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In keeping with his election promise, President Trump has brought to a head discussions on revisiting NAFTA. The APMA has been active in publicly advocating for the importance of the trade agreement (both prior to the election and ongoing), emphasizing the interdependence of the North American automotive supply chains in anticipation of any potential trade agreement discussions.
APMA members should be aware that we are on the forefront of all issues relating to trade and matters that may impact the Canadian automotive supply chain. While you may hear varying reports in the media concerning NAFTA and other trade agreements, the APMA wishes to advise its members that we are actively working on your behalf and that your voice is being heard.
Below is a round-up of important NAFTA article summaries over the last few months, emphasizing the need for free trade-partners in an increasingly global industry. Links to the original publications are included in each article.
OTTAWA – Globe & Mail
June 10, 2018
How will Donald Trump know, within minutes, if he can deal with North Korea’s leader? “Just my touch, my feel,” he told reporters Saturday. “That’s what I do.”
Yes, that’s what he does. He moves the world according to his animal spirits. Not just with a dictator such as Kim Jong-un but with Justin Trudeau. Angry Donald Trump blew up the Group of Seven and is threatening a bigger trade war.
And now Canada is in a game of chicken with the United States.
That’s not a game this country has been in before. Canada worked to get U.S. attention. It negotiated. Sometimes it ingratiated.
In NAFTA talks, Mr. Trudeau had a careful policy of lowering the temperature. His government deflected Mr. Trump’s bluster into plodding Canadian details. And it tried to stay out of Mr. Trump’s Twitter feed.
The key is guessing whether what we’re hearing from the Trump administration is just loud scary noise or Mr. Trump’s headlong rush to Trade-ageddon.
The spark wasn’t just differences at the G7, or that Mr. Trudeau repeated that Canada would retaliate to U.S. steel tariffs. It was the way Mr. Trudeau said at his closing G7 news conference that Canada is polite, but won’t be pushed around. That triggered the rage response.
It came after Mr. Trump’s own, spectacular news conference, in which he insisted he had laid down the law on trade and other G7 leaders realized they’d have to accept it. But what was really on Mr. Trump’s mind that day, we now know, was looking strong before meeting Mr. Kim.
That’s why Mr. Trump was so mad, his economic adviser Larry Kudlow said on a Sunday talk show. Mr. Trump couldn’t show weakness just before the North Korea summit. That’s why Mr. Trudeau’s won’t-be-pushed-around remark was a “betrayal.” Mr. Trump slapped at Mr. Trudeau to show he’s not weak.
That’s not Machiavellian calculation – it’s more primatology than political science. It’s an alpha chimp puffing himself up to confront a rival – when another chimp seemed to be challenging him, he reacted aggressively to assert the dominant rank.
Mr. Trump’s aides gathered to reinforce the aggression. Mr. Kudlow went on the air to say Mr. Trudeau “stabbed us in the back.” Peter Navarro, head of Mr. Trump’s trade council, asserted “there’s a special place in hell” for foreign leaders such as Mr. Trudeau – the first time the White House had condemned a Canadian Prime Minister to burn for eternity.
Yet, it’s a mistake to think that Mr. Trump’s animal spirits, or his tactics, are easily outsmarted, or inconsequential. He can make a game of chicken scary.
He has already imposed steel and aluminum tariffs not just on adversaries, but on Canada – despite the North American free-trade agreement.
His Saturday night tweetstorm levelled a threat to impose a similar series of hefty tariffs on automobiles – a product at the centre of a $135-billion two-way Canada-U.S. trade. If Mr. Trump takes that step, it’s not just the end of NAFTA, but the start of a massive U.S. protectionist wall that could tip Canada, perhaps the world, into recession.
But it also means a big blow inside the United States, clobbering U.S. auto makers and raising consumer prices. “The threat is ridiculous,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, because it’s a threat to devastate ”the biggest business in the Great Lakes region and the U.S. southeast.”
It seems hard to believe Mr. Trump will launch a scorched-earth campaign with Canada as his first big trade enemy.
And now he’s done something he probably didn’t expect: He has strengthened Mr. Trudeau’s political position at home.
The Trump onslaught couldn’t have been better measured to raise Canadians’ national sense of injustice. Foreign Affairs Minister Chrystia Freeland responded with tart, puritan disapproval, saying that Canada doesn’t believe in conducting its relations with ad hominem attacks.
Conservative politicians trooped out on Twitter to support Mr. Trudeau in a rally-to-the-flag moment – Alberta’s Jason Kenney, new Ontario premier-designate Doug Ford and federal Conservative Leader Andrew Scheer. Mr. Trudeau gets to pluck a chord of reasoned national pride. That can only give him some steel to stay in the game of chicken – but always hoping both countries will swerve before the end.
Click here for original article.
ADRIAN MORROW – Globe & Mail
PUBLISHED JUNE 10, 2018
U.S. President Donald Trump is increasing his threat to levy 25-per-cent tariffs on car and truck imports, a move that would devastate Canada’s auto industry and unleash the country’s most serious trade war in recent memory.
And the renegotiation of the North American free-trade agreement is stalled, with the sides at an impasse over some of the Trump administration’s toughest protectionist demands.
Auto levies represent the most immediate threat to Canada. The U.S. government is currently undertaking an “investigation” ordered by Mr. Trump to determine whether foreign vehicle imports represent a threat to “national security.”
Tariffs would pummel $80-billion in Canadian exports, hitting a sector that employs more than 120,000 people. By comparison, the Canadian steel and aluminium sectors currently facing U.S. tariffs are roughly one-quarter the size.
Already locked in a trade battle with the U.S. over Mr. Trump’s steel and aluminium tariffs, Canada is facing a mounting threat of severe economic pain inflicted by its closest ally as the relationship between the Trudeau government and the Trump administration plummeted to new lows following the weekend G7 Summit.
The President upped the ante in a Twitter barrage aimed at Mr. Trudeau after the summit, threatening “Tariffs on automobiles flooding the U.S. Market!”
Flavio Volpe, the head of Canada’s auto-parts industry group, said the pain of the tariffs would first be felt by American drivers and auto sellers, because it would take time for auto plants to relocate from Canada to the United States. Ironically, he pointed out, most Canadian-made vehicles are manufactured by branch plants of American corporations using U.S. content.
“It would be a tariff paid for by American consumers who buy cars made mostly from American parts by American companies,” he said. “That’s a shotgun blast where no pellet is left unwasted. It would hit a lot of American feet.”
By PETER MAZEREEUW JUN. 11, 2018
The Hill Times
Republican lawmakers are pushing back against U.S. President Donald Trump’s tariffs on Canada, Mexico, and the U.S., likely making the case that the move could pave the road to his impeachment, say a former trade adviser to U.S. politicians and a Canadian lobbyist tracking the trade battle.
“The only hope there is the Republican leadership gets inside the head of the administration to say, ‘Whatever you’re trying to achieve, you’re going to lose the House in November. And if you lose the House in November, we’re immediately into questions of impeachment,’” said Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, a lobby group for an industry that relies on steel and aluminum crossing the Canada-U.S. border.
“That’s an argument they’ll certainly make,” said a former trade adviser to Republican and Democratic lawmakers, adding, “I don’t think that it will cause the president to withdraw the tariffs.”
Prime Minister Justin Trudeau (Papineau, Que.) could hardly have hoped for a better outcome after he responded to Mr. Trump’s tariffs on steel and aluminum from Canada, Mexico, and the EU by imposing retaliatory penalties—effective July 1—on U.S. steel and aluminum, and a variety of other goods produced in U.S. swing states or the electoral districts of influential Republican lawmakers. Numerous Republican politicians have openly spoken against Mr. Trump’s decision, U.S. industry groups have done the same, and even the powerful conservative advocacy groups backed by the billionaire Koch brothers, including Americans For Prosperity, are campaigning against Mr. Trump’s tariffs.
It’s not clear to what extent the Republican backlash is related to Canada’s counter-tariffs, however. Several lobbyists and analysts following U.S. trade issues closely said the penalties brought in by Canada’s government have created some pressure on Republicans and the White House, as intended, by hitting the pocketbooks of businesses that export to Canada and are represented by Republican lawmakers. But some of the politicians who have spoken out or taken action against the tariffs—including Republican House speaker Paul Ryan, who was targeted by Canada’s counter-tariffs, and the Republican Senate Foreign Relations Committee chair Bob Corker—have already said they won’t run for re-election, theoretically diminishing the threat unhappy constituents would pose to them.
“Clearly across the country, in many places, what they have done is going to adversely affect campaigns for Republicans in the House and Senate where the Democrats have a chance, certainly to win the House, if not the Senate,” said Mickey Kantor, who served as the U.S. trade representative, the highest-ranking trade official in the government, under former Democratic president Bill Clinton.
“And that’s exactly what puts the Republicans under pressure. Now, whether that can pressure this president, is quite another question,” he said.
“Whether or not you can pressure an administration that has no policy, no direction, and no philosophy, I don’t know,” he said.
Mr. Trump took aim squarely at Canada after the G7 meeting in Charlevoix, Quebec last weekend, and a closing press conference in which Mr. Trudeau said Canada wouldn’t be pushed around by the U.S. on trade. Mr. Trump fired off a series of tweets in which he called Mr. Trudeau “meek and mild” and “dishonest and weak.” He left the G7 summit early, refusing to sign onto declarations about reducing plastic waste and climate change.
Mr. Trump’s chief economic adviser, Larry Kudlow, appeared on CNN Sunday that Mr. Trudeau had “stabbed us in the back.” White House trade adviser Peter Navarro told Fox News “there’ a special place in hell for for any foreign leader that engages in bad faith diplomacy with President Donald J. Trump,” referencing Mr. Trudeau.
‘Dicey’ for Republicans to take on Trump
The Democrats are thought to have a strong chance of taking back majority control of the House from the Republicans in November’s mid-term elections, needing to win 24 Republican seats while keeping their own, with the party polling well and more Republican-held seats appearing vulnerable than those held by Democrats, according to reporting from The Financial Times, The New York Times, CNN, Fivethirtyeight.com, and others.
Special counsel Robert Mueller’s investigation into the Trump team’s possible collusion with Russia during the 2016 election campaign, once completed, could produce evidence that Democrats could use to begin impeachment proceedings. If a majority of House members vote to impeach, the U.S. Senate would ultimately decide whether to accept that decision. Two-thirds of Senators would have to vote in favour of impeachment, The New York Times reported. The Republicans have a majority in the Senate, however, and are thought to have a good chance at holding it after the midterms.
“I’m not sure that he is convinced” that impeachment is a realistic outcome, said the former trade adviser, speaking on a not-for-attribution basis. “And at the end of the day, he doesn’t care about anyone but himself.”
Republicans vying for re-election are under pressure to support Mr. Trump’s actions, as the president can undermine their bids to stay in office by backing their challengers for the Republican nomination, which is not automatically awarded to incumbents, said Maryscott Greenwood, the CEO of the Canadian American Business Council, a government relations consultant at Dentons’ in Washington, and a former U.S. diplomat to Canada.
“That’s why it’s dicey to take him on,” she said.
“What [Mr. Trump] is doing is politically popular in the Republican base among Trump voters,” she added.
Mr. Trump’s White House team is digging into the “loyalty” of Republican members of Congress as it decides which races Mr. Trump should lend his support to, or not, CNN reported last week. The White House is also considering doubling down, and imposing additional trade penalties on Canada in response to Mr. Trudeau’s retaliatory tariffs, The Washington Post reported last week.
Some Republicans may not feel pressured to react to Canada’s threat of counter-tariffs until it becomes a reality, and businesses in their district start to feel financial pain, said Ms. Greenwood.
