NAFTA Deadlines

September 16, 2018

Foreign Minister Chrystia Freeland is facing pressure to return to Washington this week in a bid to conclude a NAFTA deal under a deadline set by the Americans.

Ms. Freeland will be in Ottawa for the resumption of Parliament Monday, where the Liberal government will be defending the view expressed by her and Prime Minister Justin Trudeau that no deal is better than a bad deal when it comes to the North American free-trade agreement.

Top-level negotiations could resume as early as Tuesday between Ms. Freeland and her American counterpart, U.S. Trade Representative Robert Lighthizer, a federal government source said. But that has yet to be decided.

 Ms. Freeland and Mr. Lighthizer are expected to talk by telephone Monday to discuss whether she should return to Washington on Tuesday for more negotiations, the source said. Mr. Lighthizer signalled to the Canadians that he would be available if warranted on Tuesday, Wednesday and Thursday next week.

Several trade experts said she is likely to make the trip given that she is working under a tight timeline to reach a deal that would prevent the United States and Mexico from moving forward with a bilateral agreement as U.S. President Donald Trump has threatened.

Mexico wants an agreement concluded before incoming president Andres Manuel Lopez Obrador takes office on Dec. 1, and the U.S. administration must give Congress 60 days’ notice for a final text, meaning a Sept. 30 deadline. As well, Mr. Trump is keen to announce a new deal − which he wants renamed as the U.S.-Mexico agreement, or the U.S.-Mexico-Canada accord − prior to the November congressional elections, which are being billed as a referendum on his polarizing tenure in office.

“It’s do or die time for a trilateral deal if the goal is to get it done before Lopez Obrador takes office,” said Maryscott Greenwood, Washington-based chief executive of the Canadian American Business Council.

Ms. Greenwood said Canadian and American negotiators are making slow progress, but added that the United States appears willing to make some compromises. She noted that the U.S. side softened its position in a number of areas to reach an agreement in principle with Mexico late last month.

One veteran trade consultant questioned whether the end-of-month deadline is a real one.

“I think a deal is doable but we don’t have to be rushed,” said Colin Robertson, a former trade negotiator and vice-president of the Canadian Global Affairs Institute. He said there is no reason that Mexico’s incoming president, Mr. Lopez Obrador, could not conclude the deal that was reached with his blessing by his predecessor, Enrique Pena Nieto

“We’ve had these false deadlines before and this seems to me to be the weakest of them all,” he said.

Ottawa could disregard the deadline and take time to pursue a more favourable deal, while counting on Congress to block the administration’s effort to exclude Canada from the trade agreement, Mr. Robertson said. Leading members of Congress and the American business community have said that any new trade deal must include Canada, but Mr. Trump is threatening to impose crippling tariffs on the Canadian auto industry if there is no trade deal.

Key stumbling blocks continue to be U.S. demands that Canada provide significantly greater access to its dairy industry and Ottawa’s insistence on maintaining the Chapter 19 dispute-settlement mechanism that gives parties the right to challenge one another’s application of duties and punitive tariffs. There are several other outstanding issues, including the U.S. desire for greater patent protection for a class of drugs known as biologics; Canada’s demand to have access to U.S. government procurement; and an American push to increase the value of purchases that Canadian shoppers can bring back duty free from the United States.

While Mr. Trump would clearly like to tout his success in renegotiating NAFTA for the mid-term election campaign, he will need Congressional approval to pass it into law. He already faces resistance there, but it will be far tougher for him if the Democrats win control of the House of Representatives as many pollsters and pundits now forecast, said Dan Ujczo, an Ohio-based international trade lawyer who has worked for the Canadian and U.S. governments and closely monitors the NAFTA talks.

Concluding the negotiations “are the least difficult part of what is left to do to complete a new NAFTA,” Mr. Ujczo said. “Getting this through Congress is going to be twice as hard as it was the first time around back in the 1990s, given the politics of trade in the United States right now.”

But Canada cannot count on Congress turning down a new deal and keeping the old one in place, he added. Instead, the Trump administration would likely abrogate the existing deal at the same time it puts the new one before Congress.

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Dairy and the NAFTA Negotiations

POLITICO

Morning Trade

A daily speed read on global trade news

With help from Megan Cassella

 A PESSIMISTIC VIEW ON CANADA DEAL TIMING FROM UP NORTH: Colin Robertson, a former Canadian diplomat who is vice president at the Canadian Global Affairs Institute, told Morning Trade he thinks the negotiations could drag on for weeks because of the difficulty Trudeau faces in reaching a deal on dairy before the Oct. 1 election in Quebec.

