Canadian officials signaled Friday that a deal to support adding a U.S.-Mexican side agreement to the North American Free Trade Agreement may not happen this week. The U.S., Canadian, and Mexican officials had been meeting in Washington throughout the week in hopes of finishing the deal by Friday.
“We are looking for a good deal, not just any deal. We are not there yet,” Canadian Foreign Minister Chrystia Freeland told reporters following a two-hour meeting with her American counterpart, U.S. Trade Representative Robert Lighthizer.
Canadian Prime Minister Justin Trudeau echoed her in comments at a Toronto event. “We have been very clear about where our red lines are. … This is something we take seriously as a renegotiation,” he said.
The U.S. and Mexico had hoped to get Canada’s assent to a U.S.-Mexican bilateral deal that would, in the words of the Trump administration, “supplant” NAFTA. Friday is widely thought to be the last day that the administration of outgoing Mexican President Enrique Pena Nieto could approve it.
It is unclear whether Mexico would remain in the deal if Canada opposes it. Pena Nieto pressed Trump three times during a Monday press conference to get Mexico’s support. Trump was noncommittal.
Should Mexico remain on board, it is unclear what Canada could do to oppose the deal, which requires only congressional approval. Trade policy analysts said that Canada had no apparent legal way to intervene and would have to rely on support in the U.S. Congress to stop it. Many lawmakers have cited Canada’s exclusion as a reason to be skeptical of it. The Trump administration has said it would proceed with seeking congressional approval of the deal regardless of whether Canada backs it.
The main provision of the U.S.-Mexican agreement alters the so-called “rules of origin,” raising to 75 percent, up from 62.5 percent, the amount of North American-made parts needed for a car or truck 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.
[Opinion: Trump is confused by trade, as shown by NAFTA and Canada]
The key issue 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.
Getting rid of the section has been a priority for the Trump administration, which regards 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, that benefit from generous government economic policies. It was Canada that insisted the section be included when NAFTA was first written in 1993. The section has been of much less interest to Mexico.
Scrapping the chapter between the U.S. and Mexico would grant the U.S. significant leverage in later NAFTA talks regarding that issue. Mexico and Canada have generally provided a united front to oppose proposed U.S. revisions to the deal, each backing the other on individual matters.
The U.S.-Mexico deal has only a 16-year lifespan, but can be extended for another 16 years if every sixth year both countries agree. That mirrors a Trump proposal for NAFTA: creating an eventual “sunset provision” for the deal if one of the trade partners no longer supports it.
Most of the other details of the agreement had little impact on Canada’s economy, but the precedent of a side deal that would replace elements of NAFTA — President Trump went so far as to say the deal would “terminate” NAFTA — was a problem for Canada, which had relied on Mexico to provide a united front against the U.S. in the talks.
The Toronto Star reported Friday that Trump boasted in off-the-record comments to Bloomberg 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.