Bill Huizenga, the Republican representative for Michigan’s second district, told The Hill Times that delay could be a reality for some lawmakers, but “for some of us it’s very ripe and we want to deal with it.”
“Some polling will say that people are in favour of this, and the population are in favour of this, but part of that might be they haven’t seen some of the ramifications of it. I’m not just talking with Canada and NAFTA. I’m talking larger scale,” he said.
“What I have expressed both publicly and privately is that I’m afraid that the actions from the [U.S.] administration, while they may be well meaning, are a misguided effort to recapture a world that really no longer exists that way that it once did.”
Republican Senator brings bill to rein in president
Sen. Corker made a splash last week by introducing a bill that would force the president to seek approval from Congress before introducing tariffs under national security provisions of the Trade Expansion Act of 1962, which Mr. Trump used to bring in the penalties against steel and aluminum from Canada and other countries.
That bill would apply to any decisions made in the past two years as well, essentially giving Congress a veto over Mr. Trump’s tariffs on Canada. Sen. Corker has support from nine other Senators in both parties, The Denver Post reported. The bill has a tough road ahead, however. Time to pass it before the midterms is running short, with a summer break looming. The former trade adviser said the bill was unlikely to attract enough support from Republicans—wary of a backlash from Mr. Trump—and Democrats, some of whom are protectionist, and favour U.S. trade restrictions.
Mr. Trump called Sen. Corker on the day he introduced the legislation, and the two had what the Senator described as a “lengthy” and “heartfelt” conversation, CNN reported. Mr. Trump would have the power to veto the legislation if it advanced through both chambers of Congress.
Mr. Trump’s treasury secretary, Steven Mnuchin, also urged the president to exempt Canada from the steel and aluminum tariffs, ABC News reported last week, after Finance Minister Bill Morneau (Toronto Centre, Ont.) and his counterparts in the G7 issued a statement urging him to do so.
Mr. Trump hasn’t shown signs of backing down yet, tweeting late last week that Mr. Trudeau was “being so indignant” and that Canada’s protected dairy sector was “killing our agriculture.”
“Trudeau has no option but to retaliate,” said Mr. Kantor. “Simply because, for domestic purposes, if not anything else, I would assume that the business community and regular folks in Canada are upset at what the U.S. has done and demand that Canada respond.”
Editor’s note: this story was updated online to include the outcome of the G7 summit that ended June 9.
Sunday, June 10, 2018 @ 12:01 am
Roberta Rampton & Jean-Baptiste Vey
Reuters via Automotive News Canada
LA MALBAIE, Quebec — President Donald Trump on Saturday threw the G7’s efforts to show a united front into disarray after he became angry with Canadian Prime Minister Justin Trudeau, and said he might double down on import tariffs by hitting the sensitive auto industry.
Trump’s bombshell announcement that he was backing out of the Group of Seven communique, made after he left the summit in Canada early, torpedoed what appeared to be a fragile consensus on the trade dispute between Washington and its top allies.
“PM Justin Trudeau of Canada acted so meek and mild during our @G7 meetings only to give a news conference after I left saying that, ‘US Tariffs were kind of insulting’ and he ‘will not be pushed around.’ Very dishonest & weak. Our Tariffs are in response to his of 270% on dairy!” the U.S. president tweeted.
In his press conference, Trudeau had spoken of retaliatory measures that Canada would take next month in response to Trump’s decision to slap tariffs on steel and aluminum imports from Canada, Mexico and the European Union.
“Canadians, we’re polite, we’re reasonable but we also will not be pushed around,” Trudeau, the host of the two-day summit in La Malbaie, Quebec, told reporters.
“Based on Justin’s false statements at his news conference, and the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!” Trump wrote in another tweet.
Reacting to Trump’s tweets, Trudeau’s office said: “We are focused on everything we accomplished here at the summit. The Prime Minister said nothing he hasn’t said before – both in public, and in private conversations with the President.”
Flavio Volpe, head of the Canadian Automotive Parts Manufacturers’ Association fired back on Twitter.
“So…. you’re suggesting using a National Security regulation to charge $8B in tariffs to *American* consumers who buy 1 million cars made by American automakers, containing 60% American parts content, because of the price of milk in Windsor? Where do I start?” Volpe responded.
Trump’s salvo capped a dizzying two days of controversies that began with his suggestion Russia be readmitted to the G7, then what a French official described as a “rant” full of “recriminations” against U.S. trading partners, followed by Trump’s denial of any contention with leaders at the summit and his description of their relationship as a “10.”
By ordering his representatives to back out of the communique, Trump appeared to be asserting his oft-stated aim of upsetting the status quo whether by pulling out of the global climate accord or the international nuclear deal with Iran or threats to scrap the North American Free Trade Agreement.
The communique, which appeared to have papered over the cracks that have surfaced in the G7, said the leaders of the United States, Canada, Britain, France, Italy, Germany and Japan agreed on the need for “free, fair, and mutually beneficial trade” and the importance of fighting protectionism.
“We strive to reduce tariff barriers, non-tariff barriers and subsidies,” the statement said.
Trump’s reversal, announced while he was en route to Singapore for a meeting with North Korean leader Kim Jong Un, sent his G7 partners scrambling.
“We stick to the communique as agreed by all participants,” a European official said on condition of anonymity.
Trump’s counterparts in the G7 had sought this week to try to find some semblance of consensus with Washington on trade and the other key issues that have formed the basis of the 42-year-old grouping of industrialized nations.
French President Emmanuel Macron had labeled the summit a success before Trump’s Twitter posts, saying there was relief within the G7 that an escalation of the trade dispute had been avoided.
“The nature of the debate we had was rather appeasement and it stopped the escalation in terms of behavior,” Macron, who had exchanged terse Twitter messages with Trump in the run-up to the summit, told reporters.
“It allowed a dialogue, where for weeks there were uncoordinated unilateral actions and non-cooperation.”
Macron is aware of the latest twist on the communique and does not have a comment at this time, a French presidential official said.
Trump says his tariffs are meant to protect U.S. industry and workers from unfair international competition as part of his “America First” agenda.
The prospect that he could be moving toward an even greater protectionist trade policy is likely to chill financial markets worried about tit-for-tit escalation that could lead to a full-blown global trade war.
Trump has announced tariffs of up to $150 billion on Chinese goods over U.S. complaints of Beijing’s trade practices and its alleged theft of U.S. technology. China has vowed to retaliate in equal measure.
Canada, Mexico and the EU also are moving ahead with their own levies on U.S. goods.
But tariffs on U.S. imports of cars and auto parts would devastate the Canadian auto industry, which is highly integrated with the U.S. sector. They could also damage Japan and Germany.
The Trump administration announced two weeks ago that it would investigate whether auto imports hurt U.S. national security, the first step toward tariffs similar to the ones he imposed on steel and aluminum imports last week.
Earlier on Saturday, Trump told reporters it would be “very easy” to make the case for tariffs on auto imports using the rationale that they threaten national security.
“It’s economic. It’s the balance sheet. To have a great military, you need a great balance sheet,” he said.
Such a move could make it nearly impossible to renegotiate the terms of the 1994 NAFTA pact between the United States, Canada and Mexico.
On Saturday, Trump repeated his desire to have a sunset clause in an updated NAFTA deal, a demand Trudeau rejected again.
BY BROOKE SEIPEL – 06/09/18 09:09 PM
Flavio Volpe, president of Canada’s Automotive Parts Manufacturers Association (APMA), mocked President Trump after he threatened to create new tariffs on automobiles on Saturday, saying Trump would end up hurting Americans.
“So…. you’re suggesting using a National Security regulation to charge $8B in tariffs to *American* consumers who buy 1 million cars made by American automakers, containing 60% American parts content, because of the price of milk in Windsor?” Volpe wrote.
So…. you’re suggesting using a National Security regulation to charge $8B in tariffs to *American* consumers who buy 1 million cars made by American automakers, containing 60% American parts content, because of the price of milk in Windsor?
Where do I start?
Volpe’s comment came after Trump said he would not endorse a joint communique signed with the other Group of Seven (G-7) members at this weekend’s summit, and appeared to threaten to impose further tariffs on the country.
Based on Justin’s false statements at his news conference, and the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!
Trump’s decision not to endorse the joint statement came just hours after all nations had agreed to sign the document, despite previous fears that trade tensions between the U.S. and its allies would lead to the U.S. being excluded.
Tensions over trade have ratcheted up in recent days after Trump’s decision to impose tariffs on steel and aluminum.
Mexico announced this week that it would hit the U.S. with a 20 percent tariff on pork imports in response to Trump’s tariffs.
Canada and the European Union have also threatened to slap tariffs on U.S. goods such as blue jeans, bourbon and yogurt, in retaliation to Trump’s tariffs.
Trump had also criticized dairy prices from Canada earlier in the week.
Prime Minister Trudeau is being so indignant, bringing up the relationship that the U.S. and Canada had over the many years and all sorts of other things…but he doesn’t bring up the fact that they charge us up to 300% on dairy — hurting our Farmers, killing our Agriculture!
The decision on Saturday prompted criticism from Democrats and others, though some supported Trump’s decision, including Former Arkansas Gov. Mike Huckabee (R).
Greg Keenan – Auto &n Steel Industry Reporter
Steven Chase – Washington & Toronto & Ottawa
U.S. President Donald Trump has pushed relations between Canada and its largest trading partner to their tensest point in recent memory: American tariffs on steel and aluminum have sparked a trade war over more than $30-billion worth of goods. The Canadian lumber industry is coping with heavy U.S. duties on softwood, and the renegotiation of the North American free-trade agreement has proven fruitless.
And things could get far worse. Serious progress on NAFTA is likely to be delayed until at least the end of the year, said sources with knowledge of the confidential discussions, prolonging uncertainty for business. Mr. Trump’s willingness to hit metal imports, meanwhile, increases the risk he will follow through on threats to impose a 25-per-cent tariff on imports of cars and trucks, a move that would devastate Canada’s manufacturing sector.
Canada, which has previously taken a restrained approach to dealing with Mr. Trump, has shifted into fightback mode. Prime Minister Justin Trudeau is openly criticizing the President, and hoping to inflict maximum political pain on him through a series of targeted tariffs.
Mr. Trump singled out Canada for attack Friday, threatening the country’s forestry sector and falsely claiming that Ottawa – which, according to the United States’ own figures, has an $8.4-billion trade deficit with the United States – has a surplus.
“Canada has treated our Agricultural business and Farmers very poorly for a very long period of time. Highly restrictive on Trade! They must open their markets and take down their trade barriers!” the President tweeted. “They report a really high surplus on trade with us. Do Timber & Lumber in U.S.?”
It was Mr. Trump’s second shot at Canada in 12 hours; in a statement the night before, he warned Mr. Trudeau that, on NAFTA, “the United States will agree to a fair deal, or there will be no deal at all.” Mr. Trump also on Friday raised the prospect of separate trade deals with Canada and Mexico.
The President was particularly irked by Mr. Trudeau; Mr. Trump refrained from similarly firing back at Mexico or the European Union, which also announced levies on U.S. goods in retaliation for the steel and aluminum tariffs. The Prime Minister the previous day openly discussed his private conversations with Mr. Trump, referred to the U.S. administration as “unpredictable” and said it lacked “logic and common sense.”
A resolution on NAFTA now looks increasingly remote, with the Mexican election looming July 1 and U.S. midterms in November.
“It’s increasingly likely that the U.S. wants to wait until after November. I don’t think we’ll see a deal by the end of 2018,” said Daniel Ujczo, an Ohio-based trade lawyer with Dickinson Wright.
This means the pact would not be resolved before the U.S. Commerce Department is scheduled to report back on a plan to slap hefty levies on imported vehicles. And Mr. Trump’s actions on steel and aluminum have the Canadian auto sector worried that they will be next.
