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Canada demands concessions from U.S. as NAFTA deal nears

Canada demands concessions from U.S. as NAFTA deal nears

ADRIAN MORROW AND GREG KEENAN
WASHINGTON AND TORONTO
PUBLISHED APRIL 3, 2018

NAFTA renegotiations have kicked into high gear, with the Trump administration pushing for an agreement before the end of next week and Canada demanding concessions to seal the deal.

Both Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo are planning talks in Washington this week with U.S. Trade Representative Robert Lighthizer.

After months of deadlock, negotiations have begun to move rapidly over the past four weeks, said people with knowledge of the top-secret discussions, after the United States suddenly agreed to drop some of its toughest proposals or to compromise.

The three sides are nearing agreement on the crucial issue of auto content rules, the insiders said, and the United States has indicated it can be flexible on its demands to kill or gut the Chapter 19 and 20 dispute-resolution provisions, and a proposed sunset clause.

But negotiators remain far apart on procurement, sources said, with the United States demanding a hard cap on the amount of U.S. government contracting Canadian and Mexican firms can bid on. And Canada is continuing to defend its system of supply management for eggs, milk and poultry against U.S. demands for a more open market.

People familiar with Canada’s strategy said Ottawa is happy to strike a quick deal, but the United States will have to make concessions if this is to happen.

Any deal would be preliminary and high-level, with many details to be worked out in future.

In lieu of the large, formal negotiating rounds that marked the first seven months of talks, negotiators have traded proposals sporadically over the past month, including a meeting between Mr. Lighthizer and Ms. Freeland in Washington in early March.

Ms. Freeland and Mr. Lighthizer are trying to get together in the coming days, sources said.

Mr. Guajardo said on Tuesday the United States wants a “quick solution” on NAFTA so that leaders of the three countries can sign a pact at the Summit of the Americas on April 13 and 14 in Peru.

Mr. Guajardo said he will be in Washington on Wednesday to see Mr. Lighthizer.

“We’ve made a lot of progress,” he told Mexican radio. “On the complex issues, well, it looks like there’s a willingness to be flexible.”

The United States wants a deal before the campaign for Mexico’s July 1 presidential election kicks into high gear.

Washington wants to make trade peace in North America so it can focus on its trade war with China. Mr. Lighthizer on Tuesday released a proposed list of 1,300 Chinese goods representing $50-billion worth of imports that he is considering hitting with tariffs meant to cause China economic pain for forcing foreign companies to hand over their proprietary technologies to Beijing.

Flavio Volpe, president of the Automotive Parts Manufacturers Association of Canada, said negotiators from the three countries appear to be down to the short strokes. Mr. Volpe has been at all negotiating rounds and has advised the Canadian government on auto provisions.

“This is an expressly different direction than they were going in for the last six months or so, and I think it’s directly related to moving on to China,” he said.

Mr. Lighthizer has already agreed to give up his toughest demand – a 50-per-cent U.S.-content requirement for all vehicles made in Canada and Mexico to be exported to the United States – in exchange for Ms. Freeland and Mr. Guajardo agreeing to a higher percentage of North American content than the current 62.5 per cent, sources have said.

U.S. President Donald Trump, meanwhile, continued to undermine his administration’s attempts to get a NAFTA deal by threatening to tear up the pact if Mexico did not do more to keep Honduran migrants out of the United States.

“The big Caravan of People from Honduras, now coming across Mexico and heading to our ‘Weak Laws’ Border, had better be stopped before it gets there,” he tweeted. “Cash cow NAFTA is in play, as is foreign aid to Honduras and the countries that allow this to happen.”

Later, at an unrelated White House meeting, Mr. Trump announced that he would send the military to “secure” the border with Mexico.

“Until we can have a wall and proper security, we’re going to be guarding our border with the military,” the President said. “That’s a big step. We really haven’t done that before.”

Mr. Trump later said he would soon meet with Defence Secretary James Mattis to make this happen.

The President also said that Mexico and Canada have tougher immigration laws than the United States, and called on Congress to pass rules to match. He did not say what rules he believes are more stringent.

“The Mexican border is very unprotected by our laws. We have horrible, horrible and very unfair laws in the United States,” Mr. Trump said.

At a news conference, the President reiterated that he had told Mexico to stop the Honduran “caravan” because “their laws are so strong, they can do things about it.”

“As you know, NAFTA is a phenomenal deal for Mexico. … But it has been a horrible, horrible, embarrassing deal for the United States,” he said. “It should have been terminated or renegotiated many years ago.”

A source in the Office of the United States Trade Representative said on Tuesday that it is up to the White House to clarify whether the President’s threats are an actual negotiating position.

Unifor President Jerry Dias, who represents Canadian auto workers, scoffed at Mr. Lighthizer’s belief a deal can be done within two weeks.

“And I was hoping the Easter Bunny was going to show up on Sunday,” he said.

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