NAFTA Talks With US ‘Very Constructive’: Canada

August 29, 2018 Updated: August 29, 2018

Canadian Foreign Minister Chrystia Freeland on Tuesday, Aug. 28, called her her first negotiating session with U.S. Trade Representative Robert Lighthizer “very constructive.”

Freeland said talks aimed at forging a new North American trade agreement would continue.

“What has really paved the way for what Canada believes will be a good week is the fact that Mexico has made some significant concessions, particularly in the area of labor and of rules of origin on cars,” Freeland told reporters outside Lighthizer’s office.

Freeland said Canadian officials would meet with Mexico on Tuesday evening before resuming talks with Lighthizer on Wednesday morning.

Canada is under pressure to accept new terms on auto trade and dispute settlement rules after the U.S. and Mexico agreed on Aug. 27 to overhaul the North American Free Trade Agreement (NAFTA).

President Donald Trump said the U.S. would proceed with a deal with Mexico alone and levy tariffs on Canada if it does not come on board with the revised trade deal. He spoke with Canadian Prime Minister Justin Trudeau shortly after the announcement, and both agreed to continue the conversation on trade.

Select Details of the Agreement

While details of the agreement are still under wraps, the Office of the U.S. Trade Representative put out select details, which include enforceable provisions on labor requirements, zero tariffs on agricultural products, enhanced protection on intellectual property, the liberalization of financial services, and a requirement that 75 percent of automobiles be made in the United States or Mexico.

U.S. Treasury Secretary Steven Mnuchin told CNBC on Aug. 28 that he believed the United States could also reach a trade deal with Canada this week.

“The U.S. market and the Canadian markets are very intertwined,” Mnuchin said. “It’s important for them to get this deal and it’s important for us to get this deal.”

Mexican Foreign Minister Luis Videgaray told Mexican television on Aug. 28 the three sides would work for a three-way deal.

“We are now going to devote long hours to the negotiation with Canada,” he said.

Mexico’s president-elect Andrés Manuel López Obrador has also said he wants Canada to be part of the deal.

“We’re very interested in it remaining a three-country deal,” he said, according to AFP. “The free-trade agreement should remain as it was originally conceived.”

Prolonged Negotiations

Negotiations among the three partners, whose mutual trade totals more than $1 trillion annually, have dragged on for more than a year, putting pressure on the Mexican peso and the Canadian dollar. Both currencies gained against the U.S. dollar on Aug. 27, but the peso weakened the next day.

Canada’s main stock index opened higher on Aug. 28 on the prospect of Ottawa reaching a deal this week, before dipping.

A sticking point for Canada is the U.S. effort to drop the Chapter 19 dispute resolution mechanism that hinders the United States from pursuing anti-dumping and anti-subsidy cases. U.S. Trade Representative Robert Lighthizer said on Aug. 27 that Mexico had agreed to eliminate the mechanism.

Trump says he still could put tariffs on Canadian-made cars if Canada didn’t join its neighbors, and warned he expected concessions on Canada’s dairy protections.

Canada’s dairy farmers operate under a protectionist system that manages supplies and prices, and imposes high tariffs to limit imports. U.S. demands have ranged from ending those tariffs to scrapping a milk ingredient pricing system called Class 7.

“It seems like a pretty steep challenge to now resolve these issues in three days,” said David Wiens, a Manitoba dairy farmer and vice president of industry group Dairy Farmers of Canada.

If a deal isn’t reached with Canada, Mnuchin said, the United States would proceed with a separate trade agreement with Mexico. The Mexican government has also taken that position, even as it says it wants a trilateral deal.

The president must notify Congress 90 days in advance of a trade deal being signed, and the White House said Trump will sign the deal if Congress approves it.

Julie Gordon & Sharay Angulo, as well as Epoch Times staff member Holly Kellum contributed to this report.