“Where he’s been consistent is trade protection,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association of Canada and an adviser to the federal government on the NAFTA talks. “They don’t back off based on our logic. We can probably expect for them to move forward with their threats on everything they’ve told us they are going to threaten us with.”
An auto tariff would hit about $80-billion worth of Canadian exports – more than four times as much as exports of steel and aluminum. There are more than 120,000 vehicle-assembly and auto-parts jobs, compared with about 30,000 in the steel and aluminum sectors. Such a move would also damage the U.S. auto sector, eliminating 195,000 American jobs and sending the price of vehicles soaring, the Washington-based Peterson Institute for International Economics said in a study.
Canada would take the biggest hit among all countries if the Trump administration moves forward on auto tariffs, since about 85 per cent of the vehicles assembled in Canada are shipped to the U.S. market. The most damaging aspect of a tariff would be on investment in Canada.
“Canada would be challenged to attract new auto-related investment in a world of potential tariffs,” said Doug Porter, chief economist at Bank of Montreal. “I suspect even the vague threat could put a chill on new capital spending, which may be precisely what the administration hopes to achieve.”
After more than a year of trying to charm Mr. Trump, the Trudeau government has toughened its stance. A Canadian official said the U.S. goods hit with tariffs were picked to make a political impact: Orange juice was picked to hurt Florida, a swing state that voted for Mr. Trump, while pickles will hit Wisconsin, home of House Speaker Paul Ryan, and bourbon will slam Senate Majority Leader Mitch McConnell’s native Kentucky.
Ottawa’s retaliation could also hit Canadian companies that sell many of the affected U.S. goods. Canada is holding a quick 15-day consultation on the target list before hitting American goods July 1.
The Retail Council of Canada, in a statement on its website, said it’s not certain there are “acceptable substitutes” available on Canadian store shelves for American whiskies, orange juice or lawn mowers. The Retail Council’s vice-president of public affairs, Karl Littler, said he would not be surprised if retailers are trying to bring more American products across the Canada-U.S. border – at least non-perishable products – in the month before tariffs hit.
Eric Miller, a Washington-based consultant who works with companies doing international business, warned that people cannot be complacent about Mr. Trump’s threats.
“He is a guy who has a strong track record of following through on his promises. On every decision, there is a phenomenon of Trump self-denial: People say, ‘Oh, he won’t do it,’” said Mr. Miller, who pointed to the administration’s pledges to move the U.S. embassy to Jerusalem and pull out of international deals on climate and Iran’s nuclear program. “Then they wake up one day and find he’s done it.”
Published JUNE 3, 2018 – Globe and Mail
In the final days of Ontario’s chaotic election campaign, a single narrative has dominated: The public wants change. Even Liberal Leader Kathleen Wynne admits it.
The billion-dollar question for Canada’s largest economy is what exactly such change will bring.
The Progressive Conservatives and the NDP, the two parties now tied neck-and-neck for the lead in polls, have bashed the Liberals for being reckless with Ontario’s finances, but they have largely evaded talking about the consequences of their own fiscal policies.
Until Wednesday, the PCs had not released an official platform. What they finally unveiled, with only a week to go, wasn’t fully costed – that is, the full consequences for Ontario’s finances weren’t spelled out. PC Leader Doug Ford’s promise to find $5.6-billion in spending “efficiencies” in Ontario’s budget also wasn’t included, raising questions about one of his signature pledges.
As for the NDP, the party has given details on what its ideas will cost, but there is so much on the table that it is tough to absorb it all – everything from raising corporate taxes to boosting spending in virtually every area of the budget.
What’s at stake can hardly be understated. While the economy is humming with unemployment at a 17-year low, Ontario is already awash in debt and the existing growth could quickly vanish. U.S. President Donald Trump just implemented tariffs on Canadian steel and aluminum, and nine years into its economic expansion, Ontario is likely in the late stages of the current boom.
The province contributes nearly 40 per cent of Canada’s gross domestic product, the most of any province, and any fiscal woes will hurt a national economy that is just starting to shake off Alberta’s energy crash.
If the Liberals weren’t so far behind in polls, Ontarians would have a clearer picture of their economic future, because the party released its fiscal platform with the province’s budget in late March. Yet only a few days before the election, the PC and NDP plans each promise around $10-billion in extra annual spending, and they haven’t had much of a scrub.
Digging through the details of both, one clear message emerges: Neither party exhibits much fiscal prudence.
“It is difficult to make the case that any of the platforms are fiscally responsible or are grounded in a prudent economic strategy,” former federal parliamentary budget officer Kevin Page told The Globe and Mail.
Few issues are as politically toxic in Ontario as the cost of hydro, which, until last year, had soared at four times the rate of inflation since 2006. Meanwhile Hydro One, the province’s electricity distribution utility, was recently privatized to raise $9-billion for debt repayment and transit funding. (Ontario still holds a 47-per-cent stake.) Hydro One has hardly anything to do with energy rates, which are set by a regulator, but some voters conflate the sale with their expensive bills.
Mr. Ford has vowed to fire Hydro One’s CEO and replace the utility’s board of directors. The Progressive Conservatives have also promised to hand the annual dividend that Hydro One pays to Ontario straight to taxpayers, and to also lower hydro costs by moving energy conservation programs off of bills and onto the province’s balance sheet.
The NDP wants to buy back Hydro One, and also promises to slash Hydro rates by 30 per cent.
A DOSE OF REALITY:
As premier, Doug Ford would have no power to fire Hydro One’s CEO. This was populist politics at its best. And the Tories’ methods to lower hydro bills would force Ontario to tack on more debt – the two ideas will cost around $800-million a year.
If the NDP tries to buy back Hydro One, it will likely cost around $10-billion. The party claims it can do this bit-by-bit using the dividends the utility pays to the province, but that would take decades. The dividends also help pay for current program spending, so new debt would be needed to offset stockpiling them.
The NDP also hasn’t explained how it will lower rates. Campaign literature claims that the privatization largely sent hydro bills soaring. That isn’t true.
With so much uncertainty, Ontario is only hurting itself. The province still owns nearly half of the utility, and the share price has suffered lately. “The weakness is attributable to persistent political noise in the Ontario election,” Neil Kalton of Wells Fargo wrote in a recent note to clients.
Both parties plan to make significant changes – but true to their political stripes, they want to move taxes in different directions.
The Progressive Conservatives hope to slash taxes – and do away with some altogether. Changes would include: Cutting the second income-tax bracket by 20 per cent; taking 10 cents per litre off the provincial gas tax; ending income taxes for every worker on minimum wage; and scrapping the province’s carbon tax, which is implemented through a cap-and-trade policy. The PCs also want to reduce the corporate income tax by a percentage point, to 10.5 per cent. Combined, the resulting budget hole would total $7.2-billion.
The NDP wants to raise taxes to pay for its proposed spending. The party will raise income taxes for those earning more than $220,000; implement a property tax on those who do not pay taxes in Ontario; and change the way tobacco is taxed, among other things. As for corporate income taxes, the party will boost the rate to 13 per cent. It projects bringing in $5.9-billion from these new taxes within five years.
A DOSE OF REALITY:
There is a fear that Ontario’s corporate tax regime is now at a major disadvantage relative to the U.S., which just cut its own. But Don Drummond, former chief economist at Toronto-Dominion Bank, who also ran the recent Commission on the Reform of Ontario’s Public Services, believes there are flaws with this argument.
The U.S. changes, for one, are projected to add $11.7-trillion to the U.S. debt over the next decade, because they weren’t made revenue neutral. And even though the U.S. now has lower rates, Canada isn’t that far behind. “We’re about middle of the pack among developed countries.”
When it comes to raising taxes, however, he said it’s a different ball game. The last thing Ontario needs amid uncertainty with its major trading partner is an extra hurdle to win business investments. “You don’t want to put the province at a disadvantage,” he argued.
Industrial, innovation and labour policies
Here, more than anywhere else, the opposition parties propose grab bags of policies. Neither projects an overarching vision to help Ontarians excel in the 21st-century economy.
The signature element is scrapping the Jobs and Prosperity fund, which was created in 2015 to dole out $2.7-billion over 10 years to bolster Ontario’s productivity and innovation. The other policies are mostly platitudes, such as cutting red tape with few figures attached.
The plans are somewhat scattershot, but each individual item is concrete. The party will require employers to offer at least three weeks paid vacation, up from two; allow newly unionized workplaces to automatically move to binding arbitration; and make it easier for workplaces to unionize without a vote.
There is also one area where both parties overlap: Each wants to spur development in the Ring of Fire, a mineral rich area in the northern Ontario. The PCs vow to remove alleged bureaucratic delays, and the NDP has pledged to spend $1-billion “to get things moving on the Ring of Fire.”
A DOSE OF REALITY:
There is only so much the government can do to spur mining development. The industry was decimated when metals prices nosedived in 2011 and 2012, and many investors have fled.
Meanwhile, neither party has said much about the auto industry and the auto parts industry, which collectively employ 100,000 people in Ontario.
Government grants and loans to auto makers are vital to landing new investments that extend the lives of assembly plants by eight to 10 years. There are fears the Tories will view this money as government waste, while the NDP’s new union rules could discourage companies from making such investments.
Whichever party wins, the auto industry will need to educate it on the important role government plays in keeping Ontario competitive, argued Flavio Volpe, president of the Automotive Parts Manufacturers Association of Canada. “I worry that some of the people around those tables are ideologues and they will not listen to reason,” he said, referring to both the NDP and the Conservatives.
Education and health
After the Liberals fought tooth and nail to hold the line on spending within these ministries over the last four years, the NDP and Conservatives don’t seem too concerned with such restraint – particularly on health.
For education, the only material expense is a 75-per-cent tax credit for child-care costs. But with health care, the PCs are happy to shell out funds. Chiefly, the party will create 15,000 new long-term care beds over the next five years – which will eventually cost close to $1-billion annually.
The NDP plans to add 15,000 long-term care beds as well, but it will also create some signature programs, such as dental care for everyone and universal pharmacare to cover 125 essential medicines. As for child care, it will be free for families that need it most, and $12 for everyone else. There are more expenses, too, including adding 2,000 hospital beds, ending the budget freeze on colleges and universities and turning provincial loans for all postsecondary students into grants. The child-care plan alone will cost almost $4-billion annually within five years.
A DOSE OF REALITY:
Nothing matters more to Ontario’s finances more than these two ministries, because they comprise roughly 60 per cent of government spending. The new premier will have to wrestle with tough demographics – chiefly, an aging population – and merely capping spending can be politically toxic, because health and education matter so much to voters.
If either party really values solid finances, they’ll have to make some tough choices here – but that won’t be easy. As rating agency S&P noted in 2017, “we think spending reductions would be very challenging for the province with a growing population, given its education and health-care responsibilities and the share of Ontario’s work force covered by multiyear collective agreements.”
The Tories and the NDP bash the Liberals for their fiscal record, but both opposition parties’ platforms suggest they will be no better. That’s problematic, because with a net debt-to-GDP ratio of 38 per cent, Ontario’s burden is already sky high.
Despite promising nearly $10-billion in new spending, the Tories refuse to spell out whether these will be funded with debt. (Mr. Ford has promised to find efficiencies, but the idea is rather vague and isn’t even part of the official platform.)
The NDP are at least upfront about their intentions. Although they plan to spend heavily, they will raise taxes to cover some of it. The rest will come from adding to the debt, and they aren’t scared of that.
A DOSE OF REALITY:
Deficit-fuelled spending can be justified during recessions, because it can help spur an economic rebound by putting people back to work. Yet right now the economy is in great shape – which means the parties will add debt when Ontario is already at, or near, its best.
