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NAFTA: A concise update

Here's a summary of where the NAFTA talks stand after a week-long round in Montreal. The round officially concludes Monday with meetings between the political ministers leading the negotiations for Canada, Mexico and the U.S.

Chapters: A chapter on anti-corruption measures was concluded in Montreal. Officials from one country say chapters on telecommunications and digital trade are also more than 90 per cent done.

Autos: The countries have begun a real dialogue. Previous rounds saw acrimony over a U.S. demand that 85 per cent of a car's parts be North American — a major increase from the current 62.5 per cent requirement — and 50 per cent be American to avoid a tariff. Some in the auto sector called that idea so unworkable it would induce companies to move to Asia and simply pay the import tariff. At this round, Canada proposed a major overhaul: include the value of intellectual property in the calculation, instead of just parts, thereby inflating U.S. numbers while being less disruptive to the industry. The countries are now analyzing how such formulas could work.

Chapter 11: The Americans want it to be voluntary for countries to participate in the investor-state system, which allows companies to sue countries for discriminatory treatment. The Canadians and Mexicans worked out a proposal on Chapter 11. Their idea would essentially sideline the Americans, creating a new investor-state system that applies only to them. Under the Canadian proposal, backed by Mexico, the U.S. would be prevented from participating in or developing the rules of the new system: "We basically said to them, 'If you want to opt out that's fine, you're gone,''' one non-American said.

Sunset clause: The U.S. has proposed a clause that would automatically terminate NAFTA every five years, unless renewed by all three countries. The other countries called that unworkable, and a constant chill on investment, akin to placing an automatic-divorce clause in a marriage license. The Canadians offered new ideas at this round for how the review clause might work. One suggestion is for NAFTA's central body, the Free Trade Commission, to produce regular updates on how the agreement is working.

Dairy: The U.S. wants to end, within a decade, Canada's supply-management system, which limits imports on milk, cheese and poultry, and sets minimum prices. The U.S. also wants to end a special program, known as Class 7, which lets Canadian producers sell certain cheese-making proteins at lower worldwide prices, squeezing out some imports from Americans who have an excess supply. Sources say Canada has not made any counter-offers in Montreal.

Buy American: The U.S. wants limits on how many public contracts can be won by its free-trade neighbours. In October, it proposed limiting Canada and Mexico to one dollar of contracts for every dollar in contracts granted by Canada and Mexico to American companies. Sources say there was no major engagement on this at the Montreal round.

What's next: Future talks are slated for late February in Mexico, then for Washington a month later. U.S. President Donald Trump has a decision to make by about March: start cancelling NAFTA, keep negotiating, or pause until the fall. The new engagement at this round has some insiders hoping he might avoid cancelling the deal. 



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