met Tuesday and Wednesday in Washington, and Freeland says they’ve been making progress on some of the most contentious issues, including content rules for cars.
Negotiators are plowing ahead to try and reach a deal by May 1, which is also the day temporary exemptions for U.S. steel and aluminum tariffs on imports from Canada and Mexico are due to expire, according to three people familiar with the talks who declined to be identified. Lighthizer will join Treasury Secretary Steven Mnuchin on a trip to China that’s expected next week for discussions on how to resolve a simmering trade dispute.
A quick deal over Nafta is still far from certain and major differences remain on several tough issues, according to the three people. When asked by reporters outside the USTR office in Washington on Thursday if a deal is possible in coming days, Lighthizer declined to comment.
President Donald Trump said Tuesday that the talks are “moving along.” “I could make a deal very quickly, but I’m not sure that’s in the best interest of the United States. We’ll see what happens, but we’re doing very well,” he said.
Agreement Hopes
Still, all three countries have reason to hope for an agreement soon. Canada and Mexico were both temporarily excluded from recent U.S. tariffs on steel and aluminum, with the Trump administration linking permanent relief to the successful renegotiation of Nafta.
Negotiators could also be hurrying for a Nafta deal before Lighthizer’s attention shifts to major trade and economic negotiations with China. White House economic adviser Larry Kudlow, who will join the delegation, said on Thursday that the administration will push China to address a wide range of trade irritants during the visit.
A Nafta deal would remove the uncertainty over the regional economy, in particular in Mexico, and soothe the concerns of business leaders worried that the collapse of the trade deal could shake up their supply chains.
Tentative Details
However, it’s not clear what the details of a tentative deal would include, or whether it would ever come into force. Time is running out for the U.S. to get a deal through Congress before midterm elections in November, while Mexico says it’s seeking a comprehensive new agreement that updates the 24-year-old pact.
Wide differences remain on some of the toughest issues, such as tightening up the rules of origin for cars and their components. The potential change is designed to boost American manufacturing but could upend existing supply chains.
Negotiators have also finished work on the telecommunications chapter, two people familiar with the talks said last week, asking not to be identified discussing private negotiations.
Auto Rules
Canada’s Freeland said Tuesday’s talks focused on automotive rules of origin -- a crucial sticking point, which she sees as the linchpin to a deal -- and noted that negotiators have been having constructive talks on the subject for some time, moved ahead in part due to some creative thinking put forward by the U.S. side last month.
Conceding that “there are other issues that still need to be resolved,” she maintained that “we think a win-win-win agreement is possible.” She regularly says that Canada will take as much as time as needed to get the right deal.
Guajardo said this month he sees an 80 percent chance of an agreement by the first week of May. Negotiators are also rushing for a deal as Mexico approaches elections on July 1. Mexican left-wing presidential candidate Andres Manuel Lopez Obrador, who has stoked investor concern with talk of canceling an airport and slowing an oil-industry opening, has consistently led in polls.
This week’s talks are set to cover the most ground since the final official negotiating round in Mexico City in early March, according to a preliminary agenda obtained by Bloomberg. Topics include automotive rules, agriculture, and legal and institutional matters such as dispute settlement mechanisms.
