By William Mauldin and Paul Vieira
OTTAWA -- The Trump administration plans to take aim at the
areas of the North American Free Trade Agreement it finds most
objectionable as negotiators for the U.S., Canada and Mexico gather
Saturday in Ottawa, setting the stage for a contentious third round
of talks.
"At this point in the negotiations, more challenging issues will
start taking center stage, and the U.S. remains committed to
advancing and negotiating substantial changes to Nafta for an
agreement that benefits all Americans," John Melle, the U.S. chief
Nafta negotiator, said in a statement to The Wall Street
Journal.
Mr. Melle didn't elaborate.
"We are all putting text on the table at this point," Steve
Verheul, Canada's chief Nafta negotiator, told reporters Saturday
as he entered the negotiating rooms, adding he expects talks to
intensify over the next five days.
But according to people familiar with the Trump administration's
Nafta strategy, the U.S. moves at the Ottawa round seek to bring in
the "America First" theme championed by Mr. Trump, including by
rolling back international arbitration and other forms of dispute
resolution enshrined in the current version of the trade pact. The
Trump administration has expressed strong reservations about such
binding arbitration decisions, seeing them as an erosion of
national sovereignty.
But such proposals aren't likely to face opposition from only
Canada and Mexico -- they also are causing an uproar at home in the
U.S. business community and among members of Congress in both
parties, according to the people familiar with the matter.
U.S. Trade Representative Robert Lighthizer this week backed a
preference for government-to-government consultations and
negotiations to resolve disputes rather than binding solutions
imposed by an arbitrator.
As for Nafta talks in general, he said they were "moving at warp
speed but we don't know whether we're getting to a conclusion."
The U.S. has said it wants to do away with one of these dispute
systems, known as Chapter 19, in which panels of trade experts
resolve conflicts over tariffs.
Any move to abolish them is bound to face stiff opposition,
especially from Canada. That country's exporters see the
dispute-resolution panels as an essential safeguard against U.S.
protectionist whims in areas such as softwood lumber.
Pressure this week from Capitol Hill and the business community
means that these changes are unlikely to be introduced in a formal
written proposal this round, but are set to be informally discussed
with senior Canadian and Mexican officials, according to people
briefed on the U.S. strategy.
In recent days, the U.S. has floated proposals in Washington
that would overhaul Nafta's Chapter 20, too, which sets out the
rules for resolving general disputes among the three countries,
according to two people familiar with the U.S. position.
In addition, they said the office of Mr. Lighthizer has
discussed sweeping changes to the investor-state dispute-settlement
system, which allows investors from one country to challenge
governments in another country before an arbitration board. The
U.S. has been working on a proposal that would allow it to withdraw
from the system.
But the moves away from arbitration panels are creating alarm
among U.S. companies that are major international investors,
including those in the energy industry, because they say the panels
protect their interests overseas. Two people familiar with
briefings between the Trump administration and congressional
staffers said the discussions were tense and involved what one of
the people called a "crazy" approach to dispute settlement. Other
backers of traditional U.S. trade policy agreed with that
description.
"Any talk about eliminating investor-state dispute settlement
will have a harmful impact," said Cal Dooley, president of the
American Chemistry Council, in a call Friday with business groups
concerned about the potential loss of international investor
arbitration.
Still, the administration's approach has support from labor and
other left-leaning organizations in the U.S. that don't want trade
agreements to give American businesses what they see as
international protections.
Also unclear is the fate this round of other controversial
measures the Trump administration has floated, such as increasing
the amount of U.S. content in North American-produced cars;
demanding a "sunset clause" that could reopen Nafta to
renegotiations every five years; and measures aimed at narrowing
the U.S. trade deficit with Mexico.
On the prickly issue of auto-sector-rules, Mr. Verheul told
reporters he "didn't expect to see anything radically new at this
point."
Canada and Mexico officials have grown frustrated over the lack
of detail from the U.S. on matters expected to be flashpoints
during the talks.
"We still aren't very sure about what the real ask is from the
U.S.," said Jayson Myers, a Guelph, Ontario, trade consultant and
former chief lobbyist for Canadian manufacturers. "There's a lot of
political rhetoric going on, but when it comes to negotiations,
there's not a lot to work on."
Mexico Economy Minister Ildefonso Guajardo warned this week the
success of the Nafta renegotiations hinge on addressing "elephants
in the room." He told a Mexico City audience that seven Nafta
chapters are close to completion, with some of them likely done in
the Ottawa round.
However, echoing the sentiments of U.S. negotiators ahead of
this week's talks, he said work remained on another 13 chapters
"that represent some degree of difficulty."
--Jacob M. Schlesinger contributed to this article.
Write to William Mauldin at william.mauldin@wsj.com and Paul
Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
September 23, 2017 11:14 ET (15:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.