“I think talks could go on into October. Like the World Series, there are still innings to be played and [we should] expect surprises,” Robertson said.

Quebec is Canada’s largest dairy-producing province, accounting for nearly half of the country’s farms and about 37 percent of its milk productionIn addition to the upcoming vote for the Quebec National Assembly, the French-Canadian province will also be a prime battleground in the next federal election, which many expect in October 2019.

To stay in power, the Liberals will have to pick up seats there to offset likely losses in Atlantic, where they currently hold all the seats, and perhaps in British Columbia because of a pipeline controversy, Robertson said.

A Canadian government spokesman did not directly say whether the elections are complicating the talks but told Morning Trade that “the federal government is in touch and consults regularly with provincial and territorial governments on the NAFTA negotiations. In fact, Prime Minister Trudeau held a call with provincial and territorial premiers just over a week ago to update them on progress.”

As for timing, Freeland knows a swift resolution is important, but Canada will take the time needed to get a good deal, an aide said.

Two industry officials — one American and the other Canadian — speaking on the condition they not be identified, doubted the fast-approaching Quebec election was having much impact on the negotiations. “Sure, the Quebec election adds another political angle to it here, but by no means is the political sensitivity new,” the Canadian industry aide said. “I don’t think the Quebec election is going to be holding back things in the ag context.”

Dairy plays both ways with the electorate, Robertson added. “While all Quebec parties fiercely defend supply management. Some producers favor the end of supply management as they think — and I think correctly — that Canadian cheese can be world busters and that we can be as competitive as New Zealand and Australia. Of course there will have to be adjustment assistance. But it is affordable, if costly in the short term, and there is no reason our dairy and poultry can’t be as successful as our beef pork grains and lentils. Mr. Trump may force us to do what we should do,” he said.

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NAFTA Negotiations


Colin Robertson joined CBC’s Vassy Kapelos & Katie Simpson yesterday to answer social media questions on NAFTA:You can watch the full special episode on Power & Politics Here.

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NAFTA: What Next?

Despite Trump’s threats, it won’t be easy to cut Canada out of NAFTA, experts say

OTTAWA—U.S. President Donald Trump’s threat to leave Canada out of a new NAFTA deal heightened tensions and capped an already dramatic week of negotiations, but some experts say the threat isn’t quite as direct as it seems.

On Saturday, Trump threatened to go it alone with Mexico on a revised agreement or to terminate NAFTA entirely.One U.S. trade lawyer said the “real test” of President Donald Trump’s trade policy lies with his base of support, who may not back any attempt to cut Canada out of a revised NAFTA.

“There is no political necessity to keep Canada in the new NAFTA deal,” he tweeted, while on his way to play golf. “If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out. Congress should not interfere w/ these negotiations or I will simply terminate NAFTA entirely & we will be far better off.”

Read more:

Donald Trump threatens to terminate NAFTA if Congress stands up for Canada

Donald Trump confirms Star story on his secret bombshell remarks about Canada

Deal, or no deal, NAFTA uncertainty means consumers lose out, say experts

With memories fresh from U.S. tariffs on steel and aluminum, Canadian officials are mindful that Trump’s threats aren’t all bluster.

But experts say it won’t be quite that easy to cut Canada out of a revised North American Free Trade Agreement.

For starters, Congress has a critical say on trade agreements, noted Toronto-based international trade lawyer Lawrence Herman.

“Trump has no authority from Congress to end NAFTA and do a bilateral deal with Mexico as he threatens. I suspect lots of political pushback and, importantly, legal challenges to any such attempt,” Herman said on Twitter.

U.S. trade lawyer Dan Ujczo said he doesn’t see a procedural barrier to going forward with Mexico alone, but he does think political considerations would scuttle such a move.

“The issue is whether Congress will stand up to the president,” Ujczo said in an interview Sunday. “It’s a political question, not a procedural question. At the end of the day, it will be up to Congress to decide whether we can proceed with a bilateral deal as opposed to a trilateral.”

Aside from the procedural questions, including a six-month notice requirement, Trump would also certainly face a backlash from members of Congress, state governors and U.S. business leaders whose constituencies and companies would pay an economic price if Canada — America’s largest goods export market in 2017 — were left out.

Even before trade negotiations got underway, Ottawa had begun a concerted strategy to reach out to U.S. stakeholders to drive home the benefits of Canada-U.S. trade and what it meant economically to their individual districts.

That’s helped build valuable allies.

On Friday, Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, issued a statement stressing that a revised NAFTA must include all three countries.

“NAFTA’s many strengths rest on the fact that it ties together three economically vibrant nations, drawing upon each of our strengths to boost the competitiveness of the whole. If you break off one member of this agreement, you break it all, and that would be bad news for U.S. businesses, for American jobs, and for economic growth,” Donohue said.

