WASHINGTON - Negotiations between the United States, Canada and Mexico aimed at revising the North American Free Trade Agreement are scheduled to resume next week, but recent developments are adding to worries - perhaps nowhere more than in Texas - that the talks and the treaty will unravel, disrupting economic connections built over a quarter-century.

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James Osborne
, Houston Chronicle

WASHINGTON - Negotiations between the United States, Canada and Mexico aimed at revising the North American Free Trade Agreement are scheduled to resume next week, but recent developments are adding to worries - perhaps nowhere more than in Texas - that the talks and the treaty will unravel, disrupting economic connections built over a quarter-century.

Even as trade specialists note that such negotiations are complex, difficult and subject to stops, starts and posturing, recent statements and actions are stoking concerns among some political and business leaders that prospects for a deal are deteriorating.

Last week, Canadian officials, speaking on conditions of anonymity, told news wire services that the odds of President Donald Trump withdrawing the United States from NAFTA were rising, while Trump himself, in an interview with the Wall Street Journal, reiterated his threat of a pullout if he can't win favorable terms.

The Canadian government also disclosed that it has brought a dispute over how the United States imposes punitive duties to the World Trade Organization, prompting U.S. Trade Representative Robert Lighthizer to blast the move as "a broad and ill-advised attack" that could "lower U.S. confidence that Canada is committed to mutually beneficial trade."

Rep. Henry Cuellar, D-Laredo, meanwhile, said he has sensed growing anxiety over the future of NAFTA as he monitors the negotiations, which could dramatically affect his border district.

"I've talked to Mexican officials off the record and some of the Canadian parliament members. They're getting worried," said Cuellar. "Folks are saying what can Congress do? What if this president decides to pull out of this?"

The stakes are particularly high for Texas. Few states have benefited as much from the free-flow goods among the three countries, whether the heavy Canadian crude flowing to Gulf Coast refineries or natural gas from Texas shale fields moving to Mexico through newly built pipelines.

Mexico important to Texas

Texas, of course, is closely tied to Mexico, a large and burgeoning market for products from fuels and semiconductors to beef. In 2016, Texas sold more than $90 billion in products to Mexico, about 40 percent of all exports from the state, according to the Commerce Department.

The possibility of withdrawal is setting off alarm bells among American business leaders, who have almost universally proclaimed their support for the free trade agreement. In Washington Tuesday, Jack Gerard, president of American Petroleum Institute, the energy industry's largest trade group, aid the focus should be on "preserving the current NAFTA agreement."

"It would be disruptive to change the rules in the middle of the game, but we hope that doesn't happen," Gerard said.

How likely the United States is to declare it is leaving NAFTA remains something of a guessing game. In October, Trump told Republican senators that he might need to initiate the six-month withdrawal process from NAFTA to gain leverage in negotiations over Mexico and Canada. A White House official said last week that "there has been no change in the president's position on NAFTA."

The sixth round of negotiations, which have yet to make discernible progress, are scheduled to get underway in Montreal on Jan. 23. At the center of tensions are demands by Lighthizer aimed at increasing sales of U.S. products, including a provision to require a minimum amount of U.S. content for automobiles classified as NAFTA products. He is also pressing for automatic withdrawal in five years unless all three countries agree to renew and the elimination of a mechanism that allows companies to file for independent arbitration if they feel a country is not living up to NAFTA's terms.

NAFTA has been controversial since Mexico, Canada and the United States began negotiations in the early 1990s as opponents warned of an exodus of American jobs and investment to low-wage Mexico and supporters predicted a major economic boost from the free flow of goods and services throughout the continent. Neither the worst fears or highest hopes for the treaty have materialized since Congress ratified and President Bill Clinton signed it in 1993, but most economists say that on balance, all three national economies have benefited.

Trump, however, has argued that most of the benefits have gone to Mexico and Canada. He has broadly attacked free trade as the cause of American job losses - particularly manufacturing jobs - and called NAFTA "the worst trade deal ever made."

Antonio Garza, the former U.S. ambassador to Mexico, said trade negotiations like this often bog down once they enter the later rounds.

"I continue to be encouraged," said Garza, now working as lawyer in Mexico City. "The last yards are always the hard yards."

Texas politicians in fight

In Washington, meanwhile, Texas lawmakers from both parties are chasing down members of the Trump administration to try to convince them of NAFTA's importance. Sen. John Cornyn, the No. 2 Republican in the Senate, has had a series of phone calls and meetings on the subject with Lighthizer and Vice President Mike Pence.

Rep. Gene Green, D-Houston, who voted against NAFTA in 1993, said doing away with it now posed too great of a risk to the economy.

"I have a blue-collar district and my main concern was the transfer of jobs, which we've seen," he said. "There are things I would like to update in NAFTA, but just pulling out would be disruptive to a lot of companies."

The great unknown remains how far Trump is willing to go. In his real estate career, Trump was notorious for proclaiming his willingness to walk away from deals that he ultimately made.

"The worst thing you can possibly do in a deal is seem desperate to make it," he wrote in his 1987 best-seller, "The Art of the Deal." "That makes the other guy smell blood, and then you're dead."

Rep. Pete Olson, R-Sugar Land, said the president, in threatening to walk away from NAFTA, could be employing this familiar tactic.

"Mr. Trump is a negotiator and this could be a part of the negotiation," Olson said. "We're hoping President Trump gets the message."

But in Texas, the high-stakes negotiations and possibility of a drying up of trade with Mexico are causing no shortage of anxiety.

In the Rio Grande Valley, through which nearly half of Texas' exports to Mexico move each year, discussions of contingencies should Trump pull out of NAFTA are already underway. No plans have been finalized, said Steve Ahlenius, president of McAllen Chamber of Commerce.

"We haven't gotten to that point, yet," he said. "There's a wide range of opinions here. It goes from the U.S. is never going to opt out, to the other side saying, wow, there is a real possibility, we could lose Mexico as a trade partner."

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