Negotiating NAFTA: How it works

Behind the scenes of how Canada’s ‘dream team’ negotiates NAFTA

Chief negotiator Steve Verheul, and Canada’s top two officials in Washington, David MacNaughton and Kirsten Hillman, are among the dozens involved in the sensitive trade talks, which see negotiators holed up in a different North American capital’s hotel board rooms every few weeks to hash out the text.

Mexico’s Economy Secretary Ildefonso Guajardo, Canada’s Minister of Foreign Affairs Chrystia Freeland, and U.S. Trade Representative Robert Lighthizer exit a press briefing during the third round of negotiations to rework NAFTA.The Hill Times photograph by Andrew Meade

PUBLISHED :Wednesday, Oct. 18, 2017 12:00 AM

Every few weeks this fall, roughly 300 Canadians, Americans, and Mexicans descend on a hotel in one of their respective capitals for about five days. While lobbyists chat in the hotel coffee shop or restaurant and reporters troll for tidbits of news, trade negotiators are holed up in hotel board rooms, sometimes 20 to a room, hashing out how to rework the North American Free Trade Agreement, at times until the wee hours of the morning.

The hundreds of Canadians working on the highly secretive NAFTA renegotiation operate largely behind the scenes and work on a need-to-know basis, but the talks nevertheless follow a formula familiar to the experienced team, say trade experts.

“There’s a considerable effort to keep things fairly quiet in public,” said Queen’s University professor emeritus Robert Wolfe, adding the relatively few leaks to media on Canadian strategy is no mistake.

Representatives of businesses and other groups getting updates or serving in advisory roles have signed non-disclosure agreements.

The negotiations, ongoing since August, involve 28 “tables” or negotiating rooms, each hashing out what will likely become a chapter in the final deal’s text.

These NAFTA talks are different from past trade talks in that the time between rounds is only a few weeks, whereas in other talks it might be months. Also, the politicians leading the talks from the three countries fly in for the end of each round, typically dining with each other, sitting down for formal meetings, and approving a joint communiqué on what was accomplished.

During the latest round, the fourth, in a Washington-area hotel, negotiators seemed to have finished the low-hanging fruit where the three countries could easily agree, and moved on to stickier subjects. “Substantially all” initial text proposals have been tabled, according to the three sides’ joint communiqué at the end of the round.

Canada, the United States, and Mexico have touted progress after effectively closing chapters on small- and medium-sized enterprises and competition, but tensions grew in the fourth round, which ended Oct. 17, as American negotiators were accused of pushing non-starters and United States President Donald Trump mused again about pulling out of the deal if his country doesn’t get what it wants.

After the breakneck speed of initial negotiations, there will now be more time in between, the communiqué said, with Mexico set to host the fifth round of talks in Mexico City from Nov. 17-21. More negotiating rounds will be scheduled through the first quarter of 2018.

Based on past practice, like with the Trans-Pacific Partnership trade deal, there wouldn’t be many Canadians involved who know very much of the big-picture details, and Mr. Wolfe’s sense is with NAFTA even less are in the loop.

“They are being very careful. They really do not want to negotiate in public, they really do not want something being said in Ottawa that could cause a firestorm in the White House because there’s a completely unpredictable negotiating environment.”

It’s a necessity born of the alchemy of several factors: a tight timeline ahead of 2018 elections in Mexico and U.S., the intensity of interest in Canada, and the volatile situation under Mr. Trump and his America-first rhetoric.

 

The tables

The chief negotiators’ table seems to meet all the time during a round, observers noted, made up of John Melle of the United States, Kenneth Smith of Mexico, and Canada’s Steve Verheul. They also would have met early on to determine the topics each table would focus on—which are likely to become the chapters of the deal’s text.

Each table, or negotiating room, works with the text in their chapter alone, while the chief negotiators carry with them the full text and will cover the contentious issues. They usually meet at the beginning and end of the day to debrief with their table leads and funnel key information up to the political leads, in Canada’s case Foreign Affairs Minister Chrystia Freeland (University-Rosedale, Ont.). Sometimes a chief negotiator might interrupt a head of one table if their discussion becomes relevant, but “they try and do it in tandem so they’re not upsetting the process,” said former Canadian diplomat Colin Robertson.

