NAFTA Update - Round 5 Complete

The fifth round of NAFTA negotiations recently wrapped up in Mexico City and the main headline out of this round of negotiations seems to be “no significant progress”.  This means that while there was some progress made, it appears to be mostly around technical issues and regulatory practices, and that on hot button issues like the 5-year sunset clause and rules of origin targets for the auto industry the negotiation teams did not get any closer to agreement.  Issues about dairy seem to have faded from the spotlight for now.  In general, the mood of the fifth round of negotiation seems to be hope for the best, but don’t necessarily expect a great outcome, or perhaps even an agreement.

Given that the most recent round did not seem particularly promising, many commentators have begun to speculate that perhaps the US will begin one of the technical pathways for withdrawal.  This involves a six month notification period, advising the other participants that one party intends to withdraw.  (This existing withdrawal mechanism is also part of the reason why the sunset clause seems unnecessary.)  If any one country chooses to withdraw, the two remaining countries are still bound by the NAFTA terms.  Essentially, if the US withdraws, Mexico and Canada can still trade on NAFTA terms and would have to decide how to proceed with negotiating trade relations with the United States.

At this point it would be premature to speculate on the possibility of bilateral trade relations with the United States.  However, if we get to that point, it seems clear that there would be significantly different priorities, proposals and views on negotiation. 

For now, we will wait to see what the next round of talks brings.  Round six of the NAFTA negotiations will take place in Montreal from January 23-28.