With new trade talks set to begin, analysts say you can't rule out a failure by the U.S., Canada and Mexico to agree to terms on a replacement for the 23-year-old North American Free Trade Agreement.
Negotiators meet in Washington Wednesday to start a fourth round of talks aimed at revamping NAFTA. Canadian Prime Minister Justin Trudeau was also to be in Washington Wednesday, as the talks kick off, and he was expected to meet with members of the House Ways and Means committee before heading to the White House to meet with President Donald Trump.
Sources told CNBC that the U.S. is expected to come to the table with a new proposal on origination of content, which would require, for instance, an automobile made in Mexico and sold in the U.S. to have 85 percent NAFTA content in order to be tariff free. The current rule requires 62.5 percent of NAFTA content. The U.S. may also propose 50 percent of content be made in the U.S.
The "rules of origin" proposal is just one of the controversial demands the U.S. is planning to make this week that could alienate not just its trading partners — but also U.S. lawmakers and businesses. Others that are bound to draw ire: a "sunset provision" that would require any new agreement get unanimous buy-in every five years, otherwise it ends; and a proposal to settle disputes outside the World Trade Organization.
"We've reached a critical moment, and the chamber has had no choice but to ring the alarm bells," Tom Donohue, head of the U.S. Chamber of Commerce, said in a speech Tuesday that listed the items above as non-starters for U.S. business. "Let me be forceful and direct. There are several poison pill proposals still on the table that could doom the entire deal."