Last week, U.S. Commerce Secretary Wilbur Ross circulated a list of 28 topics not previously made public. Global Affairs Canada did not respond to confirm if the list was accurate, after some observers noted oddities, namely the lumping of trade remedies in with dispute settlement and a “securities annex,” which sources told Inside U.S. Trade was not a topic being covered in the talks or something the three countries were looking to include in a new deal.

Other topics included agriculture, customs, energy, environment, digital trade, intellectual property, labour, rules of origin, and technical barriers to trade. While there is a table on gender, which Canada said was a priority, a chapter dedicated to Indigenous people was absent. That’s likely still being handled at the chief negotiators’ table, said Mr. Wolfe.

As much as Canada may publicly push for the above goals and environmental standards, the reality is defensive issues are taking the top spot, said Ottawa-based trade strategist Peter Clark. Hotly contested issues are rules of origin, the review of Chapter 19’s dispute settlement, and supply management, which came into the crosshairs this week as the U.S. demanded its end, according to media reports.

Most of the tables are working from a single unified text, with sections in square brackets highlighting separate language where the sides disagree. A particular clause could have three different versions, or perhaps two, if only one is the odd country out on language agreement. The tables work off that piece of paper until they reach consensus, or one single text they all agree on.

Often the Canadian chapter heads managing each table would be from Global Affairs Canada, but also from the government department responsible for the area. That’s the case with Canada’s chief agriculture negotiator Frédéric Seppey, who observers note is in a uniquely—and historically—public position given the complexity of the highly technical file. Other negotiator names are not public and Global Affairs did not respond to a request for that list.

Other than the heads and their supporting staff, the hundred or so Canadians in Arlington, Va. supporting the negotiations this week didn’t divide into sectors. There are legal staff, regional and provincial experts, including those from the respective department or the embassy in Washington.

“They’re the resource people. They’re to help you from falling into [an] abyss,” Mr. Clark said, adding Canada’s Ambassador to the United States David MacNaughton—the country’s quarterback when it comes to Congress—has a big team working for him, including his No. 2 Kirsten Hillman, deputy head of mission, who used to be Canada’s chief negotiator for the TPP.

“They’re aware where all of the bodies are buried, where Canada has leverage, which states are big suppliers to Canada. He puts it all together,” said Mr. Clark, referring to Mr. McNaughton. He was speaking last week from Washington where he said the sides were going in the rooms to negotiate late in the evening, often with at least half a dozen people from each country. By Sunday, he noted the pace of the meetings had slowed.

In an interview last month, Rideau Potomac Strategy Group president Eric Miller, a former vice-president with the Canadian Council of Chief Executives, called them the “dream team.” Ms. Hillman has the technical knowledge from her years working in trade, including on the TPP, and Mr. MacNaughton, while not a deep trade expert, has the “complete trust” of Prime Minister Justin Trudeau (Papineau, Que.).

Both Mr. Wolfe and Mr. Robertson sit on a trade-experts council that acts as an advisory sounding board to the deputy minister of trade, who briefs the group periodically and seeks their views. There are also a number of advisory groups from various business sectors, Mr. Robertson added. Those groups likely have their own lawyers looking at the language of the deal and aware of the sensitivities.

“That’s why these things run over three or four days, because you are constantly checking back to verify,” Mr. Robertson said.

As much as the action is where the negotiating teams meet, there’s also that chain of check-ins and a fairly complex behind-the-scenes process in Ottawa to develop negotiating objectives and to ensure there is broad support within the government, Mr. Wolfe added.

Hotels make a good space for these sorts of negotiations, said Mr. Robertson, explaining in his experience how they would reorganize tables to fit in a big square or triangle to fit the three sides. Principal negotiators for each country would be in the front row, with those in supporting roles behind.

