Negotiations on the fate of NAFTA kick off

The fate of the North American Free Trade Agreement hung in the balance Tuesday as Canadian, US and Mexican negotiators kicked off a sixth round of talks aimed at revamping the 1994 free trade pact Washington has threatened to dump.

With time running out to reach a deal, Canada and Mexico will do everything to prevent the United States from following through on its threat to withdraw from the continental deal that binds nearly 500 million consumers unless it gets significant concessions.

Amid the rise in US protectionism and US President Donald Trump's relentless condemnation of NAFTA -- he last week called the trade pact "a bad joke" -- a revised deal has been hampered by a lack of progress on the most contentious issues since talks began last summer.

On the eve of the Montreal meeting, Canadian Foreign Minister Chrystia Freelanand Mexican Economy Minister Ildefonso Guajardo"agreed that the sixth round of talks will be critical."

"Decisions on some of the most complex issues under discussion will have to be made in this round of talks," according to a Mexican government statement.

Canadian Trade Minister François-Philippe Champagne said, "Everything will be on the table," and noted that 28 of the 30 NAFTA chapters remain to be renegotiated.

The talks have stalled over American proposals that Canada and Mexico deemed "unacceptable."

These include adding a "sunset clause" that would automatically repeal NAFTA after five years unless it is renewed by the member countries, and elimination of bi-national panels to resolve trade disputes among NAFTA partners under Chapter 19 of the agreement.

Canada has shown its steadfast support for Chapter 19, and invoked the dispute resolution mechanism on Friday to challenge US anti-dumping and countervailing duties on exports of its Bombardier CSeries passenger aircraft and softwood lumber.

End of quotas?

Another thorny issue is Washington's demand for stricter "rules of origin" for the automotive industry. The current agreement specifies at least 62.5 percent of vehicle components must be manufactured in one of the three member countries in order to be exempted from customs duties.

The Trump administration proposed raising the bar to a minimum North American content of 85 percent and requiring 50 percent US origin. The US-made requirement irritates Mexico and Canada, but a compromise is still possible on the volume of regional content, according to sources.

The Trump administration also has called on Canada to abolish its supply managed dairy and poultry sectors -- a quota and price system championed by successive Canadian governments including Prime Minister Justin Trudeau's Liberal administration. At the same time, Washington would like to drastically limit access to US government procurement.

Canada and the United States "have to make concessions in order to save NAFTA," said the Montreal Economic Institute, a research group that promotes economic liberalism.

It warned that the trade pact's "days are numbered if the parties at the negotiating table persist in wanting to protect their industries to the detriment of consumers and free trade."

Business on the continent are worried as well: 25 chambers of commerce came to NAFTA's defense in a joint statement on Monday calling on the governments to strengthen the trade pact and keep the US market open.

The Montreal talks are expected to last until January 29, making this the longest bargaining session since the start of the talks six months ago.

Before coming together for a joint press conference at the conclusion, Freeland, Guajardo and US Trade Representative Robert Lighthizer will meet this week at the World Economic Forum in Davos, where delegates are expected to tout the merits of free trade.