BUSINESS

TRADING POSITIONS

TRAVEL-WEARY TRADE OFFICIALS ARE FIGHTING THE PHONES AND FATIGUE IN PURSUIT OF A NAFTA

BARBARA WICKENS August 10 1992
BUSINESS

TRADING POSITIONS

TRAVEL-WEARY TRADE OFFICIALS ARE FIGHTING THE PHONES AND FATIGUE IN PURSUIT OF A NAFTA

BARBARA WICKENS August 10 1992

TRADING POSITIONS

BUSINESS

TRAVEL-WEARY TRADE OFFICIALS ARE FIGHTING THE PHONES AND FATIGUE IN PURSUIT OF A NAFTA

On the rare occasions that they appear in public, the Canadian, American and Mexican officials negotiating the terms of a North American Free Trade Agreement (NAFTA) appear cool and confident. But behind the scenes, many acknowledge that their frenzied lives include sleepless nights, meals on the run—and even washing their clothing in hotel-room sinks. Last week, after working through a sixth consecutive weekend, many took an overnight flight from Mexico City to Washington, where talks resumed the next morning. There, new logistical problems awaited them. Meetings were scheduled for numerous locations

throughout the capital, making it difficult for the 80-member Canadian team to stay in close communication. Some sessions took place in the Winder Building, which served as campaign headquarters for the Union Army during the Civil War. The Winder has few meeting rooms, which forced negotiators to spend hours waiting in corridors until they were needed. “You have to have all your wits even when you are very tired,” said one senior Canadian official who asked not to be named. “Morale is good, but I think we’ll all be glad when it’s over.” The negotiations had then lasted 13 months. President George Bush, intent on strengthening his image as a world leader and improving

his plummeting popularity at home, has said that he wants to sign an agreement with Prime Minister Brian ! Mulroney and Mexican President Carlos Salinas de Gortari before the Nov. 3 presidential election; U.S. Trade Representative Carla Hills had once aimed to reach agreement by the beginning of August. At the end of last week, by then meeting in the more salubrious Watergate Hotel beside the Potomac River, it was still uncertain that trade officials could meet that deadline. Although chief negotiators reported progress in some key areas, including agriculture and automobiles, several contentious issues remained unresolved. After waiting on standby in their home countries throughout last week, Canadian Trade Minister Michael Wilson and Mexican Commerce Secretary Jaime Serra Puche flew to Washington at week’s end, but postponed a Saturday-night dinner meeting with Hills as their officials haggled over details.

To make the complex trilateral talks more manageable, negotiators from the three countries sometimes hold bilateral talks instead. That strategy bore fruit last week when U.S. and Mexican negotiators reached agreements in principle on trade in cars and sugar. The tentative auto agreement would phase out, over 11 years, Mexico’s highly protectionist laws that require U.S. automakers in Mexico to export $2.30 worth of vehicles for each $1.15 they import.

In return, the United States agreed that, also over 11 years, Mexico could gradually phase out a requirement that cars made there must contain Mexican-made parts representing 36 per cent of the vehicle’s value. Norman Clark, president of the Toronto-based Motor Vehicle Manufacturers Association, which represents the Big Three North American automakers in Canada, said that any deal made with U.S. automakers should also automatically apply to Canadian manufacturers.

But while Canada could benefit when Mexico eases its tough restrictions on auto and autoparts imports, Clark said that the highly controversial issue of the so-called rules of origin must still be resolved. Under the 1989 Canada-U.S. Free Trade Agreement (FTA), vehicles have to contain 50-per-cent North American content to qualify for duty-free access to the United States. U.S. companies, however, want to raise the domestic-content level to at least 60 per cent to prevent Asian automakers from opening assembly plants in Canada or Mexico and simply putting cars together with overseas parts. Indeed, Canada and the United States are already embroiled in several disputes over Canadian cars shipped across the border.

That is because the FTA only lists broad categories of expenses that qualify as North American costs of production; the rules are

subject to interpretation by customs officials in each country. Clark said that to avoid similar problems in the future, NAFTA language on rules of origin must be much more specific. He added: “We need clear rules, understood by all, and a method for anticipating most misunderstandings, such as a trilateral dispute resolution panel.”

Still, federal New Democratic Party Leader Audrey McLaughlin said last week that a leaked portion of the proposed NAFTA agreement shows that Canada has failed to gain significant improvements in resolving free trade disputes. She added: “The whole reason we were given for Canada participating in this was to get a better deal.”

Under another tentative bilateral agreement reached last week, Mexico will be able to gradually increase its sugar exports to the United States. Sandra Marsden, president of the Toronto-based Canadian Sugar Institute, said that it was not immediately clear what impact the agreement would have on the Canadian refining industry. But any increased U.S. quota for Mexico would likely lead to a reduction in quotas that the agriculture department sets for other sugar-producing nations.

Despite the occasional glitches in procedure during the protracted negotiations, most participants say that previous free trade talks between Canada and the U.S. provided good practice. For one thing, officials say that they are also benefiting from better technology than they had during the FTA talks. Now, most negotiators are working with portable laptop computers. Instead of exchanging piles of background papers, officials are able to trade computer diskettes. And in general, information is now available more freely and widely to interested parties. Spokesmen from industries with a keen interest in the talks said that the Canadian negotiators have kept them informed of every major development. Said Clark: “With the FTA, there was too much secrecy. This time, the process has been very good.”

Jack Kivenko, president of the Canadian Apparel Manufacturers’ Institute, agrees that the Canadian negotiators have improved their communications with industry. But the end result could still be disappointing for the beleaguered Canadian clothing industry, said Kivenko, who is also president of Jack Spratt Manufacturing Inc., a Montreal-based jeans and work-wear maker. U.S. officials are pressing for new rules that would restrict the foreign fabrics used in Canadian-made clothing designed for export to the United States or Mexico. Added Kivenko: “Unless the Canadian negotiators find a crowbar to move the Americans off this point, we could be stuck with it.” Meanwhile, for the travel-weary negotiators, balancing all the demands placed on them is the unenviable task that they have to perform before they can escape from the quick-march orders that are ruling their lives.

BARBARA WICKENS

LUCY CONGER

WILLIAM LOWTHER

Washington