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Planet Money: A Look Inside Big Trade Negotiations


NAFTA talks formally started this week, reopening a chapter in one of North America's longest and most complex negotiations. And that got us thinking about the original NAFTA talks and a story that Stacey Vanek Smith of our Planet Money team reported two summers ago. She introduced us to one of the negotiators and a sticking point that could have derailed the deal.

STACEY VANEK SMITH, BYLINE: They called themselves the Watergate 300. Negotiators from Mexico, Canada and the U.S. took over the Watergate Hotel in Washington, D.C., to finish NAFTA negotiations. It was 1992, late July. It was hot, humid, and they planned on wrapping everything up in two days.

ANDREW SHOYER: We just took over many, many hotel rooms. The hotel just pulled out all the furniture. We would just set up a circle of chairs.

SMITH: Andrew Shoyer was one of the Watergate 300.

SHOYER: You could walk down a hallway, and there are negotiations going on really in each room.

SMITH: In one room, people were arguing about sugar - in another room, cars - in another room, textiles. Ron Sorini was in that room. He was the chief textile negotiator for the U.S. He was 30 years old.

RON SORINI: I was nervous, right? I knew that my issue could potentially be the one to derail the agreement.

SMITH: The issue threatening the multi-trillion dollar trade deal - wool suits from Canada.

Why were wool suits such a big deal? That seems - like, Canadian wool suits - I've never thought of Canada as a big suit maker (laughter).

SORINI: There was a company in Canada. I still think they exist. They're Peerless. They were starting to compete very intensely with Hart, Schaffner and Marx, all the major suit manufacturers.

SMITH: Canadian suit maker Peerless had figured something out. It could import wool from Italy duty-free, make a suit and sell it in the U.S. without paying taxes. U.S. suit makers like Hart Schaffner Marx were paying a 30 percent tariff to import wool from Italy. Because of this trade quirk, Canadian companies could sell suits in the U.S. for a lot less. Head Canadian negotiator Michael Wilson says one U.S. colleague summed it up this way.

MICHAEL WILSON: He said all I can find in my tailor's shop in Washington were Canadian suits made in Montreal.

SMITH: Every day, Ron Sorini would sit in a little room, drinking coffee and going through the latest draft of textile deals with the Canadians and the Mexicans.

Can you give me some of the tricks you used back then?

SORINI: I played a lot of poker (laughter), so I think that helped.

SMITH: One of Sorini's favorite poker moves - go ask your boss.

SORINI: You, too, as the negotiator reporting to the ministers - you don't want to bring everything to your minister, so that puts a little pressure on you to be reasonable.

SMITH: So it's like saying, can I please speak with your supervisor?

SORINI: Exactly, right, exactly.

SMITH: (Laughter).

Once they reached a deal, Sorini would walk down the hall to the U.S. minister.

SORINI: There would be congressional staff that were waiting outside to be briefed, hovering over - lobbyists, you know, representing yarn spinners or ferries fabric makers.

SMITH: Just, like, hanging out outside of the room?

SORINI: Right.

SMITH: The two days at the Watergate turned into two weeks, and the pressure was on. The president at the time, the first George Bush, really wanted to announce the deal at the Republican National Convention, and that was coming up in less than a week. But one thing still hadn't been settled - Canadian suits. So 30-year-old Ron Sorini found himself in a room with the head negotiators from all the countries, including Carla Hills with the U.S.

SORINI: I said, I better not screw this up. The minister from Canada turned to me and said, OK, so, Ron, what can we do on this issue? And Carla leaned over and whispered in my ear, I'm not feeling very generous. Be very careful. And I knew what our upper limit was. So I want in and proposed something like halfway between.

SMITH: The Canadians wanted 3 million wool suits to come into the U.S. every year duty-free. The U.S. wanted none. But the U.S. needed the deal done that day. So Sorini proposed 1.4 million.

SORINI: And I said, I'm sorry. That's all the room I think that we have to maneuver. And Carla said, that's right; that's it. And we settled.

SMITH: To this day, Sorini laughs thinking about that bluff. But in the end, 1.4 million suits was enough. Peerless, the Canadian company, boomed. They now make the suits for Calvin Klein, DKNY, Ralph Lauren, Hugo Boss. Its American counterpart, Hart Schaffner Marx, declared bankruptcy in 2012, and Peerless bought it. Stacey Vanek Smith, NPR News.

(SOUNDBITE OF ANDREW BIRD SONG, "TRUTH LIES LOW") Transcript provided by NPR, Copyright NPR.