“What will happen to Ontario public finances when we hit the next recession?” wonders Mr. Page, the former parliamentary budget officer. “Will a future government be forced to cut spending and raise revenues when the economy is hurting because the next government chose to ‘over’-spend when times were good?”
Mr. Drummond is equally frustrated. “I have never intervened like this in an election period,” he said. Economists tend to worry their objective assessments will be taken as political statements during a campaign.
But Mr. Drummond just couldn’t keep quiet this time around. He likens every party’s spending promises to throwing gas on a debt fire. They all claim it can be contained. He sees it differently.
“There’s too much risk the fire burns out of control.”
Josh Wingrove and Jenny Leonard – May 31, 2018
The U.S. decision to proceed with steel and aluminum tariffs adds a new wrinkle to one of its other most pressing trade files: NAFTA talks with Canada and Mexico.
The countries are major U.S. steel and aluminum suppliers and both considered the threat of tariffs to be an irritant at best, an insult at worst. They have also said they would have to respond, raising the prospect of retaliatory penalties.
U.S. Commerce Secretary Wilbur Ross, in announcing the tariffs, said NAFTA talks are “taking longer than we had hoped” to wrap up. “The status to which they got did not justify continuing exemption from the tariffs based on the national security considerations of the overall situation,” he said.
NAFTA talks continue, with a deal needed probably within days to have any hope of passing the current U.S. congress and with Mexican elections one month away. The tariffs and any retaliation will further stress talks.
“I can’t see how treating your deepest trading relationships with acute disregard is going to be treated as anything but bad faith at the NAFTA table,” said Flavio Volpe, president of the Canadian Automotive Parts Manufacturers’ Association.
The U.S. wanted a NAFTA deal passed under this Congress, but that window is closing. U.S. House Speaker Paul Ryan said the deadline to receive a notice of intent to sign a deal was May 17, and then said there may be a couple of weeks of wiggle room, placing the deadline around now. “There is no longer a very precise date when they will be concluded,” Ross said Thursday.
Canada and Mexico say the tariffs are a separate issue from trade talks and it’s absurd to consider allies, particularly Canada, a national security threat. Talks will continue, Ross said, and the president could unilaterally decrease tariffs also. “The fact that we took a tariff action does not mean that we cannot have trade negotiations. They are not mutually exclusive behaviors,” he said.
U.S. Commerce Department data show Canada is the top source of U.S. imports of steel and aluminum, while Mexico is the U.S.’s fourth-largest provider of steel and 10th-largest of aluminum.
“The decision to impose tariffs is unexpected and unfortunate in the case of Canada and Mexico,” said Bill Reinsch, senior adviser at the Washington-based Center for Strategic and International Studies. The tariffs will lead to retaliation and market turmoil, he said. “Good faith negotiations have been underway, and there is no reason to disrupt them.”
‘GOD HELP US’
Canadian Foreign Minister Chrystia Freeland had downplayed the NAFTA deadline pressure, saying Wednesday it will “take as long as it takes to get a good deal.” If Canada was hit by “frankly absurd” steel and aluminum tariffs, “we will respond appropriately,” she said.
Mexican Economy Minister Ildefonso Guajardo said in April the country will “have to react if any measure is imposed.”
Rufus Yerxa, president of the National Foreign Trade Council in Washington, said the steel and aluminum decision would have much broader implications for the international trading system.
“Trump has apparently decided to dismantle the existing order on trade. History will now be the judge of his actions,” Yerxa said. “If he’s right, he’ll be vindicated. If he’s wrong, God help us all.”
Thursday, May 31, 2018 @ 2:01 pm – Automotive News Canada
The man representing Canada’s automotive parts industry pulled no punches Thursday in responding the United States slapping a 25 per cent tariff on Canadian aluminum and steel.
Flavio Volpe, head of the Automotive Parts Manufacturers Association, unleashed a series of angry tweets following the news that the tariffs will go into effect Friday at 12 a.m. ET.
“I expect Canada, Mexico and the Europeans to respond by punching the bully in the nose,” Volpe said. “Probably more importantly I expect major consumers of steel in the U.S. to respond in American courts.
The United States is using Section 232 of the U.S. Trade Expansion Act to assert the tariffs, claiming Canadian steel poses a national security threat.
“Regarding 232 tariffs: The auto sector operates on single digit margins. Applying arbitrary and punitive tariffs on the main ingredients of all structural and drivetrain components in every car is nonsensical madness,” Volpe tweeted. “The results of these tariffs is to court countervailing tariffs in the main US export markets. All we end up with is everybody paying more and sharing pain.”
Volpe then continued to rant in the media.
“I can’t see how treating your deepest trading relationships with acute disregard is going to be treated as anything but bad faith at the NAFTA table,” Volpe told Bloomberg News.
Volpe wasn’t alone in criticizing the move.
Manufacturers and business groups slammed President Donald Trump’s decision to impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico, warning of promised retaliation and calling it a tax on U.S. companies and consumers.
The U.S. Chamber of Commerce urged the administration on the eve of Thursday’s announcement not to proceed because the tariffs would hit U.S. manufacturers with higher costs, impede construction-sector growth and hurt job creation in both industries. Expected widespread retaliation from abroad would also threaten the economic momentum the administration has achieved through tax and regulatory reform, the chamber said.
U.S. steel prices are already almost 50 percent higher than those in Europe or China, and aluminum prices have been extremely volatile, the chamber added. The new tariffs “would add substantially to these challenges,” the group said.
“Months ago, the U.S. Chamber warned that alienating our strongest global allies by launching a tit-for-tat trade war would harm the U.S. economy and undermine American leadership,” Myron Brilliant, executive vice president and head of international affairs, said in the statement. “This is even clearer today.”
Some Republican lawmakers objected as well, with Senate Finance Committee Chairman Orrin Hatch calling the tariffs “a tax hike on Americans.”
The administration’s actions have already caused higher prices for key products, said Cody Lusk, president of the American International Automobile Dealers Association trade group.
“American consumers will continue to bear the brunt of a trade war with our key economic partners,” Lusk said in a statement. “The decision to forge ahead with these steel and aluminum tariffs will adversely impact the price of consumer goods, including the millions of new vehicles Americans buy each year.”
Auto-parts makers were already facing trade challenges and uncertainties on several fronts, including Nafta re-negotiations, previous tariffs on Chinese imports and possible duties on imported vehicles and parts, said Ann Wilson, senior vice president of government affairs for the Motor & Equipment Manufacturers Association, which represents vehicle suppliers. The industry depends on regulatory and market stability, she said.
“These actions have thrown all of that up in the air,” Wilson said in a statement. “There is little doubt that the uncertainty and added costs the administration is creating will put U.S. investments and jobs at risk.”
NOT ALL COMPLAINTS
The American Iron and Steel Institute praised the move and said it supports the administration’s policy that any country granted an exemption from tariffs must be subject to a quota. “We thank the president for his actions to ensure a strong American steel sector that is fundamental to our national and economic security,” Thomas J. Gibson, the group’s president and chief executive, said in a statement.
The EU has indicated that it will impose tariffs on American-made blue jeans, t-shirts, and footwear, and the ability to export “Made in USA” products is essential for the health of U.S. manufacturing and its workers, the American Apparel & Footwear Association said.
“To make this move against our closest allies, especially during the renegotiation of Nafta, creates more difficulty and chaos for the business community,” Rick Helfenbein, the group’s president and chief executive officer, said in a statement. “Let’s be clear, Made in USA apparel and footwear will suffer as a direct result of this action by the Trump administration.”
The Aluminum Association, representing producers including Alcoa, said it was “disappointed” by the expansion of the tariffs because the real problem is overcapacity in China caused by “rampant, illegal” government subsidies, said Heidi Brock, the group’s president and chief executive officer.
“Today’s action does little to address the China challenge while potentially alienating allies and disrupting supply chains that more than 97 percent of U.S. aluminum industry jobs rely upon,” Brock said in a statement. “During a time of record demand for aluminum in the United States, it is critical that aluminum producers across the value chain have a steady and reliable source of supply.”
Can-makers rely on metal imports because there is not enough domestic supply to support demand, according to the Can Manufacturers Institute, a trade organization. Members of the organization have applied for exclusions from the tariffs and are still waiting to hear back, Robert Budway, the institute’s president, said in a statement.
“The administration’s actions artificially create winners and losers in the very competitive packaging space,” Budway said.
Commerce Secretary Wilbur Ross displayed cans of Campbell soup and Budweiser during a March television appearance, when he argued the tariffs would have not have a major impact on U.S. businesses.
Campbell Soup Co., however, recently said that it expects to face “double-digit increases” on steel and aluminum prices, with the higher costs weighing on profit margins. The anticipated tariffs were part of the reason that company cut its guidance for the next fiscal year.
Senator Hatch, a Utah Republican, said he will continue to push the administration to change course because of the “mounting evidence” that the tariffs will harm U.S. consumers.
“My position remains unchanged: Tariffs on steel and aluminum imports are a tax hike on Americans and will have damaging consequences for consumers, manufacturers and workers,” Hatch said in a statement.
Bloomberg and Greg Layson of Automotive News Canada.
May 31, 2018 – BNN Bloombergc
“It’s almost like the President and the administration should take a Macro Economic Seminar and really try to understand what they’re doing before they go and rattle the cage.” – Flavio Volpe, president of the Automotive Parts Manufacturers Association, explains what the Trump administration’s tariffs on steel and aluminum mean for Canada’s auto sector and consumers.
Click here for Video.
GREG KEENAN, AUTO AND STEEL INDUSTRY REPORTER
LAWRENCE MARTIN, PUBLIC AFFAIRS COLUMNIST
WASHINGTON, TORONTO AND WASHINGTON
PUBLISHED MAY 30, 2018
The Trump administration is planning to impose hefty tariffs on Canadian steel and aluminum imports as soon as Thursday – a move that threatens to spark a trade war and blow up already tense negotiations over the North American free-trade agreement.
Canada has crafted a retaliation plan that would involve U.S. steel and aluminum and other politically sensitive products, sources briefed on Ottawa’s strategy said.
U.S. President Donald Trump’s decision to hit Canada – as well as Mexico and the European Union – was reported by the Washington Post on Wednesday, and confirmed to The Globe and Mail by a senior Canadian official and a U.S. industry source. The official cautioned that the President could change his mind before an official announcement.
The move would be the latest trade attack on Canada from its largest trading partner: Mr. Trump has accused the country of “taking advantage” of the United States under NAFTA and wants the pact overhauled. And last week, he ordered an investigation into auto imports to the United States that could lead to 25-per-cent tariffs on cars and trucks, which would disproportionately hit Canada; about 80 per cent of Canadian-made vehicles are for the U.S. market.
Two sources said Canada has prepared detailed options for retaliation, including an investigation into steel dumping from several countries, including the United States, with the possibility of imposing its own tariffs. Canada is also considering imposing levies on high-profile U.S.-made consumer goods and luxury items, with the goal of hurting the United States in a visible way without damaging Canada’s economy by restricting necessary imports.
“I would like to absolutely assure Canadians, particularly those who work in the steel and aluminium industries, that the government is absolutely prepared to and will defend Canadian industries and Canadian jobs,” Foreign Minister Chrystia Freeland said earlier on Wednesday. “We will respond. And we will respond appropriately.”
Mr. Trump brought in tariffs on all steel and aluminum imports earlier this year, claiming they were necessary to ensure “national security” by building U.S. capacity to construct its own tanks and warships. The President granted temporary exemptions to a handful of countries, giving them time to negotiate permanent exclusions in exchange for accepting restrictions on how much of the metals they could sell to the United States.
The tariff exemptions for Canada, Mexico and the EU expire on Friday.
