(Adds details, comments from trade ministers, analysts)
By David Lawder and Dave Graham
WASHINGTON, Oct 17 (Reuters) - The top U.S. and Canadian and
trade officials on Tuesday accused each other of sabotaging
efforts to renegotiate the North American Free Trade Agreement,
even as they and Mexico agreed to extend talks into the first
quarter of 2018.
A seven-day round of talks in suburban Washington ended in
acrimony over aggressive U.S. demands on autos, a five-year
sunset clause on the pact itself and Canada's dairy regulations,
among other key issues. Canada's foreign minister, Chrystia
Freeland, accused Washington of pursuing a "winner take all"
In a major setback, Freeland, U.S. Trade Representative
Robert Lighthizer and Mexican Economy Minister Ildefonso
Guajardo said they faced "significant conceptual gaps" in their
views and agreed to stretch out the talks in search of
Lighthizer complained that the Mexican and Canadian sides
showed no evidence of willingness to make changes that would
"rebalance" NAFTA to shrink U.S. trade deficits.
He warned that U.S. companies could no longer count on NAFTA
trade rules that since 1994 have encouraged investment in Mexico
and Canada and that he views as primarily aimed at exporting to
the United States.
"Everybody has to give up a little bit of candy, that's
really what this is about," Lighthizer told a news briefing.
But the talks hit a wall on his proposals to radically
reshape NAFTA, causing some observers to wonder whether the
Trump administration intends to sink the trade pact.
PROPOSALS "WOULD TURN BACK THE CLOCK"
Washington's demands, previously identified as red lines by
its neighbors, include forcing renegotiation of the pact every
five years, reserving the lion's share of automotive
manufacturing for the United States and making it easier to
pursue import barriers against some Canadian and Mexican goods.
"We have seen proposals that would turn back the clock on 23
years of predictability, openness and collaboration under
NAFTA," Freeland said.
News of the talks' extension through to the first quarter of
next year, from the end of this year, lifted the Mexican peso
1.2 percent after a volatile day of trading. The peso
has fallen 7 percent since July on expectations that NAFTA would
Mexico sends about 80 percent of its exports to the United
States, and is home to a host of factories for U.S. companies
that manufacture products there that are then sent to the United
States for sale.
Guajardo avoided direct criticism of Lighthizer's approach,
but said Mexico would stand firm against the U.S. demands.
"A bad deal would be against the interest of Mexico itself,
and therefore you have my guarantee that there will not be a bad
deal," Guajardo told reporters.
He added that rather than being intransigent, Mexico and
Canada were taking a "good sense" approach to the talks.
Despite the tension, Mexican and Canadian officials have
stressed that their governments will not walk away from the
table. The talks are now scheduled to resume in Mexico City on
Nov. 17-21, giving negotiators additional time to devise
While the NAFTA countries did close out a chapter on
competition policy, Lighthizer said there were still deep
differences on some issues such as digital trade, intellectual
property rights and anti-corruption policies.
U.S. President Donald Trump, who made trade a centerpiece of
his 2016 presidential campaign, has repeatedly threatened to
terminate NAFTA if Mexico and Canada refuse major changes.
Lighthizer said he was not focused on termination and wanted
to negotiate a "good agreement," but added that he had no plan
should talks collapse.
"If we end up not having an agreement, my guess is all three
countries would do just fine. We have a lot of trade, a lot of
reasons to trade," he said.
One person close to the process said there was now a real
possibility that negotiations to modernize NAFTA, which
underpins some $1.2 trillion in annual trade between the three
countries, could collapse.
Any termination decision would now be postponed until March
2018, by which time Trump could be distracted by other
developments such as his tax reform plan, said Gary Hufbauer, a
senior fellow at the Peterson Institute for International
But it remained unclear how the talks regain momentum.
"Staggering talks could be the right description in the
meantime," Hufbauer said.
The Trump administration has also set out proposals that
could impose fresh restrictions on long-haul trucking from
Mexico, according to a person familiar with the matter. That too
is likely to meet stiff resistance, Mexican officials say.
U.S. opposition to NAFTA's dispute resolution mechanisms,
plans to restrict outside access to government contracts and
attacks on Canadian dairy and softwood lumber producers are all
causing friction behind the scenes, officials say.
(Additional reporting by David Ljunggren in Washington and
Sharay Angulo in Mexico City; Editing by Jonathan Oatis and
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