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Unrealistic Demands By Trump May Cause NAFTA Negotiations To Collapse

Though some progress has been made, it remains to be seen if President Trump will compromise enough to seal a deal.

The Trump administration is hoping to seal a preliminary deal on the North American Free Trade Agreement this month, though it remains unclear how flexible U.S. negotiators will be in relaxing demands on key provisions.

President Donald Trump has spent much time railing against the current NAFTA rules, but if he wants to move this trade agreement off the table to make room for a looming trade war with China, Trump might have to settle for a deal that is quite similar to the one already in place.

“Unless the United States is quite a bit more flexible, I don’t see how it’s possible to have a quick agreement, even just an agreement in principle,” said Antonio Ortiz-Mena, a senior vice president at the Albright Stonebridge Group and a former Mexican diplomat in the United States.

White House trade advisers are meeting with their Mexican and Canadian counterparts in Washington this week to try to hammer out areas of consensus on the most difficult issues of the talks. Robert Lighthizer, the United States trade representative, Foreign Minister Chrystia Freeland of Canada and Economy Minister Ildefonso Guajardo of Mexico were expected to kick off trilateral talks on some of the pact’s thorniest issues over dinner in Washington on Thursday night.

However, following several months of stalled talks, all sides are encouraged by recent forward movement, particularly regarding the auto industry.

The Trump administration has relaxed its demand that at least half the value of automobiles be manufactured in the United States.

Instead, it is proposing a system that would require a certain proportion of auto parts to be made by workers earning certain wages.

That proposal is likely to be more palatable to Canada and could also encourage Mexico to ultimately pay higher wages. And it could help Mr. Trump court the votes of congressional Democrats, who complain that Mexico’s low wages are the reason companies have relocated auto production from the United States.

The proposal is expected to meet resistance from Mexico, whose current wage scale would not satisfy the requirements, and is but one of numerous issues that need hammered out before a preliminary deal can be reached.

Other key areas of dispute also remain: Negotiators have so far concluded work on only six of the trade agreement’s roughly 30 chapters, and little progress has been made on contentious issues like mechanisms for settling trade disputes or rules for government purchases.

Adding a sense of urgency to negotiations are the escalating tensions around trade with China as well as the coming 2018 midterm elections.

Finalizing a NAFTA deal would free up Trump’s trade advisers to tackle the China situation, and it would also provide a welcome victory heading into election season.

Midterms also present the possibility of Republicans losing full control of Congress, which could make pushing a deal through more difficult:

For a revised Nafta to be approved by the current Republican-controlled congress, the Trump administration would probably have to finalize it before the end of May to allow time for congressional review given the House and Senate calendar.

It remains to be seen if Trump is willing to compromise on enough demands to meet these deadlines, particularly if it means agreeing to terms he previously denounced as a "travesty" and "embarrassment" -- and, perhaps most significantly, if it means he will appear a weak negotiator.

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