The Trump administration used the threat of tariffs in NAFTA talks, saying Canada and Mexico would receive a permanent pass only as part of a renegotiated deal. NAFTA negotiations are deadlocked over tough protectionist demands from the United States.
Canada and Mexico have proposed NAFTA deals over the past month, said sources with knowledge of the closed-door talks – offering to agree to U.S. demands on content rules in the auto sector if the Trump administration drops its other proposals. The United States rejected the offers.
On Tuesday, Ms. Freeland met with Mr. Trump’s trade chief, Robert Lighthizer, in Washington for two hours in an effort to get a permanent exemption on tariffs. She spoke with him again later by telephone, but left the U.S. capital on Wednesday morning empty-handed.
Negotiations on a further exemption for Canada had focused on agreeing to U.S. demands that NAFTA force auto makers to use more North American-made steel, the sources said. The Americans also pressed for a quota on the amount of steel and aluminium Canada could ship to the United States.
One source close to the NAFTA negotiations said Ms. Freeland informed Mr. Lighthizer that ending Canada’s exemption on steel and aluminum tariffs would be a clear signal that the Americans are not that interested in reaching a NAFTA deal.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association of Canada, echoed Ms. Freeland.
“It makes it really difficult to believe that deliberations are in good faith if you’re taking capricious actions like this that really hurt the other parties,” he said. “How do you sit at the centre of the global economy and behave this way?”
Prime Minister Justin Trudeau lobbied Mr. Trump directly by telephone last week, and contacted Vice-President Mike Pence on Tuesday.
Ambrose O’Callaghan – Friday, May 25, 2018
NAFTA negotiations took an ugly turn on May 24 after United States President Donald Trump lobbed criticism at Canada and threatened to impose tariffs on imported automobiles into the U.S. Trump directed Commerce secretary Wilbur Ross to initiate a Section 232 national-security investigation into imports of cars, trucks, and vehicle parts.
The threat may be yet another tactic in what has been a long negotiating process, it comes after the Trump administration extended steel and aluminum tariff relief on Canada and Mexico. This may be more evidence that the pressure is on the GOP to conclude NAFTA negotiations before the crucial November midterms.
Linamar Corp. (TSX:LNR), the second-largest auto parts manufacturer in Canada, saw its stock fall 1.83% on May 24. CEO Linda Hasenfratz called it “ludicrous” that imports from Canada and Mexico present a national-security risk. “This is clearly a negotiating tactic to draw to a close the ongoing NAFTA negotiations and other trade disputes,” she said on Thursday.
Shares of Magna International Inc. (TSX:MG)(NYSE:MGA), the largest auto parts manufacturer in Canada, dropped 0.93% on Thursday. The stock has surged 16.8% in 2018 on the back of record sales in consecutive quarters.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, pointed out that the majority of cars built in Canada are made by American manufactures with U.S. content. The Trump administration recently saw its bellicose rhetoric toward North Korea backfire and a war of words erupted between the nations, culminating in Trump scuttling the June summit. Time will tell whether or not this gambit will push NAFTA negotiations toward a swifter conclusion.
GREG KEENAN – AUTO, STEEL AND AIRLINE INDUSTRY REPORTER
May 24, 2018 – Globe and Mail
The Canadian government, companies in the auto sector and a leading U.S. business group have condemned the Trump administration for launching an investigation into whether vehicles imported from Canada, Mexico and other countries represent a security threat to the United States.
The move by the U.S. government targets autos imported from all countries, noting that vehicles made outside the United States captured almost half the U.S. market last year.
The investigation, using legislation from the 1960s that allows the United States to impose tariffs if national security is under threat, has also been used to target imports of steel and aluminum and could lead to tariffs of 25 per cent on vehicles and auto parts shipments to the United States.
If put in place, such tariffs would cause a substantial increase in the costs of the approximately 1.7 million vehicles and the more than $17-billion worth of parts shipped out of Canada to the United States annually.
“It’s absurd to think that Canada in any way could pose a national security threat to the United States,” Minister of Foreign Affairs Chrystia Freeland said in Ottawa, noting that Canada will resist auto tariffs as it has fought 25 per cent tariffs on steel and 10 per cent levies on aluminum entering the United States from Canada. Canada has an exemption from those tariffs that expires next Friday.
Prime Minister Justin Trudeau told reporters he believes the U.S. threat is related to negotiations to transform the North American free-trade agreement, where Canada and Mexico have forced U.S. negotiators to drop some automotive demands and reduce others. But the talks are deadlocked in part on Mexico’s refusal to agree a certain percentage of vehicles be made in high-wage regions in order to qualify for duty-free shipment within North America.
“Obviously trying to find what would be the link between the national security of the United States and cars that would be made in Ontario, it is starting to be less and less relevant or justified in terms of logic and intellectual rigour,” Mr. Trudeau said with an audible sigh.
Linda Hasenfratz, chief executive officer of Linamar Corp., Canada’s second-largest auto parts company by revenue, said the suggestion that vehicles from Canada and Mexico are a security threat is “ludicrous.”
Tariffs will add cost, which will drive up prices, reduce demand and potentially lead to a recession, Ms. Hasenfratz said in an e-mailed statement.
“President [Donald] Trump needs to stop playing games and start supporting the American economy with positive action.”
Shares of Linamar, and Canada’s other large publicly traded auto-parts makers, Magna International Inc. and Martinrea International Inc., fell on the news.
A sport utility vehicle Magna assembles for Mercedes-Benz in Austria would be subject to the tariff.
Five auto makers – two based in Japan, two in Detroit and one in Italy – assembled 2.18 million vehicles in Canada last year. They exported about 85 per cent of those to the United States, although the number varies by company.
Toyota Motor Corp. which is the largest vehicle assembler by volume in Canada, said the threat of tariffs has not changed its plans to invest $1.4-billion in assembly plants in Cambridge, Ont. and Woodstock, Ont.
Toyota has invested more than US$23-billion in the United States, so a determination that its vehicles harm U.S. national security seems “implausible,” a spokeswoman said in an e-mail from the company’s North American headquarters in Plano, Tex.
There was no comment from the Detroit-based companies Ford Motor Co. and General Motors Co. or from Fiat Chrysler Automobiles NV or their Canadian organization, the Canadian Vehicle Manufacturers Association.
But such companies, which have large assembly operations in Mexico and Canada, will be harmed if their imports from the two countries are subject to tariffs, said Flavio Volpe, president of the Automotive Parts Manufacturers Association of Canada.
“Section 232 tariffs on light vehicles made in Canada are going to punish American companies, American suppliers and American customers,” Mr. Volpe said. “That’s not smart.”
The U.S. Chamber of Commerce blasted the move, saying the President’s national security powers were being “abused” purely to ratchet up the pressure at the bargaining table.
“The administration has already signalled its true objective is to leverage this tariff threat in trade negotiations with Mexico, Canada, Japan, the European Union, and South Korea,” chamber President Thomas Donohue said in a statement.
Daniel Ujczo, an Ohio-based international trade lawyer at the firm Dickinson Wright, said the tariff threat is purely about turning up the pressure in NAFTA talks and pleasing Mr. Trump’s protectionist supporters.
“The investigation into autos is pure pressure and politics. While the administration has discussed this since the 2016 campaign, it was launched only after it became clear NAFTA was at an impasse and the President was facing strong criticisms from his base on China,” Mr. Ujczo said.
By DANIEL DALE, Washington Bureau Chief
Wed., May 9, 2018
WASHINGTON—Foreign Affairs Minister Chrystia Freeland says she used a North American Free Trade Agreement negotiating meeting with her American counterpart on Wednesday to raise “concerns” from Canadian companies about U.S. automotive proposals
Freeland declined to speak in detail about those concerns. But she said she wants to avoid a new agreement that burdens Canadian companies with “red tape” that would make them less competitive than international rivals.
“I want the rules that we come up with to be rules that do not force our car companies, and our car parts companies, to be spending too much time on administration and on box-checking when I would like them to be spending most of their time inventing and building really, really great cars and trucks,” she told reporters upon leaving a meeting with U.S. Trade Representative Robert Ligthizer.
Freeland’s comments underscore the challenge that U.S. President Donald Trump’s team faces as it scrambles to make a deal by the end of next week, before it is too late for the current Republican-controlled Congress to hold a vote on a revised text.
The automotive issue has occupied by far the biggest share of the recent meetings between Freeland, Lighthizer and Mexican Economy Secretary Ildefonso Guajardo. To make a deal, they must resolve that issue and then rapidly resolve several other delicate matters unrelated to the auto industry.
Mexico has balked at key parts of the latest U.S. auto proposal. While the Trump administration has backed away from its initial hard-line demands, its current proposal also includes provisions many Mexican analysts say are non-starters.
One of those U.S. provisions is a new rule that would only give a car tariff-free treatment if 40 per cent of it was made by workers in a high-wage country such as the U.S. or Canada.
The U.S. is also seeking to require more than two-thirds of the steel in a car to come from North America (the current deal includes no such rule) and 75 per cent of the car to be manufactured in North America (up from the current 62.5 per cent).
And the U.S. wants a transition period of four years, according to The Canadian Press, for the new rules to take effect. Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, said that is too fast. Volpe said his sector is also strongly opposed to the U.S. proposal for a “sunset clause” that would automatically terminate NAFTA in five years if the three countries did not agree to re-endorse it.
He added, though, that he is now optimistic the three sides are nearing a solution on the auto file.
“We’ve made the journey and we’re circling the airport, so you want to be careful on the landing. You’ve got to do it right,” Volpe said.
Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association, which represents the Canadian interests of the big American automakers, said early U.S. auto proposals were “essentially unworkable.” He said he has not seen the specifics of the latest proposals, but he added, “We’re encouraged by what the Canadian negotiators are doing and directionally where it’s going.”
By Reuters through the Daily Mail – 7 May 2018
Talks to update the NAFTA trade deal enter a make-or-break week on Monday, as ministers from Canada, the United States and Mexico seek to resolve an impasse in key areas before elections in Mexico and the United States complicate the process.
Discussions in Washington will center on rules of origin that govern what percentage of a car needs to be built in the North American Free Trade Agreement region to avoid tariffs, the dispute-resolution mechanism and U.S. demands for a sunset clause that could automatically kill the trade deal after five years.
U.S. Trade Representative Robert Lighthizer warned last week that if the talks took too long, approval by the Republican-controlled Congress may be on ‘thin ice.’
The aim is to complete a vote during the ‘lame-duck’ period before a new Congress is seated after November’s congressional elections.
Mexico holds its presidential election on July 1 and the front-runner, leftist Andres Manuel Lopez Obrador, says he wants a hand in redrafting NAFTA if he wins.
‘We have a window of opportunity in the next two or three weeks … considering two things: where the talks are now and the political calendars’ in Mexico and the United States, said Moises Kalach, head of the international negotiating arm of Mexico’s CCE business lobby, which is leading the private sector’s involvement in the talks.
Sources close to the talks have suggested there is a creeping feeling of uncertainty and pessimism going into the new round because of gridlock on the most critical issues.
At the heart of the NAFTA revamp is U.S. President Donald Trump’s desire to retool rules for the automotive sector in order to try to bring jobs and investment back north from lower-cost Mexico. Despite months of talks on the issue, the sides remain far apart.
A round of talks among Canadian Foreign Minister Chrystia Freeland, Mexican Economy Minister Ildefonso Guajardo and Lighthizer scheduled for last week was canceled to allow consultations with the Mexican car industry and for the American to go on a trade mission to China.
Mexico’s main auto sector lobby has described the latest U.S. demands, which include raising the North American content to 75 percent from the current 62.5 percent over a period of four years for light vehicles, as ‘not acceptable.’
