NAFTA negotiations at tipping point

By Tim Kalinowski

Canadian Federation of Agriculture president Ron Bonnett says he wishes he had better news to share on the state of NAFTA negotiations, but higher level talks appear to have reached a strange and largely unproductive juncture.

“Would I say we are going to have a deal right now? I would not,” says Bonnett. “I would say there is a lot of details to be worked out, and some of them are the big ones. The auto sector, the sunset clause, and pharmaceuticals is a huge issue. So getting through some of those issues, I think, is going to be critical as to whether or not there is a deal.”

And the news is even worse for agriculture.

“With respect to agriculture, while there has been some work done on some technical issues, there is still a lot of issues outstanding. Nothing has been mentioned or talked about other than what the U.S. presented on supply management access. There really has been no more discussion on that.

“I know the meat industry is really seek changes to streamline the inspections going across the border. There has been very little discussion on that from what our sources are telling us. And then there is the whole issue of seasonality with horticultural crops is still outstanding.”

Seasonality was introduced as a point for discussion by U.S. negotiators, says Bonnett, but more as a potential poison pill than as any kind of serious bargaining position.

“Seasonality would allow certain regions of the United States to declare they can’t take any imports of horticultural crops because it would disturb the local market,” explains Bonnett. “There is a clause right now in NAFTA where they can do that as a nation, but they can’t do it with a region putting it in place.

“It’s really a non-starter; especially with the uncertainty it presents to the whole horticultural sector as to whether or not they would still be able to export into the States.”

Bonnett says his sources have no doubts where the focal point of obstruction in the current negotiations lies.

“The U.S. is going to have to back off from some of their positions where they are really driving everybody else into a corner. And the big uncertainty is just what the White House is going to do, because it can be so unpredictable it leaves you wondering just what kind of a deal is going ahead.”

Politics has muddied the waters of the entire negotiation process from the beginning.

“What we will have to do I think is separate some of the economic stuff from some of political rhetoric,” states Bonnett. “The NAFTA deal became a bit of a political football last election cycle,” Bonnett explains, “with some saying NAFTA was hurting American workers, which wasn’t really supported by the information. Now some who were using it as a political tool, are now having to face some of the economic realities between the three countries.”

Bonnett says it is looking increasingly unlikely a deal will get done before the end of the year if nothing is on the table by June. The U.S. Congress is ending its current session for the summer, and then there is the Mexican presidential elections, followed by the U.S. congressional election cycle heating up in the fall.

With all these political factors arrayed against a trade deal for the next several months, none of the sides can afford to look conciliatory or too willing to compromise, he says.

“There has to be some sort of a political win for all three parties, Canada, Mexico and the United States, or it is going to be very difficult to sell.”

Bonnett says the silver lining, if there is one, has to be the solidarity expressed between industry leaders on all sides of the borders, who are pressuring the three nations to make a fair trade deal.

However, Bonnett admits good will to make a deal is not sufficient unless it is followed by concrete gestures to make it happen.

“In the mean time, it leads to a certain amount of uncertainty in investment. Companies that might want to start doing some marketing and expansion into the States, and building some facilities, they go to  hold off on that investment until they hear what the rules are going to be.”

On the other hand, none of the sides wants to make a bad deal either.

“You worry about seeing something done just for the sake of the deal as opposed to making sure we (in the agriculture sector) are getting the stuff we need,” says Bonnett, who also adds, “Some people would suggest the time frame which was established with the negotiations to start with was likely unrealistic.”