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Canada need not worry about U.S. and Mexico meeting in two-way NAFTA talks, analysts say

Canada need not worry about U.S. and Mexico meeting in two-way NAFTA talks, analysts say

It’s on the outside looking in for now, but Mexico and the U.S. are focused largely on auto-industry wages, an issue that should have little impact on Canada

Tom Blackwell – National Post
August 2, 2018

WASHINGTON, D.C. — Canada tried to get an invitation, but was rebuffed. The U.S. talked of using it to pressure Canadian counterparts. Members of Congress warned it might be illegal — a breach of the trade-negotiating authority they gave the White House.

But as an unusual round of NAFTA talks between the States and Mexico began Thursday with their northern partner notably absent, some analysts suggested Canada may not have much to fret about.

It’s on the outside looking in for now, but the other two countries are focused largely on auto-industry wages, an issue that should have little impact on Canada, they say.

“Whether Canada is physically at this particular table on this particular day on this issue is not especially an important distinction,” said Scotty Greenwood, a Washington, D.C., lawyer and head of the Canada-U.S. Business Council.

“I’m not worried about whether Canada is in a two-way discussion between U.S. and Mexico or not,” echoed Flavio Volpe, president of the Canadian Automotive Parts Manufacturers Association.

Meanwhile, Ildefonso Guajardo, Mexico’s economy minister, said Thursday that Canada could be back in the talks as early as next week.

Guajardo confirmed his meeting with U.S. Trade Representative Robert Lighthizer dealt “intensively” with the so-called “rules of origin” for autos sold duty-free under NAFTA, and other Mexico-U.S. questions.

“There are some issues that are very important to Canada, and I think that will be next,” Guajardo said. “I don’t know if it will be next week or the following.”

The U.S. has made a number of demands on auto content, including that 40 per cent of light vehicles and 45 per cent of pickup trucks imported to the States be made in factories that pay at least $16 an hour — a bid to stem the flow of jobs to Mexico. Autoworkers there can make as little as a few dollars an hour now.

But if the discussions this week range beyond autos into other prickly areas, it could be trouble for Canada, said Hugo Perezcano Diaz, Mexico’s original NAFTA negotiator.

Diaz, now at the Centre for International Governance Innovation in Waterloo, Ont., said he’s heard that Mexico is amenable to U.S. demands to scrap NAFTA’s “chapter 19” dispute resolution system.

There are some issues that are very important to Canada, and I think that will be next

It allows countries to appeal anti-dumping or countervailing-duty rulings to a bilateral NAFTA panel, rather than the importing nation’s local courts. The Trump administration sees it as a curb on U.S. sovereignty.

The threat is that if Lighthizer gets a deal with Mexico on chapter 19, he could then push Canada to agree. Diaz said that would be a mistake for both countries, as mounting U.S. protectionism could make biased anti-dumping and countervailing decisions more common.

“It is my understanding that Mexico decided a while back that that was more of a Canadian issue,” said Diaz. “Mexico said ‘Let them fight that battle, we won’t.’ ”

Lighthizer said last week he hopes to strike a deal on NAFTA with Mexico soon, then use it as leverage to exact “compromises” from Canada.

On autos, resolving another rules-of-origin demand by the U.S. — that 75 per cent of components be made in North America — is actually “doable” soon, argued Volpe.

That leaves wage levels, which isn’t an issue in Canada since no autoworker is paid less than $16 an hour.

“The implications of that proposal are extensively Mexican,” Volpe said.

But some members of Congress are still concerned that Lighthizer is pursuing a separate negotiating track with Mexico.

Four Democrats in the House of Representatives wrote him a letter this week warning that a bilateral deal would not be allowed under the law that lets the administration make trade deals. The White House only has permission to negotiate a new, trilateral NAFTA, they noted.

In the Senate, Democrat Ben Cardin also raised a red flag about splitting the talks. “I am not confident this is a smart strategy,” he told the Inside U.S. Trade website.

Click here for original article.

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