‘The positive momentum on the rules of origin appears to be counterbalanced by the opposite movement on labor wage treatment proposals,’ said Flavio Volpe, president of Canada’s Automotive Parts Manufacturers Association.
Alicja Siekierska, May 4, 2018
Toyota Motor Corp. announced Friday that it is investing $1.4 billion to upgrade two of its manufacturing plants in Ontario, a move that comes after years of auto industry investment shifting south of the border and amid uncertainty over NAFTA negotiations.
The Japanese automaker said it will spend $1.4 billion to upgrade its facilities in Cambridge and Woodstock, where its RAV4 sports utility vehicle is produced, turning the plants into its North American hub for RAV4 production. The federal and Ontario governments will each contribute $110 million toward the upgrade of the plants, which they say will help create 450 new jobs and support 1,000 new co-op placements. Toyota also said it will also commit $200 million for research and development in Canada over the next 10 years.
The investment comes as auto manufacturers in North America adjust their production mix to meet unprecedented demand for SUVs and light trucks. Last month, Ford Motor Co. announced it would discontinue almost all of its car models in North America within two years, shifting its focus to the increasingly popular SUVs and light trucks.
It also sends a signal of confidence in the ongoing NAFTA negotiations, said Flavio Volpe, the president of the Auto Parts Manufacturers’ Association. Recently, pressure has been ramping up on Ottawa to conclude NAFTA talks as trade uncertainty lingers.
David Worts, the executive director of the Japan Automobile Manufacturers’ Association of Canada, hailed the investment as an endorsement of the competitiveness of Canadian production.
At the same time, while the investment was welcomed across the Canadian auto industry, some representatives who have been critical of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership said the money does little to alleviate the concerns they have about the trade deal, which still needs to be formally ratified.
Volpe said Toyota’s investment, while signalling a vote of confidence in Ontario’s manufacturing capabilities, does not address concerns about the CPTPP deal, including that lower automotive rules of origin will make it easier for countries to import non-TPP sourced vehicles into Canada, and that the deal doesn’t provide increased access to the Japanese market.
“Toyota’s operations at both locations in Ontario are the highest rated plants for productivity in North America and among the elite plants from around the world …. This is the highest quality producer in their No. 1 plant deciding to reinvest in the hottest product in the fastest growing segment in the market,” Volpe said.
“(Our position is) unaffected by this. These RAV4s are going to be made for Canadians, Mexicans and Americans, not exported to Japan… If more than 1,000 made their way to Japan, I’d be surprised.”
Jerry Dias, the president of Unifor, which represents more than 23,000 Canadian autoworkers, echoed Volpe’s sentiments and said it was a welcome announcement, but he still has concerns about CPTPP.
“This is a way of, in my opinion, softening the blow of CPTPP,” Dias said. “Ultimately, they will start flooding the Canadian market with vehicles that have a majority of parts coming from non-CPTPP nations.”
Katie Simpson · CBC News · May 06, 2018
NAFTA negotiators are nearing the end of the runway.
Observers tracking the ups and downs of these intense trade talks say that if Canada, the United States and Mexico can’t get something on paper over the next few weeks, negotiations could easily drag on into 2019.
Foreign Affairs Minister Chrystia Freeland arrives in Washington Monday for another round of meetings with her political counterparts — and she hasn’t booked a return ticket to Ottawa yet.
“We are really committed to doing whatever it takes to get a good win-win result,” she told reporters on Saturday, but was quick to add she would not “pre-judge the outcome of the talks.”
Freeland’s schedule has been nearly upended by the demands of NAFTA; she’s been in D.C. almost every week since March. She even cancelled longstanding plans to travel to Brussels for NATO meetings last week, opting to stay at the negotiating table instead.
“We are coming up against some very significant deadlines,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.
Three deadlines worry the negotiators and their political masters.
The first is June 1. The Trump administration is threatening to hit Canada and Mexico with heavy tariffs on steel and aluminum unless it gets a renegotiated NAFTA agreement that it likes by that date.
The U.S. previously threatened to impose those tariffs by May 1, but at the last minute President Donald Trump granted both countries an extended exemption.
This is … much more complicated than I think anybody realized when they started.
– Lawrence Herman, trade lawyer
The second deadline is July 1, the day Mexican voters head to the polls for a federal election. As the campaign intensifies, so does the threat that it will force delays in the NAFTA process.
The fall midterm elections in the United States represent the third time factor that could delay talks and push negotiations into 2019.
It’s not ideal for the Canadian economy if talks drag on for months longer, since uncertainty erodes investor confidence.
“Oh well, goodness, I think the biggest problem is with private investment,” said Pedro Antunes, deputy chief economist for the Conference Board of Canada.
“The uncertainty for businesses about whether they will have access to the North American market has played out a big role in holding back private investment intentions.”
Antunes said that if all three countries are able sign off soon on a preliminary NAFTA agreement-in-principle, it would send some positive signals to those jittery investors.
“An agreement-in-principle is simply an agreement to agree later on,” he said. “It doesn’t provide a whole lot of certainty. But I think what it will provide is some certainty that things won’t change for the next little while, and I hope that would be positive for investors.”
Sources have told CBC News that all three NAFTA countries are seeking an agreement-in-principle in the short term that would focus primarily on the auto sector.
For industry leaders like Volpe, that’s welcome news.
“We could see a broad sense of principles that could then be handed to staff and industry to hammer out exactly what that looks like down at the customs level,” Volpe said.
“I think there’s real will around the table … to get an agreement-in-principle.”
Any sort of preliminary deal would offer only a temporary respite for negotiators, according to a Canadian trade lawyer.
“There’s a long way between an agreement in principle and a final treaty that can be signed and presented to the legislatures of all three countries for ratification,” Lawrence Herman told CBC News.
“This is very complicated, much more complicated than I think anybody realized when they started.
“They’ve made a lot of progress, but once the outlines of an agreement are there, the technical elements have to be negotiated.”
Herman said it’s important to remember that when and the European Union reached an agreement-in-principle on CETA (the Comprehensive Economic Trade Agreement) in 2014, it took several years more before the deal was finalized and presented for ratification.
Veronica Gomez, Anthony Esposito – May 7, 2018
WASHINGTON (Reuters) – Talks to update the NAFTA trade deal enter a make-or-break week on Monday, as ministers from Canada, the United States and Mexico seek to resolve an impasse in key areas before elections in Mexico and the United States complicate the process.
U.S. Trade Representative Robert Lighthizer warned last week that if the talks took too long, approval by the Republican-controlled Congress may be on “thin ice.” The aim is to complete a vote during the “lame-duck” period before a new Congress is seated after November’s congressional elections.
“We have a window of opportunity in the next two or three weeks … considering two things: where the talks are now and the political calendars” in Mexico and the United States, said Moises Kalach, head of the international negotiating arm of Mexico’s CCE business lobby, which is leading the private sector’s involvement in the talks.
Mexico’s main auto sector lobby has described the latest U.S. demands, which include raising the North American content to 75 percent from the current 62.5 percent over a period of four years for light vehicles, as “not acceptable.”
“The positive momentum on the rules of origin appears to be counterbalanced by the opposite movement on labor wage treatment proposals,” said Flavio Volpe, president of Canada’s Automotive Parts Manufacturers Association.
The U.S. proposal also would require that 40 percent of the value of light-duty passenger vehicles and 45 percent for pickup trucks be built in areas with wages of $16 per hour or higher.
That is seen as a hard pill to swallow for Mexico, where the Ann Arbor, Michigan-based Center for Automotive Research has estimated auto assembly workers average under $6 an hour, and auto parts plants workers average less than $3 an hour.
Critics also say it would create a bureaucratic nightmare of paperwork.
EVERY FIVE YEARS
Talks to renegotiate NAFTA started last August to fulfill a campaign pledge by Trump to bring manufacturing jobs back to the United States.
Nine months later, the most contentious issues remain open. The United States has stuck with a proposed sunset clause for the new deal, which would mean the agreement would need to be renewed every five years, a move that critics say would create huge uncertainty for businesses.
Another contentious U.S. proposal is to repatriate dispute resolution to the domestic legal system from international tribunals.
Both Canada and Mexico oppose that measure, and so does U.S. business.
In a May 2 letter, the U.S. Chamber of Commerce, American Petroleum Institute Business Roundtable and National Association of Manufacturers urged Trump and Lighthizer “to retain strong investment protections and investor-state dispute settlement in NAFTA.”
Asked if an agreement was possible this week, a Mexican source close to the talks said: “The possibility is there, but it will depend on whether the United States is flexible.”
Trump has frequently said he would pull out of NAFTA if a better deal was not possible, although he has sounded more positive about the deal in recent weeks.
It is unclear where the United States will give ground to win a quick deal. The Trump administration has embraced confrontational policies in its dealings on trade.
By William Mauldin – Wall Street Journal
May 7, 2018
The Trump administration is seeking to complete its overhaul of the North American Free Trade Agreement with new rules that would penalize the Mexican auto industry unless it boosts wages—to roughly $16 an hour.
The administration is winning some support from U.S. auto makers for its Nafta proposals by including terms that would favor U.S. manufacturers over Asian and European rivals that produce cars in the U.S.
Support from Detroit might help the administration reach its goal of concluding a Nafta deal by mid-May, which could allow it to push the pact through Congress by year-end.
Under Nafta, U.S. manufacturers have produced in Mexico where wages are cheaper, but the Trump administration now is seeking to force Mexican factories to pay more for labor—or send auto jobs back to the U.S. or Canada.
Robert Lighthizer, the U.S. trade representative and lead negotiator for the Trump administration, is reworking Nafta to require that 40% of the content of any car that trades duty-free within the North American bloc to come from workers who earn above a particular wage level, according to industry officials familiar with the trade negotiations.
In recent talks, the U.S. side has discussed a wage floor of around $16 an hour, the officials said. By comparison, Mexican auto assembly workers made less than $8 an hour on average in 2017, with workers at parts plants making less than $4 an hour, according to the Center for Automotive Research.
Any manufacturer turning out cars with too little content at the wage threshold would face tariffs at the border. For light trucks, a higher amount—45% of the vehicle–would have to come from such higher-wage labor, the officials said.
U.S. negotiators have struggled for months to write concrete rules to bring back auto jobs without granting special privileges to the U.S. or explicitly singling out Mexico. Mexican and Canadian officials had flatly rejected a previous Washington proposal that would have required high levels of U.S.-specific content in cars.
Mexico’s auto industry—which includes major manufacturing operations run by auto makers from the U.S., Japan and elsewhere—rejected the latest U.S. wages proposal last week.
The Mexican government, however, is open to a Nafta deal before the July 1 presidential election, and senior Mexican officials are expected to introduce a counterproposal or compromise this week, when talks resume in Washington.
The American Automotive Policy Council, which represents Fiat Chrysler Automobiles NV , Ford Motor Co . , and General Motors Co. , said it is “encouraged” by the latest version of the rules. U.S. auto makers would get credit for higher wages not only on the factory floor but also in the areas of research and development, marketing and perhaps administrative work, industry officials say.
White-collar work in North America could contribute up to 15% toward the car’s 40% labor threshold—which could potentially allow a car to qualify for duty-free treatment if just 25% of its physical content were made with high-wage labor, the officials said.
The credit for R&D would lift the Detroit manufacturers, since they do the overwhelming amount of research, design and marketing work in North America. German, Japanese and Korean auto makers, by comparison, tend to do a greater amount of their R&D overseas.
On Tuesday, an association of global auto makers said it is “concerned” about the latest talks. “It is important that the agreement create feasible automotive rules that treat all U.S. auto producers equally,” said John Bozzella, president of Global Automakers, a group that includes Toyota Motor Corp. and Kia Motors Corp.
