The U.S. has started delivering its bombshell demands at NAFTA talks

PENTAGON, United States _ The NAFTA negotiations have now entered their most difficult phase with the United States beginning to drop its bombshell proposals on the negotiating table at a just-begun round outside Washington.

U.S. officials had foreshadowed that this week-long round would be where the most contentious discussions opened and that is coming to fruition, with the American side levelling one demand deemed a non-starter _ and preparing to deliver another one.

The just-delivered demand would create a so-called termination clause. The clause would end NAFTA after five years, if its member countries fail to explicitly renew it. That proposal was delivered late Wednesday night.

That comes after the U.S. proposed far stricter Buy American rules at the last negotiating round, and in the leadup to one of the most important proposals of the entire negotiation: on rules for auto parts, which could come as early as Friday.

U.S. Commerce Secretary Wilbur Ross confirmed the five-year termination idea. He shrugged off the fact that other NAFTA countries are vehemently opposed to it, seeing it as a destabilizing investment-killer and unacceptable red line.

“Yes, that’s our proposal,” Ross said during a panel discussion Wednesday at the Dentons law firm. “Red lines, blue lines, green lines, purple lines. Those are just colours in a rainbow… It’s a big, complicated negotiation and the key is having an overall package that works (at the end).”

The next big drop could occur Friday.

That’s when the group handling rules for auto parts meets for the first time in this round, and it’s expected the U.S. is preparing to level demands viewed as non-starters by Canada, Mexico, and the auto industry.

One report said the planned demand would require 85 per cent of a car’s parts to come from North America, and half of them to come from the U.S. That industry says many of these components simply aren’t made on the continent, and warn that if the rules get too onerous they might just stop working within NAFTA and start paying tariffs.

Again, Ross confirmed that U.S. policy is headed in that direction, and shrugged off the concerns: “I think you’ll find the car companies will adapt themselves to it,” he said.

The main thing other countries are trying to figure out about this hardline approach from the U.S. is what it signals: flexible opening positions that will change with time, inflexible demands, or a desire to poison the talks and do away with NAFTA entirely.

Officials in Canada say they’re legitimately baffled by where the U.S. is headed.

As for Mexico, the demands being levelled cross several of the six so-called red lines laid out in that country’s Senate, which says it would refuse any deal that includes a termination clause, a U.S. auto content requirement or the end of the Chapter 19 dispute-resolution system.

An official in one of those two countries says it’s important to keep negotiating calmly.

“We’re expecting some contentious proposals this week,” he said. “Having said that, no one should lose sight of the fact you have three teams of negotiators working to make progress on the deal and they are making progress.

“If there weren’t contentious proposals,” the official continued, “it wouldn’t be a negotiation.”