Ongoing NAFTA talks could lead to 'devastating' economic fallout, ex-commerce secretary says

  • The United States' opaque approach to negotiations on the North American Free Trade Agreement discould well lead to a collapse of the treaty, former U.S. Secretary of Commerce Carlos Gutierrez said
  • The U.S. side is holding off on the toughest issues, and make-or-break issues have not been settled, he said
  • If NAFTA falls through, the impact on the U.S., Canada and Mexico would be "devastating," according to Gutierrez

The United States' opaque approach to negotiations on the North American Free Trade Agreement could well lead to a "devastating" collapse of the treaty, former U.S. Secretary of Commerce Carlos Gutierrez told CNBC.

Trade representatives from the U.S., Canada and Mexico meet this week for the fifth round of NAFTA talks. However, the ongoing discussions belie an increasingly bleak future for the trade agreement, said Gutierrez, who is also the chair of strategic advisory Albright Stonebridge Group.

"I'm hearing it from the Mexican side, where some people have it at 70 percent chance [the deal will blow up.] On the U.S. side, 50 percent chance — something that would have been unheard of several months ago," he said.

"Apparently, the U.S. side is holding off on the toughest issues to the end. And there are some ... make-or-break issues that have not been taken off the table," Gutierrez added.

One major point of difference is the U.S. demand to change the rules of origin. The United States wants to raise the minimum required proportion of NAFTA-sourced auto products from 62.5 to 85 percent, with 50 percent of the total coming from America. But Canada and Mexico said they were against the adjustment.

The U.S. also wants to eliminate the current dispute settlement mechanism, and that could break the deal for the country's neighbors.

In previous discussions, the United States pushed to modernize the treaty's terms on intellectual property, digital trade and financial services. U.S. Trade Representative Robert Lighthizer said after the talks that he was "surprised and disappointed by the resistance to change" by Mexico and Canada, but added that there had been some progress.

If NAFTA falls through, the impact on all three countries would be "devastating," Gutierrez said, adding that it would "essentially take away all the good things that are happening today in the U.S. economy, whether it be the stock market or consumer confidence."

"I hope I'm wrong, but it's going in the wrong direction."

President Donald Trump has said the trade deal was a disaster for the United States and threatened to withdraw the country from the agreement unless major changes were implemented.

According to statistics from the Office of the United States Trade Representative, the country's trade with Mexico ran at a deficit of $55.6 billion whereas a surplus with Canada hit $12.5 billion last year.

—CNBC's Patti Domm contributed to this report.