U.S. to Partially Unveil Key NAFTA Proposal, Talks Seen Dragging

OTTAWA (Reuters) -

U.S. trade negotiators will only partially unveil new text on modifying a key chapter on investment under NAFTA, two well-placed sources said on Sunday, underlying the slow pace of talks that are supposed to wrap up by the end of the year.

The sources, with knowledge of the effort to modernize the trilateral North American Free Trade Agreement, said the proposal would not elaborate on possible changes being weighed by the Trump administration in the Chapter 11 of NAFTA.

Trade experts say the sluggish tempo of the talks mean it is doubtful whether Canada, Mexico and the United States, meeting in Ottawa for the third of seven planned rounds, can come to a deal on schedule.

Canadian officials on Sunday said no major breakthroughs were expected in the five-day Ottawa round that started on Saturday, and highlighted what they said were uncertainties around the timetable.

U.S. President Donald Trump, who says the 1994 treaty has been a disaster, is threatening to walk away unless major changes are made.

NAFTA’s Chapter 11 allows an investor from a member country to sue a member government on the basis that it was not treated fairly. Canada, which has been targeted regularly under the chapter, says it wants reform but has not given any details.

The sources said that when the U.S. team unveiled its proposal later in the round, it would focus on eliminating barriers to investment in all sectors in the NAFTA countries, but not weigh in to possible changes to Chapter 11.

The office of the U.S. Trade Representative was not immediately available for comment

The three member nations want to seal a deal before Mexico’s presidential election campaign kicks into high gear early next year.

Canadian officials said there was little chance of major progress on the most challenging topics such as labor rules, settling investment disputes, and a U.S. demand that more of a vehicle’s components must originate from within North America to qualify for tax free status.

The officials, who declined to be identified because of the sensitivity of the situation, said negotiators would try for breakthroughs in the last four rounds.

The head of Unifor, Canada’s largest private sector union, told reporters he doubted a deal would be agreed on in time.

“There is no progress. Things are going very slowly,” said Jerry Dias of Unifor, who keeps in close touch with the negotiating team.