President Donald Trump was elected in part because of trade concerns in the Midwest. But German, Japanese and Korean auto makers have numerous plants in the Southeast, often in Republican districts, and lobbyists are urging lawmakers from those regions to complain that the Nafta proposals would put these plants—and the local workers they employ—at a disadvantage.
If the proposals are enacted, the burden for calculating whether a car meets the labor rule would fall largely on auto makers that do the final assembly. The rules could lead to significant costs for auto-parts suppliers as they shift production to help their customers, the big auto makers, meet the rules, in addition to administrative expenses to ensure compliance.
“We are approaching this with caution because of the potential for administrative burdens placed on suppliers,” said Ann Wilson, senior vice president at the Washington-based Motor Equipment & Manufacturers Association, which represents major auto suppliers.
Big Canadian auto suppliers could get some extra business back home under proposals promoting higher-wage labor. Still, Canadian firms are remaining cautious, in part because the rules could weigh on their Mexican operations.
“This proposal disproportionately affects Mexico and interests in Mexico and Mexican firms, and so it’s incumbent on the Mexican government to oppose it,” said Flavio Volpe, president of the Toronto-based Automotive Parts Manufacturers’ Association “We’re advising Canada not to comment or take a position until the Mexicans do.”
A spokesman for the United Auto Workers union declined to comment on the continuing negotiations. Overall, U.S. labor unions have been supportive of the Trump administration’s approach and say they could potentially support a new Nafta deal.
Click Here for original article.
Josh Wingrove, Andrew Mayeda and Eric Martin, Bloomberg News
Bloomberg, April 26, 2018
The Trump administration and its NAFTA partners are stepping up efforts to reach a tentative deal in the coming days as the U.S. prepares for potentially rocky discussions with China.
U.S. Trade Representative Robert Lighthizer met again Thursday with Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo in an effort to reach an agreement, the third straight day for such meetings. Freeland said Thursday they’ve made “significant progress’’ on rules for cars, arguably the biggest sticking point.
Negotiators are plowing ahead to try to reach a deal by May 1, which is also the day temporary exemptions for U.S. steel and aluminum tariffs on imports from Canada and Mexico are due to expire, according to three people familiar with the talks who asked not to be identified. Lighthizer will join Treasury Secretary Steven Mnuchin on a trip to China that’s expected next week for discussions on how to resolve a simmering trade dispute.
However, a quick deal over Nafta is still far from certain and major differences remain on several issues, according to the three people. Even if a deal is struck on car rules, division remains over a sunset clause, dispute panels and other issues. When asked by reporters outside his office Thursday if a deal is possible in coming days, Lighthizer declined to comment. Mexican Foreign Minister Luis Videgaray, meanwhile, said, “we’ll see.”
The mood is more optimistic within the White House. Talks are “moving along,” President Donald Trump said Tuesday. “I could make a deal very quickly, but I’m not sure that’s in the best interest of the United States. We’ll see what happens, but we’re doing very well,” he said.
Still, all three countries have reason to hope for an agreement soon. Canada and Mexico were both temporarily excluded from recent U.S. tariffs on steel and aluminum, with the Trump administration linking permanent relief to the successful renegotiation of NAFTA.
Talks Thursday included White House aide Jared Kushner and Katie Telford, chief of staff to Canadian Prime Minister Justin Trudeau, reflecting the push to get a deal. Freeland, meanwhile, hailed progress on rules that govern what share of a car must be made within Nafta countries to be traded tariff-free under the pact.
“Something really significant has happened this week, which is that we have moved from a conceptual level on rules of origin on cars to really talking about the details,’’ Freeland said. “That is an essential step. I’m very glad we’re taking it.’’
Flavio Volpe, head of the the Toronto-based Automotive Parts Manufacturers’ Association industry group, cautioned that the U.S. hasn’t put many of its recent proposals in writing. He said a deal on autos is possible by Tuesday but warned other key disputes remain unsolved.
“I think we can have a deal if the Americans want to have a deal,’’ he said. “The space we’re in is positive, but I don’t have text’’ that details specific proposals or agreed changes.
Not everyone is applauding, however. Canada and the Mexico, typically united in the face of Trump’s demands, appear to be diverging on a U.S. proposal to require a share of a car –- 30 percent, according to Jerry Dias, head of labor group Unifor — be made with a minimum wage of about US$15.
The provision would, if adopted, effectively mean that share is made in the U.S. or Canada. Mexico opposes it, according to two people familiar with talks, speaking on condition of anonymity. Volpe said there’s indeed “anxiety’’ on the issue but no firm proposal; Dias said Mexico has been “balking’’ at certain issues.
Negotiators have also finished work on the telecommunications chapter, two people familiar with the talks said last week, which would mean that seven of about 30 chapters have been completed.
There won’t be a deal by May 1 without major changes in negotiating positions, Dias told reporters Thursday. The U.S. still wants to eliminate anti-dumping trade panels allowed under Nafta’s Chapter 19, and “the Canadian team is never going to agree.’’ He also warned against announcing a deal in principle that doesn’t include key details. “Just because Donald Trump and Mexico say we’re in a rush, it doesn’t mean Canada needs to be.’’
The Trump administration faces political pressure over Nafta, including from Republicans from farming states who say changes to the pact could hurt exports and market access. Democratic lawmakers are also saying they’ve not been adequately informed on negotiations.
“We feel that, to date, the administration has failed to meet its consultation obligations under the Bipartisan Trade Priorities and Accountability Act,” according to a letter from 12 members of the New Democrat Coalition to Lighthizer on Thursday.
It’s not clear what the details of a tentative deal would include, or whether it would ever come into force. Time is running out for the U.S. to get a deal through Congress before midterm elections in November.
Freeland regularly says Canada will take the time needed to get a suitable deal. She stayed in Washington Thursday for Nafta talks, skipping a meeting Friday of North Atlantic Treaty Organization foreign ministers. Guajardo said this month he sees an 80 percent chance of an agreement by the first week of May. Negotiators are also rushing for a deal as Mexico approaches elections on July 1.
ADRIAN MORROW with GREG KEENAN, AUTO, STEEL & AIRLINE INDUSTRY REPORTER
WASHINGTON AND TORONTO
PUBLISHED APRIL 24, 2018 – Globe & Mail
The three NAFTA countries are making a full-court press to reach a deal on overhauling the 24-year-old pact, with the U.S. pushing for a conclusion to the eight-month-old talks as soon as this week.
In the most intensive flurry of negotiations so far, Foreign Affairs Minister Chrystia Freeland hunkered down Tuesday with U.S. Trade Representative Robert Lighthizer in Washington. She was joined by Prime Minister Justin Trudeau’s chief of staff, Katie Telford, and the head of the North American free-trade agreement unit in Mr. Trudeau’s office, Brian Clow – signalling the increasing earnestness of the talks.
Negotiators have been in near-continuous talks for the last month, and Ms. Freeland has made three trips to the U.S. capital. She is scheduled to stay until Thursday. In recent days, sources with knowledge of the confidential negotiations have expressed increasing optimism that a deal can be reached.
Ms. Freeland told reporters talks are in “a very crucial moment” and “everyone is working 24/7” toward a deal.
“We are going to be working hard, late into the night, based on some of the points that were raised today,” she said as she left the Winder Building near the White House after a three-hour tête-à-tête with Mr. Lighthizer on Tuesday.
On the U.S. side, President Donald Trump’s son-in-law, Jared Kushner, joined the negotiations. Mexico sent both Economy Minister Ildefonso Guajardo and Foreign Minister Luis Videgaray.
Talks Tuesday focused on the “rules of origin” governing the content of autos made in the NAFTA zone – expected to be the centrepiece of the revised pact. Currently, 62.5 per cent of all content in NAFTA zone vehicles must be made in North America. Mr. Lighthizer wants this raised to at least 75 per cent, with several other rules added to drive more auto jobs to the United States.
Mexico has been resisting an American demand to force auto companies to source roughly a third of their content from factories that pay at least US$15 to US$17 an hour – a move that would discourage companies from investing in Mexican auto plants, where workers make an average of US$3.
One source briefed on the discussions said talks have focused on writing the content rules to give some advantages to the U.S. without hurting Mexico too badly. Mexican negotiators are pushing the U.S. hard to compromise for the sake of a quick deal, the person said.
“It depends on the commitment and flexibilities around the table,” Mr. Guajardo said as he arrived at talks Tuesday.
Another source of heated disagreement between the three countries is how long a transition will be permitted before auto makers have to comply with the new rules of origin. The U.S. is pushing for a two-year phase-in, while Canada is proposing a five-to-seven-year time frame and Mexico seeks a 10-year horizon, sources familiar with the negotiations said.
That’s a key issue for the auto sector, noted Flavio Volpe, president of the Automotive Parts Manufacturers Association in Canada, because new and redesigned vehicles typically contain supplier contracts that last at least four years.
“If you change the rules to count more things and then change the way you count them and then require a whole bunch of those parts to have a majority of North American steel in them, you really need to give people five to seven years [transition],” he said.
Ms. Freeland said the three countries will move on to other contentious matters on Wednesday.
Among the sticking points are U.S. demands for tougher Buy American procurement rules that would cap the amount of U.S. government contracts Canadian and Mexican firms could bid on; Mr. Lighthizer’s desire to abolish the Chapter 19 dispute settlement system, which Canada is refusing to give up; and Washington’s proposal to dismantle Ottawa’s protectionist system of supply management for milk, eggs and poultry.
Mr. Trump on Tuesday said talks were going well.
“NAFTA, as you know, is moving along,” he said before a White House meeting with French President Emmanuel Macron.
The Canadian Press – Via the Times Colonist
APRIL 24, 2018 12:47 PM
WASHINGTON — Negotiations have entered an around-the-clock phase in an effort to get a new NAFTA agreement within days, with top political staff converging in Washington for meetings stretching into the night Tuesday and beyond.
Top officials in the office of Prime Minister Justin Trudeau flew down to join Foreign Affairs Minister Chrystia Freeland for talks at the U.S. trade building, and President Donald Trump’s son-in-law Jared Kushner also made an appearance.
After a three-hour meeting with her U.S. counterpart Robert Lighthizer, Freeland emerged to announce that she was remaining in Washington for at least another day.
“At this point everyone is working 24-7,” Freeland told reporters. “It’s about sending each other proposals and being ready to respond to them … We are going to be working hard late into the night based on some of the points that were raised today.
“We’ll be back at it tomorrow.”
The source of this flurry of activity is the political calendar, with a confluence of events about to hit: a legislative deadline next month for the current Republican-led Congress to vote on the deal, the Mexican presidential elections, a short-staffed U.S. trade team trying to shift its focus to Asia — and fresh news that Lighthizer is being sent to China for talks next week.
Four people briefed on the NAFTA developments said they see a deal being possible as early as this week, based on a variety of factors. For one thing, the talks are drawing the political heavy-hitters of each country.
Trudeau’s chief of staff Katie Telford and his director of U.S. affairs Brian Clow are at the talks, as are the U.S. and Canadian ambassadors to each country, Kushner, and top Mexican minister Luis Videgaray — all making rare appearances alongside the ministers leading the NAFTA file.
One industry stakeholder said: “The negotiation has been elevated to the political level.”
Trump himself said an agreement could come soon. “We’re doing very nicely with NAFTA. I can make a deal very quickly,” Trump said Tuesday, though he added that he wasn’t sure.
Canada’s official position is that there is no deadline pressure.
In fact, Freeland made a point of alluding to ongoing irritants, after repeating her oft-stated view that autos would be the key to a new deal: “There are other issues that still need to be resolved,” she said.
But she repeated that autos remained the main focus at the table.
