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Nafta Round Closes With Talks Bogged Down by Conflict

Traveling an overpass toward the World Trade Bridge in Laredo, Tex. The United States trade representative, Robert Lighthizer, criticized what he called a lack of headway on the North American Free Trade Agreement as the latest round of talks drew to a close.Credit...Eric Gay/Associated Press

WASHINGTON — United States officials have tried in recent weeks to cool tensions over the North American Free Trade Agreement by extending the timetable for renegotiating the pact and asking top officials to sit out the current round of talks in Mexico City.

But as the fifth round of talks concluded in the Mexican capital on Tuesday, tensions were still simmering, with Canada and Mexico telling the United States that it would make little headway with its current approach and Mexico firing its first warning shot with a tough counterproposal.

Robert Lighthizer, the United States trade representative, took aim at his Canadian and Mexican counterparts on Tuesday, saying “thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result.”

Mr. Lighthizer said while some progress has been made to modernize Nafta, “I remain concerned about the lack of headway. Our teams will be meeting again next month in Washington. I hope our partners will come to the table in a serious way so we can see meaningful progress before the end of the year.”

In an indication of how far the talks have to go, Mr. Lighthizer will not meet again with his Canadian and Mexican counterparts until late January in Montreal, while lower-level negotiators will continue to hash out details in Washington next month.

During a week of meetings in Mexico City, negotiators hammered out more technical details of the sweeping trade agreement, including those that govern digital trade, telecommunications, anti-corruption, customs procedures and health and safety standards for food.

But the parties continued to clash on the most contentious issues, including mechanisms to resolve trade disputes and award government contracts, as well as so-called rules of origin, which govern the amount of a good that needs to be manufactured in North America in order to qualify for zero tariffs under Nafta.

The United States has called for raising that threshold for the automobile industry to 85 percent, up from 62.5 percent previously. And it has asked for a new requirement that half of a car be manufactured solely in the United States — a provision at odds with the wishes of American automakers, who fear it will drive up their costs and make them less competitive globally.

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Mexico’s chief negotiator, Kenneth Smith, spoke to reporters Tuesday as the fifth round of talks concluded in Mexico City. Mexico is proposing to limit American firms’ access to government contracts.Credit...Alejandro Cegarra/Bloomberg

Canadian and Mexican officials did not make specific counterproposals to these requests. Instead, they presented data showing the harm the proposition would inflict on the auto sector and pressed the United States to explain its reasoning.

That response frustrated the United States. A senior American official pushed back against the idea that the United States proposals were unworkable, saying the failure of Canada and Mexico to offer counterproposals had halted progress.

On the topic of government procurement, Mexico answered a tough American proposal with one of its own — the first tit-for-tat exchange in the talks so far.

The United States had proposed limiting the amount of American government contracts it offers to Canadian and Mexican companies by capping the level dollar-for-dollar to the total size of Canada and Mexico’s much smaller markets.

In response, Mexico floated the possibility of linking its government contracts to the size of deals that Mexican companies win in the United States, people familiar with the negotiations said. Because Mexican companies win few American contracts, that would significantly restrict the goods and services American companies supply to the Mexican government.

Moisés Kalach, a textile executive who represents Mexico’s private sector in the talks, said that while progress was made on some technical issues, including telecommunications, the controversial issues remain.

Speaking to reporters in Mexico City, Mr. Kalach said Mexico did present a counterproposal to the American request for a “sunset clause,” under which Nafta would expire every five years unless the three countries agree to renew it. Mexican negotiators, supported by Canada, suggested that Nafta be reviewed every five years, but not automatically expire.

Mr. Kalach added that Mexico has also rejected an American demand that would allow new seasonal restrictions on imports of Mexican produce, like tomatoes and avocados.

At the last round of negotiations, in Washington in October, tough proposals introduced by the United States raised tensions and provoked fears of Nafta’s demise, prompting business groups and lawmakers to raise concerns about the Trump administration’s approach.

More than 70 bipartisan members of Congress sent a letter to the administration on Nov. 15 saying the United States proposal for the automobile sector would diminish America’s competitiveness globally.

Negotiating partners and industries that depend on the pact have been hoping the mounting concern would shift the debate and encourage the administration to roll back some of its proposals.

In comments before the Canadian Parliament Tuesday, the foreign minister, Chrystia Freeland, said she was “heartened” to see dozens of members of Congress sign a letter about the benefits of Nafta.

“This is a trading relationship that works for both sides,” she said. “I think we’re starting to see a recognition of that among many Americans.”

Still, Canada and Mexico are hedging against the potential collapse of Nafta by pushing for trade agreements with new partners, including China. And during the president’s recent trip to Asia, both countries indicated their willingness to move forward with an 11-country trade pact called the Trans-Pacific Partnership, from which Mr. Trump withdrew the United States this year.

President Trump has often threatened to withdraw from Nafta if the United States does not secure a better deal. He has come to the brink of doing so on numerous occasions, only to have his advisers dissuade him.

A move by Mr. Trump to withdraw from Nafta would set off a six-month process to terminate America’s membership in the pact. Mr. Trump has described this action as a potential negotiating tool for persuading Canada and Mexico to accede to American demands.

But it’s unclear whether that tactic would work. People close to the discussions say Mexican officials would instead use those months to conclude trade negotiations with Brazil and the European Union.

While Mr. Trump has said that no deal is preferable to the current one, economists argue abandoning Nafta could damage the United States.

In a study published last week, researchers at the Peterson Institute for International Economics found that withdrawing from the North American pact would directly cost the United States 187,000 jobs over a one- to three-year period — not accounting for further indirect damage to the economy.

Elisabeth Malkin reported from Mexico City.

Follow Ana Swanson on Twitter: @AnaSwanson.

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A version of this article appears in print on  , Section B, Page 3 of the New York edition with the headline: Tense Round of Nafta Talks Ends With a Warning Shot by Mexico. Order Reprints | Today’s Paper | Subscribe

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