Mexican rush to get a deal has altered NAFTA negotiating strategy: Don Pittis

President Donald Trump's braying about NAFTA being the "worst trade deal maybe ever signed anywhere" might leave the impression that U.S. negotiators have all the cards in the current renegotiation.

But according to Canadian trade experts the real wild card is not the United States or the hostile views of its president.

Instead, an inflexible Mexican deadline has transformed the normal process for talks that began last week in Washington.

America First

And despite the "America First" rhetoric, the president's recent falling out with the U.S. business sector may actually mean that failure to get a deal by that deadline would be a further serious blow to the Trump administration. 

Public posturing by politicians in advance of any talks is an accepted part of the process, says negotiating expert Chi Carmody, sort of like boasting before a prizefight, except that voters take the place of the boxing fans.

"The rhetoric is always important for those of us at home, but I think it does cast a shadow in the negotiations and may signal where it is that the parties may be just not prepared to go," says Carmody, a Western University professor who is Canadian head of the Canada/U.S. Law Institute and has taught international business negotiations courses to lawyers.

He says the fact that Prime Minister Justin Trudeau has said in public that he would walk away from the talks rather than give up the dispute settlement mechanism, for instance, draws a line in the sand.

• Canada open to completing talks quickly

All the experts I talked to said that while there are still anti-free-trade voices coming from the U.S., including Trump appointee Peter Navarro, author of Death by China: Confronting the Dragon — A Global Call to Action, they are in a minority.

The most important players on all sides are anxious to get a deal.

NAFTA 2.0

That includes the U.S. Congress, which faces the lobbying efforts of farmers and business leaders who would be seriously damaged by failure to hammer out a NAFTA 2.0.

Andrea Bjorklund, an expert in international arbitration and commercial law, says there is plenty of room to find a deal that Canada, the U.S. and Mexico can live with. She says many of the issues on the table now were already worked out under the Trans-Pacific Partnership that Trump rejected early in his presidency.

"What you could say is that we already had a modern renegotiated NAFTA, and it was TPP," says Bjorklund, who used to work for the U.S. State Department and is now a law professor at McGill University.

But the process for reaching those mutual interests has been completely turned on its head this time, according to Meredith Lilly, the influential public policy analyst who was foreign affairs and international trade adviser to former prime minister Stephen Harper.

She says that's because of the Mexican calendar.

"I think it's something the Canadian side in particular may not fully appreciate," says Lilly, who now holds the Simon Reisman Chair at Ottawa's Carleton University. Reisman was Canada's chief negotiator for the very first Canada-U.S. free trade agreement.

The issue is that starting next year, Mexico heads into what could be a divisive general election, and the current pro-business government faces a serious left-wing challenger. 

She says that while the new Mexican president won't take office until December 2018, anti-American political posturing, including by the party currently in power, will likely begin in the new year.

Coming out hard against Trump

"The closer they get to the electoral cycle, the more likely the Mexicans are going to come out hard against Donald Trump and his administration as part of an election tactic," says Lilly. 

Due to Mexico's term limits, President Enrique Pena Nieto, who has developed a strained modus vivendi with Trump, will not have the incumbent's advantage.

"If the left-leaning populist candidate Lopez Obrador is elected there is some chance that NAFTA negotiations won't resume at all," says Lilly.

By tradition, negotiations where the parties want to come to a happy outcome begin with the easy things and work up. But because of the pressing Mexican deadline, says Lilly, things have turned around. Negotiators have opened with what are among the toughest trade issues, automobiles and rules of origin.

"Resolving the toughest issues is always going to wait until the end but the fact that they're talking about them at the beginning signals to me that the Americans realize that they could be put in a [difficult] position because of the Mexican calendar," says Lilly.

She says she objects to all the talk of walking away, and she says a lot of Canadians could be hurt if negotiations collapse.

But according to Carmody, pressure to close the deal by Christmas could be in Canada's interest.

He says Canada did not ask for this renegotiation and without it, Canada still has NAFTA with Mexico, a deal with Europe, the TPP with Japan and membership in the World Trade Organization.

If Canada doesn't get what it needs, the country could just say "Thank you very much. We tried it. 'Bye," says Carmody.

"I think that sort of situation would leave the Trump administration with a lot of egg on its face."

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