He warned that unless the new deal is a trilateral one, it won’t get congressional backing or the support of the business community.

In the view of the Canadians, this gives them leverage at the bargaining table, an assessment backed by Ujczo.

“Right now, the U.S. has the negotiating leverage in the negotiating room but Canada has the leverage in terms of Congress, the business community and the general U.S. public, but that balance will not last forever,” Ujczo said.

Ujczo said the “real test” of the president’s trade policy lies not with Trump but rather with his base of support.

“I think the real question is where is Trump’s base on Canada,” he said.

“I can say as someone who lives in Ohio, I don’t think for the time being there’s a great deal of support to proceed with a deal absent Canada,” he said.

But he cautioned that the issues that appear to be sticking points in Canada-U.S. discussions — Canada’s supply management system, dispute settlement and cultural protections — aren’t likely to find many defenders south of the border.

In the meantime, while Trump continues to churn the waters, Ujczo notes that these threats and “theatrics” are part of his negotiating tactics.

“Don’t underestimate the strategy of good cop, not-so-good cop and bad cop,” he said. “Others can decide who falls into what category.”

It’s all part of the president’s no-compromise bargaining style, as he bluntly stated in private comments revealed by the Star’s Daniel Dale on Friday.

In an off-the-record conversation with Bloomberg journalists, leaked to Dale by a source, Trump said that any deal with Canada would be “totally on our terms.”

Trump grumbled about Canada on social media on Saturday, reprising views that the northern neighbour had been taking advantage of the U.S. “for many years” and that NAFTA was one of the “worst trade deals ever” that cost the U.S. “thousands of businesses and millions of jobs.

“We were far better off before NAFTA — should never have been signed … We make new deal or go back to pre-NAFTA!” Trump said on Twitter.

Canada’s Foreign Affairs Minister Chrystia Freeland speaks during a news conference at the Canadian Embassy after talks at the Office of the United States Trade Representative, in Washington, Friday, Aug. 31. Freeland told the press that NAFTA negotiations are “making progress,” but aren’t “there yet.” Freeland added that a “win-win-win agreement is within reach.”

Trump’s comments ignore data that shows U.S. exports in goods and services have soared since NAFTA was signed. The U.S. Trade Representative’s Office says that U.S. exports to Canada are up 181 per cent from 1993 and U.S. exports of services to Canada are up from pre-NAFTA levels by some 243 per cent.

For now, the Canadians are insisting they won’t be rattled by Trump’s Saturday warning that Canada could be left out of a revised North American Free Trade Agreement.

And as they prepare to resume negotiations Wednesday, they say they are optimistic. Driving that optimism was agreement on auto content that would favour Canada and the United States because of their higher-wage workers, making it less appealing for manufacturers to move production to Mexico. While that was part of the preliminary deal reached by Mexico and the U.S., it follows on proposals made by Canada earlier in the talks.

“If implemented it would be very progressive for Canadian workers and Canadian labour. It was important for the United States and Mexico to get that work done,” said one official familiar with the discussions.

“We continue to work, we continue to talk, we continue to make progress. But for the government of Canada to sign an agreement, it needs to be in the best interests of Canada and Canadians,” the official said.

At this key time, Canada cannot let up on its targeted cultivation of U.S. contacts, former Canadian diplomat Colin Robertson said, in order to keep pressure on the White House not to leave Canada by the wayside.

“Keep calm and carry on with our current strategy of working Congress and the states, especially governors, and reminding U.S. business that we matter to each other,” said Robertson, a vice-president and fellow at the Canadian Global Affairs Institute.

Given Trump’s sharp-elbowed trade tactics, that strategy will remain in place going forward, Robertson said, to protect Canada’s interests.

“Normally we use the president/administration as a shield against a protectionist Congress. Now we are using Congress and the states, especially governors, as a shield against a mercantilist president,” Robertson said in an email exchange with the Star.

“I think it will oblige us to make a strategic shift in our long-term advocacy in the U.S.A.,” he said.

Others caution that Trump’s tactics have badly damaged Canada-U.S. relations.

The president’s treatment of Canada through this process is the “definition of insanity,” Bruce Heyman, the former U.S. ambassador to Canada, told CNBC’s Squawk on the Streeton Sunday.

“The U.S. has all the leverage in the world, but just because you can doesn’t mean you should. When you take your best friend, your greatest ally in the world and start squeezing them, you can win but I will tell you, the relationship will be damaged much longer than it will take the ink to dry on a new NAFTA deal,” Heyman said.

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