In this round, Mr. Clark said the board rooms can hold around 20 people.

“Each table will have its own dynamic and it is a reflection in part of the personalities at the table,” said Mr. Robertson, but what’s different here is that the players know each other quite well, many of whom would have been at the table for TPP.

“The rhythm depends on what it is you’re negotiating,” he added.

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Full Court Press on USA

‘Full court press’ by ministers, Trudeau ahead of NAFTA negotiations

An active cabinet is key to Canada’s new approach to U.S. relations, say former diplomats, current Parliamentarians.

Prime Minister Justin Trudeau speaks with Virginia Governor Terry McAuliffe during a Q&A session with governors after his keynote address to the National Governors Association last week in Providence, R.I.Photograph courtesy of the PMO

PUBLISHED : Wednesday, July 19, 2017 12:00 AM

Canada’s “full court press” on U.S. relations is one coordinated from the top and taken up by MPs of all political stripes ahead of North American Free Trade Agreement negotiations expected to begin next month.

“Our strategy is quite simply to work at all levels. We are doing everything reasonably possible to expand our relationship with the United States at every level,” said Liberal MP Wayne Easter (Malpeque, P.E.I.), who is co-chair of the Canada-United States Inter-Parliamentary Group.

He, like other Canadian officials, pushed back against reports that Prime Minister Justin Trudeau (Papineau, Que.) is going around Donald Trump’s White House, pointing to the bilateral meeting with vice-president Mike Pence that coincided with Mr. Trudeau’s speech to governors on July 14 in Rhode Island.

“We continue to work constructively with the Trump administration and with the United States Congress to advance mutual interests as well as our strong and prosperous partnership,” said Adam Austen, spokesman for Foreign Affairs Minister Chrystia Freeland (University-Rosedale, Ont.), in an emailed statement.

Since Mr. Trump’s inauguration, there have been more than 175 visits and “300 individual contacts” with senior U.S. officials and Canadian cabinet members, parliamentary secretaries, premiers and provincial and territorial ministers and Parliamentarians, according to data sent Monday by Ms. Freeland’s office.

Some 28 cabinet ministers and five parliamentary secretaries represent 95 of those interactions. Meetings have been with Mr. Trump, Mr. Pence, 17 U.S. cabinet members, 200 members of Congress, and more than 45 governors and lieutenant governors, with numbers expected to grow in the coming weeks, the office added. Washington represented the vast majority of meetings with 78, followed by New York with 18, and several spots in California made up eight visits.

 

U.S. NAFTA objectives released

Monday’s late-day announcement of negotiating objectives for the NAFTA by the United States Trade Representative started the next phase of the NAFTA talks, said Paul Frazer, a former high-level diplomat at Canada’s embassy in Washington.

“At this stage we can guess about the public role many in the Congress will choose to have. All-in-all I am confident that the Canadian advocacy work in the U.S. will need to be maintained and adjusted where necessary,” said Mr. Frazer, president of PD Frazer Associates who advises clients on cross-border issues.

“Including deficit reduction as a U.S. goal signals that the president and his rhetoric will unavoidably be prominent; Ottawa and Mexico City will have to manage two tracks: the negotiation itself and the impact of the president’s actions/statements over the course of the negotiations.”

Export Action Global principal Adam Taylor highlighted several areas that “provide a key line of sight into the Trump administration’s thinking,” including: its fixation on trade deficits; sensitivities in agricultural trade; enshrining ‘Buy American’ policies; and raising Canada’s de minimis threshold, a rule that slaps customs and duties on imported goods worth more than $20.

“While there are very few surprises, it is now clear that one person’s tweak is another’s transformation,” he said by email.

Canada will be ready for negotiations to “modernize NAFTA, while defending Canada’s national interest and standing up for our values,” said Ms. Freeland in a statement Monday.

“Canada is the top customer of the United States. Canada buys more goods from the U.S. than China, Japan, and the United Kingdom combined.”

That messaging reflected Mr. Trudeau’s address at the National Governors Association meeting Friday—a first for a Canadian leader.

