Canadian Manufacturing

Trump threat hovers over NAFTA as Ottawa talks end with no major progress

by Mike Blanchfield, The Canadian Press   

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Negotiators have little to show for their efforts as the third round of talks wraps up, raising concerns an impatient Trump might trigger NAFTA's withdrawal clause

Content rules and labour standards in the auto industry are two topics on which negotiators have made little progress. PHOTO: FCA

OTTAWA—The third round of talks to renegotiate the North American Free Trade Agreement wrapped Sept. 27 with the spectre of a U.S. withdrawal by President Donald Trump looming ever larger, thanks to slow progress on major issues.

The languid pace of the talks is being widely blamed on the lack of concrete proposals being brought by the U.S.—fuelled by internal U.S. divisions—but there is also grumbling about a lacklustre showing by some Canadian negotiators.

That is stoking broader fears that an impatient Trump could trigger NAFTA’s withdrawal clause if he doesn’t see a win for the U.S. by the end of the year.

The lead ministers for Canada, Mexico and the United States congratulated themselves for modest progress in signing off on one chapter on small and medium-sized businesses. Foreign Affairs Minister Chrystia Freeland said they expect to complete the competition chapter prior to the next round of talks two weeks from now in Washington.


No substantive progress was made on the investor state dispute settlement process; opening up Canada’s supply-managed dairy and poultry industry; or the U.S. demand for greater American content in automobiles manufactured in North America.

Nonetheless, Freeland was doing her best Wednesday to sound a positive note, calling the progress “astonishing.”

“Really significant, speedy progress has been made on a number of fronts,” she told a news conference.

“On some of the hardest issues, proposals have not been tabled, so we haven’t gotten to those. That is standard practice in a trade agreement.”

A rift also emerged Wednesday with unions saying Canada was facing opposition from the United States and Mexico on its proposal to raise labour standards, targeting what is seen as anti-union practices in more than two dozen U.S. states and improving the plight of Mexican workers.

All three ministers acknowledged that difficult issues lay ahead for the fourth round. Mexican Economy Minister Ildefonso Guajardo took a shot at the U.S., which has not tabled written proposals on the most contentious issues.

“As the negotiations move forward, it is important we have the will to table positions that encourage constructive discussions,” he said.

Sources close to the talks, who were not authorized to speak publicly, said the U.S. is demanding an eight-fold increase in Mexico’s minimum wage, which is currently less than $1 per hour. The Mexican delegation flatly rejected that idea.

Guajardo also appeared to bristle at the American and Canadian focus on labour standards, saying Mexico won’t accept any proposal that will “restrict any possibilities to create work or trade.”

Freeland held firm on her push for enforceable, progressive labour standards, drawing a link between it and lost Canadian jobs.

Freeland said the proposal was meant to address “the very legitimate concerns of Canadian workers that trade agreements can sometimes expose Canadian workers to competition with workers who function in an environment of lower labour standards.”

U.S. Trade Representative Bob Lighthizer said “some very difficult and contentious issues” lie ahead, including the inevitable showdown on Canadian dairy practices, which Trump has loudly blamed for lost jobs on Midwestern farms. The U.S. would continue to push for “reciprocal market access for American farmers, ranchers and businesses.”

Dan Ujczo, an Ohio-based international trade lawyer who represents companies in both U.S. and Canada, detected a decidedly pessimistic mood among the stakeholders and negotiators who attended a reception in Ottawa on Tuesday night.

“The universal view is that this is going down in stunning glory,” Ujczo said in an interview.

“In that room of 250 people, I didn’t hear one positive comment about what was happening in these negotiations.”

In addition to failing to provide detail on its position on some of the most contentious issues, Ujczo said the U.S. has signalled it intends to take a hard line on matters like government procurement and dispute resolution.

“Everything the U.S. is adding are those types of measures that will restrict trade,” he said, adding that stakeholders are already preparing for the demise of NAFTA, with some who made investment decisions based on the pact even getting ready to launch litigation against the U.S.

The talks ended a day after the U.S. Department of Commerce proposed a hefty 219 per cent countervailing duty on jets manufactured by Montreal’s Bombardier, further straining the Canada-U.S. trading relationship.

Freeland said she discussed the Boeing-Bombardier dispute in her meeting with Lighthizer, but she considers the matter to be separate from the NAFTA talks, in part due to the fact the action was not taken by Lighthizer’s department. She said she would be talking soon with U.S. Commerce Secretary Wilbur Ross.

The Bombardier developments had a “sobering” impact on stakeholders, who are bracing for the ongoing talks to fall apart at some point, Ujczo said.

“It fits the narrative that this is a U.S. that is very serious about restricting trade.”

Freeland reiterated her oft-repeated message that the U.S. enjoys a trade surplus with Canada in variety of areas, citing the statistics on steel, manufacturing and auto parts. She also made no bones about the fact the Trump administration is “unconventional” and “protectionist.”

“We have a highly productive relationship,” she noted. “We want to keep it that way.”

A top Mexican business leader echoed the “do no harm” approach to the talks in an interview with The Canadian Press.

Mexico is deeply worried about the possibility of Trump making a move to unilaterally withdraw from NAFTA, said Moises Kalach, a leading member of the private-sector group that advises the Mexican government on the negotiations.

“We take it very seriously. He is the president of the United States,” Kalach said in an interview.

Like Canada, Mexico has mounted its own full-court press on various levels of U.S. government and business. Kalach cited 200 stakeholder meetings in the U.S. and meetings with 22 state governors. Mexican business leaders also planned meetings with 20 Canadian businesses and associations this week.

The overarching take away from all of that consulting, said Kalach, is this: most are on a different page than Trump and see NAFTA as essential.

Most companies don’t agree with Trump’s threats to NAFTA’s Chapter 19 dispute resolution process, he said.

“It seems like the only voice out there that does not agree with some of the things we’ve been doing is President Trump and his team. So yes, we’re worried about withdrawal.”


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