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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