 

Personal relationships key to U.S. strategy

Mr. Trudeau’s reception in Providence is one sign that Canada’s message—as America’s “biggest and best” customer—is being noticed, and that the nation is less of an afterthought, said an official in Ms. Freeland’s office who said they could only speak on background.

Standing ovations at the summit, and the number of people who recognized Canada’s prime minister, speak to the work done to build ties recently, the source said.

The month before, Canada sent Andrew Leslie (Orléans, Ont.), parliamentary secretary to the foreign minister, to the Western Governors’ Association meeting.

The official didn’t confirm whether specific ministers were handed regional assignments, as reported by Vice News in May, but said some are a natural fit given their industries, like Innovation Minister Navdeep Bains’ (Mississauga-Malton, Ont.) connections to Michigan and its established auto and aerospace industries.

Former Canadian diplomat Colin Robertson said face-to-face interactions were the most effective form of free trade advocacy.

“It’s a contact sport,” said Mr. Robertson. “Personal relationships are everything.”

“There have been a whole series of efforts that [go] beyond traditionally how we approached the administration,” he said, adding there have been more minister-level meetings, such as those between Finance Minister Bill Morneau (Toronto Centre, Ont.) and his counterpart U.S. Secretary of Treasury Steven Mnuchin in February and again in June, accompanied by Ms. Freeland.

It was a smart strategy by Ms. Freeland and Defence Minister Harjit Sajjan (Vancouver South, B.C.) to meet with U.S. officials before their respective policy speeches in February, he added. 

Public Safety Minister Ralph Goodale’s (Regina-Wascana, Sask.) effort to build a relationship with U.S. Secretary of Homeland Security John Kelly, the first of Trump’s cabinet to come north, was also crucial, he said.

“The homeland security side is really important, because that’s Trump’s base and so that relationship is very important,” he said, noting Mr. Kelly met with other key ministers.

An unusually large number of American officials are deciding they should make the trip north, Mr. Robertson noted. Recently Republican Nebraska Gov. Pete Ricketts said he’d visit Canada this summer, leading a delegation of government and business representatives.

“I can’t think of a time when we’ve had that many in that short a period,” said Mr. Robertson.

Mr. Bains is one Canadian minister who has “undertaken significant outreach,” said spokesman Karl Sasseville—most notably in Michigan, Colorado, and California. And, while Mr. Trudeau was in Rhode Island, Mr. Bains met with U.S. Secretary of Commerce Wilbur Ross, who has also met with Ms. Freeland to discuss issues like softwood and steel.

Mr. Bains has met with business leaders, governors, and other elected officials where he “[insisted] on the mutually-beneficial nature of the Canada-U.S. trade relationship,” said Mr. Sasseville.

The 10 other cabinet offices contacted deferred questions about their minister’s role to Global Affairs Canada’s Mr. Austen.

 

PMO briefing Parliamentarians

Ms. Freeland accompanied the prime minister to Providence, as did Ontario Premier Kathleen Wynne, whose government has fought against Buy American rhetoric, stressing the impact Canada has on various state economies, and warning that protectionist trade measures will harm more than help.

Global Affairs has helped to brief members of the Canada-U.S. Inter-Parliamentary Group attending bilateral meetings with the latest issues and messages from the communications branch of the Prime Minister’s Office, said Mr. Easter,

The PMO has also launched an unprecedented U.S.-relations ‘war room,’ led by Brian Clow, Ms. Freeland’s former chief of staff when she was international trade minister.

Conservative Senator Bob Runciman was among the group in Rhode Island last week, and said he’s also seen more attention paid to Canada-U.S. relations.

“It’s simply more a sense of urgency and a higher priority, given some of the things president Trump has said and veiled threats, if you will, in respect to tearing [NAFTA] up. I think there’s a real full court press,” he said.

He said there’s a real “team feeling” to the meetings, and agreed it was a good idea for Mr. Trudeau to reach out to governors, noting several key cabinet secretaries came from those ranks.

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