The Trump administration and Canada failed to come to an agreement on the president’s bilateral trade deal with Mexico Friday, prompting the White House to submit the deal to Congress without Canada even while planning to continue talks between the two countries.
“Today the president notified the Congress of his intent to sign a trade agreement with Mexico — and Canada, if it is willing — 90 days from now,” U.S. Trade Representative Robert Lighthizer said. He is scheduled to resume negotiations on Wednesday.
Friday was previously considered a deadline for the deal because under Trade Promotion Authority, the law covering submitting trade deals to Congress, Trump must give lawmakers 90 days notice. Friday, Aug. 31, is 90 days before incoming President Andrés Manuel López Obrador, a NAFTA critic, officially takes office, so a deal submitted by Friday’s deadline then would still be handled by Mexico’s current president, Enrique Peña Nieto.
[Related: Leaked Trump remarks jeopardize trade talks with Canada]
The decision to move forward without an agreement from Canada sets up a potential showdown between the White House and lawmakers, many of whom have expressed skepticism of proceeding on a deal without Canada’s approval because that would damage NAFTA. Another potential sticking point is that the administration’s original notice to Congress that it was entering talks said it was going to renegotiate NAFTA. Some lawmakers argue that, accordingly, anything submitted to Congress must involve all three NAFTA countries.
“Actually fixing NAFTA requires reaching a trade agreement with both Mexico and Canada that improves the wages, the working conditions and the well-being of America’s workers and farmers,” House Democratic Leader Nancy Pelosi said in a statement late Friday afternoon.
Trump is wagering that not enough lawmakers will want to take Canada’s side in the fight. At an event in Charlotte, N.C. President Trump downplayed the significance of not getting Canada’s sign-off, saying that it would be “just fine.”
“We’ll see how it all works out,” he said, adding that Canada may start facing auto tariffs if they don’t play ball: “I say, affectionately, we just have to tariff those cars coming in. That’s a lot of money coming into the coffers of the United States.”
A senior administration official, speaking on the condition of anonymity, told reporters there was no reason that the deal couldn’t proceed through Congress. “We sent (Congress) a letter today saying that we intend to enter an agreement with Mexico and Canada, if Canada is willing to participate in that agreement,” he said, arguing that they had been “very transparent, very clear.” The official conceded that, “obviously, the Senate will make its own decisions.”
Business groups, most of whom were not pleased with Trump’s changes, expressed confidence that the deal would hit a wall in Congress. “Anything other than a trilateral agreement won’t win Congressional approval and would lose business support,” said Chamber of Commerce President Tom Donohue.
U.S. and Canadian officials had negotiated intensely throughout the week, and by Wednesday seemed confident that they could reach an agreement on the U.S.-Mexico deal by Friday. The administration has contended that Canada’s consent was not necessary, but sought the approval to prevent the deal from becoming too controversial.
For Canada’s part, Foreign Minister Chrystia Freeland told reporters Friday that she was optimistic that further talks would be fruitful. “A win-win-win agreement is within reach, and that’s what we’re working toward,” she said at the Canadian embassy in Washington.
A key sticking point for Canada was a section in the deal that scrapped NAFTA’s Chapter 19, which involves settling disputes over levies and anti-dumping rules. Chapter 19 cases are heard by an independent, binational panel of five arbitrators and are not appealable by courts in either country. The Trump administration has sought to get rid of the section, regarding it as infringing on U.S. sovereignty. Preserving it has been a goal of Canada’s, since the section is seen as key to protecting many of its domestic industries such as timber, which benefit from generous government support. It was Canada that insisted the section be included when NAFTA it was first written in 1993.
Freeland declined to get into the specifics of why they couldn’t reach a deal. She said that she had reached an agreement with Lighthizer that “the best way to get a good deal was not to be negotiating in public, and I’m going to stay true to that agreement.”
Probably not helping the situation was a report published Friday by the Toronto Star that President Trump told Bloomberg reporters in off-the-record comments that any deal with Canada would be “totally on our terms” because he was using tariffs to keep them from asking for more. “Off the record, Canada’s working their ass off. And every time we have a problem with a point, I just put up a picture of a Chevrolet Impala,” Trump said, according to what the Star said was an anonymous source. The Impala is produced at a General Motors plant in Ontario.
Freeland, however, downplayed the significance of Trump’s comments, saying that she believed that Lighthizer had been negotiating with her in good faith.
The main parts of the U.S.-Mexican deal altered the so-called “rules of origin” for cars and trucks, raising up to 75 percent, up from 62.5 percent, the amount of North American-made parts needed for them to be duty-free under NAFTA. It also required that at least 40 percent of all auto content be made by workers earning at least $16 an hour or its equivalent. Both changes would force auto manufacturers to move more production back into the U.S.
