11/17/2017 12:56 EST | Updated 11/17/2017 14:00 EST

U.S. releases list reflecting tougher NAFTA negotiating positions

MEXICO CITY — The United States has published an updated list of NAFTA negotiating objectives to reflect some of its tougher-than-anticipated demands, a reminder of the difficult hoeing ahead as parties start seeking fertile ground for a deal.

The U.S. trade czar's office released the new list Friday as the three chief negotiators began meeting in Mexico City for their first round in the aftermath of an acrimonious session several weeks ago.

Sources say Canada and Mexico will start the months-long task of probing the U.S. for signs of willingness to compromise in key areas — though they expect little progress on those tougher sticking points for another few rounds.

A document from the American side illustrated the big gaps in positions.

The U.S. released an updated version of a July document published before negotiations started, in keeping with transparency requirements under American trade law. The new list includes tougher language on Canadian dairy, auto parts and Buy American rules, reflecting negotiating demands adopted in recent weeks.

"President (Donald Trump) believes that NAFTA has not been a good deal for many American workers and businesses," says the document. 

"(Our) objectives represent a serious effort to renegotiate the agreement to update its provisions to the best 21st century standards and rebalance the benefits of the deal so that each country succeeds. ... If these objectives are achieved, the United States will obtain more open, equitable, secure and reciprocal market access and the entire NAFTA region will benefit."

Major changes from the previous version of the document released four months ago include:

—On auto parts, ensuring that rules of origin promote production in North America as well as "specifically in the United States.'' That reflects a U.S. demand at the last round that cars must include 30 per cent U.S. content and 85 per cent content from North America overall, to avoid a tariff.

—Ensuring reciprocity in market access for public-works contracts. This reflects a U.S. demand that would limit access to Canadian and Mexican companies to one dollar in public contracts for every dollar American companies receive in those countries.

—Eliminating Canadian tariffs on imports of dairy, poultry, and egg products. The July document did not specifically mention eliminating Canada's supply management system. But at the previous negotiating round in October, the U.S. requested supply management's elimination within 10 years.

All these demands, and some others, have been deemed non-starters by Canada and Mexico.

But those two are starting to demonstrate a willingness to seek compromises on some areas. For instance, both Canada and Mexico say they could envision some form of review mechanism every few years to provide status reports on the agreement.

That proposal falls short of the U.S. demand for a so-called five-year sunset clause. In the U.S. position, NAFTA should come with a proviso that the deal gets cancelled unless all parties endorse it after five years.

Canada also intends to signal its willingness to review auto-parts rules. But again, it views the U.S. starting numbers to be well outside the bounds of an acceptable final compromise.

''We’re willing to talk about rules of origin,'' said one Canadian official. ''But certain figures, or certain proposals, are just not-starters ... There are certain starting points that are just unworkable.''

It's considered doubtful too much progress on the thorny issues will happen at the current round, which ends next week. Canadian officials say they anticipate progress on less-controversial issues like digital commerce, regulatory co-operation and labour and the environment.

But they expect the more intense decision-making to ramp up in the first quarter of next year, as the talks get closer to the hoped-for deadline of March. In the meantime, they will be looking for signs of potential common ground with American negotiators and watching whether the U.S. president escalates his threats to cancel NAFTA.