According to sources familiar with the autos negotiations, a new agreement would adopt a Buy North American approach to steel in autos, with a requirement that high-value parts consist mainly of steel from this continent. One source pegged the steel requirement at 70 per cent.
In addition, the new rules would significantly ramp up the North American content requirement for all other parts, from the current 62.5 per cent of a car to 75 per cent.
Rules for individual pieces would change, with a focus on keeping high-value manufacturing on this continent.
Items like engines and batteries would have to be 75 per cent North American; the standard for mid-value parts like the electronics in seats would be 70 per cent; and it would be 65 per cent for cheaper products like seat-belts.
Now, says Flavio Volpe, head of the Canadian Automotive Parts Manufacturers Association, the challenge is getting the fine print crafted properly so that there is no accidental damage to the industry.
He said a particular concern is the number of years it will take to phase in the new rules. The U.S. has been proposing a two-year transition, but Volpe said auto investments are already locked in a few years in advance as companies work on five-to-seven-year planning cycles.
He said companies could simply ignore the NAFTA rules and pay the tariff if they find the rules impossible to meet. He added that there aren’t any idle North American plants to which production could be immediately shifted.
“If you make it happen quickly, it won’t happen,” Volpe said of the changes.
“They’ll have to break contracts with current suppliers (if it’s done too quickly), pay for the moving (of supply chains) … and compensate now-former suppliers.”
Freeland said her team is indeed sifting through the finer details on autos.
“We are the diligent, do-your-homework, fact-based country,” she told reporters, describing the auto talks. “We’re very, very focused right now on digging into some of the details, making sure there are no unintended consequences — being sure we get things right.”
By Josh Wingrove, Eric Martin, and Andrew Mayeda – Bloomberg
April 19, 2018
The trio of ministers leading Nafta talks meet again in Washington beginning Thursday as they continue to push for a deal in principle within weeks.
U.S. Trade Representative Robert Lighthizer will meet Canada’s Chrystia Freeland and Mexico’s Ildefonso Guajardo in sessions Thursday in Washington. Some talks could continue Friday. The sessions come amid the latest technical talks — what Freeland called an “intensive phase” — after the ministers’ last session on April 6.
They meet as negotiators are said to have finished work on the telecommunications chapter, according to two people familiar with the discussions, who asked to remain anonymous because the discussions are private. The telecom chapter is the seventh completed out of about 30 under consideration for a final deal.
Freeland, speaking to reporters Thursday in Washington, said Nafta talks are in period of “intensified engagement” and that so-called rules of origin for the automotive sector will be among the things discussed in her meetings.
“We are very committed to getting a deal, to getting a modernized Nafta,” she said. “We also think we need to take the time it takes to get a good deal, to get details right on complicated issues like rules of origin. So we’ll see how today’s talks go.”
Read more: These Are Five Sticking Points to a New Nafta Deal: QuickTake
Nonetheless, a few key disputes — such as autos, agriculture and investor-state dispute panels — will determine whether a deal is possible, said Flavio Volpe, head of an industry group representing Canadian auto parts makers. “On balance, we may be close enough on all of them to get a deal done,” he said in an interview.
Freeland said the auto issue is at “the heart of this agreement” and had gained momentum after a U.S. proposal about a month ago. “It is important to use this as a process that certainly enhances North American competitiveness, that is good for our steel industries, that ultimately though it does have to be something that works. We’re going to be focused on cutting red tape.”
The countries haven’t publicly confirmed an agreement on the telecom chapter. A request for comment from USTR wasn’t immediately returned. Alex Lawrence, a spokesman for Freeland, declined to comment. The U.S. had sought assurances to promote competition in Mexico’s telecom industry, where companies including AT&T Inc. have been investing and Carlos Slim’s carrier America Movil SAB is the top mobile phone player.
Talks have shifted gears to what Guajardo called a permanent round of negotiations as the Trump administration eyes a stopgap deal. U.S. Vice President Mike Pence and Guajardo have both said a deal could be reached in the coming weeks, though there are signs that there could be a deal that leaves the fine-print to further talks between bureaucrats.
Big gaps remain and the Thursday meeting is unlikely to be a final step. The ministers’ meeting will be closely watched for signs of breakthroughs on some of the key divides, such as the auto sector. But no statement or announcement is expected at this time, said a U.S. administration official speaking on condition of anonymity.
The ministers are scheduled to hold a series of bilateral and trilateral talks Thursday and Friday. Mexico Foreign Minister Luis Videgaray is also said to be planning to come to Washington to try to break a Nafta impasse.
By Alexander Panetta, The Canadian Press – April 9th, 2018
WASHINGTON — A rush to conclude a new NAFTA agreement could see negotiations spread this week across two continents and more than 5,600 kilometres in a spurt of non-stop bargaining.
Officials return to the bargaining table Tuesday in Washington, and sources say the week could end with the politicians leading the talks — Chrystia Freeland, Ildefonso Guajardo, and Robert Lighthizer — meeting Friday during the Summit of the Americas in Peru.
“It’s a permanent round,” Guajardo said, describing the non-stop negotiations, in an interview Monday with Mexico’s Televisa network.
The Peru encounter is not final, as plans evolve rapidly. The cause of this rush is a de facto deadline, about a month from now, for concluding an agreement this year, after which the talks could languish into 2019 while Mexico elects a new president and the U.S. elects a new Congress.
What are the odds of success?
Guajardo put a number on the likelihood of a deal by early May: “A very high probability — 80 per cent,” he said.
“It will depend a lot on flexibility.”
He cautioned that such an agreement will not happen this week, nor will it occur in time — as some had hoped — for Donald Trump, Justin Trudeau, and Enrique Pena Nieto to make the announcement while in Peru.
The U.S. president sounded equally optimistic: “We’re fairly close on NAFTA,” Trump said Monday. However, he continued to couch that optimism in his oft-repeated threat of terminating NAFTA should talks fail.
Guajardo warns that in the current political environment, nothing is guaranteed.
In a reference to Trump and his social-media habits, Guajardo says policy-makers sometimes find themselves scrambling to respond to the thoughts of a superior shared publicly at 6 a.m.
He says the U.S. had already shown some flexibility on autos, the top focus of the negotiations. The U.S. has dropped its demand that half of every car consist of American parts, in favour of a system that credits parts-makers who pay more than $15 an hour.
Such a system could penalize Mexico, where salaries are lower, but Guajardo noted that there are different ways to design it, including allowing a longer phase-in period: “The devil is in the details.”
His bullish prediction spurred a buoyant reaction from one auto-industry stakeholder.
“Any time the lead minister from Mexico is confident enough to put a number on it that’s equal to the percentage of dentists that recommend Colgate, we are moving in a very positive direction,” said Flavio Volpe of Canada’s Automotive Parts Manufacturers’ Association.
“(It’s) night and day different from (where negotiations were) a few months ago.”
But another trade observer offered a word of caution.
Lawyer Dan Ujczo says an agreement this month would be very preliminary — he refers to it as an “agreement in passing.”
That’s because he says it’s hard to imagine all the other sticking points like dairy, and procurement, being sorted out in sufficient detail to formally start the ratification process in the U.S. Congress by next month, in time to complete everything in 2018.
“I think that’s what they’re trying to do, (say), ‘Hey, we’re closing out what we can close out, we’ve got this auto thing and we’re going to deal with the rest later,'” said Ujczo, of the law firm Dickinson Wright.
“An agreement in principle does not start the clock (on the U.S. ratification process)… You can’t say, ‘We have like supply management (of dairy and poultry) hanging out there, or intellectual property.’ So that’s why I think you end up with this sort of NAFTA-on-ice scenario (until 2019).”
Once all three countries ratify it, the new trade pact would take effect.
Some Americans are in a hurry.
In particular, agriculture states, already battered by low crop prices and poor weather, are antsy about trade uncertainty compounding their woes, including Chinese threats of tariffs on farm goods.
A Republican senator told NBC over the weekend that he understands the U.S. targeting Chinese trade practices like the theft of intellectual property, but he says he wants to see a coherent strategy, with other trade relationships secured.
“Number 1, let’s quit fighting with Mexico and Canada,” said Sen. Mike Rounds.
“They are our allies. We’ve actually got a pretty good relationship right now with NAFTA. So, (let’s not be) going after NAFTA.”
Trump’s new economic adviser, Larry Kudlow, suggests that’s the plan.
Kudlow says good progress is happening on NAFTA. Now he’s using an old phrase, recycled from an entirely different context, to describe the current U.S. goal of building alliances against China, on issues like steel dumping.
“I call it a trade coalition of the willing,” said Kudlow, borrowing a term from the buildup to the 2003 invasion of Iraq.
Back then, Canada and most of Europe refused to join the coalition against Saddam Hussein. This time, Kudlow says, Canada, and Europe, appear to be willing partners.
ROBERT FIFE , ADRIAN MORROW AND GREG KEENAN – Globe and Mail
TORONTO, WASHINGTON, TORONTO
PUBLISHED APRIL 4, 2018
Canada’s envoy to Washington says NAFTA negotiators are under intense pressure to cut a preliminary deal before the Summit of the Americas in Peru late next week – but Mexico is resisting a U.S. proposal to boost wages in the auto industry, throwing up a difficult road block to an agreement.
Canadian Ambassador to the United States David MacNaughton told The Globe and Mail on Wednesday that the key to locking up a pact on reforming the North American free-trade agreement is reaching a deal on the all-important auto sector.
“If we can break the back on that one, then I think a lot of the other issues will go easier,” Mr. MacNaughton said.
Autos are expected to be the centrepiece of any agreement-in-principle unveiled next week, said sources with knowledge of the rapidly accelerating talks, and have taken up the vast majority of time in three-way negotiations over the past month. Many other details of the deal are expected to be punted to future talks.
Mexico, however, is holding out against a demand from U.S. Trade Representative Robert Lighthizer that would require auto makers to source car parts from factories that pay workers at least US$15 an hour for those parts to count toward a vehicle’s North American content requirement.
Such a system would punish Mexico, where workers earn an average of US$3 an hour, and favour jobs in the United States and Canada.
Mexico’s Economy and Foreign ministers, Ildefonso Guajardo and Luis Videgaray, hunkered down on Wednesday with U.S. President Donald Trump’s son-in-law, Jared Kushner, and Mr. Lighthizer at his office in Washington in a bid to crack the issue.
Foreign Minister Chrystia Freeland and Mr. MacNaughton are scheduled to meet with Mr. Lighthizer in Washington on Thursday, with meetings between all three countries to occur on Friday.
The three countries are racing the clock to hammer out a deal that Mr. Trump, Prime Minister Justin Trudeau and Mexico’s Enrique Pena Nieto can announce in Peru.
“It is certainly what we are aiming for, but whether or not we can get there, we will see,” said Mr. MacNaughton, who was in Toronto for a speech by the new U.S. Ambassador to Canada, Kelly Craft.
The auto parts sector is concerned that higher wage standards will hurt the industry’s competitiveness. One senior executive in the sector noted that if wages rise to $15 an hour for suppliers in Mexico, it will increase costs throughout the supply chain, which means prices for finished vehicles throughout the continent will increase.
And Flavio Volpe, president of the Automotive Parts Manufacturers Association of Canada, said if auto makers and their suppliers are forced to boost wages, the implications go beyond Mexico to Canadian and U.S. parts companies.
“You’ve got American and Canadian firms with big exposure in Mexico in terms of their own work forces,” Mr. Volpe said.
If costs go up substantially in Mexico, parts companies could also shift work to lower-wage jurisdictions outside the NAFTA zone and opt to pay the 2.5-per-cent tariffs to import vehicles to the United States under World Trade Organization rules, analysts and companies have said.
Mr. MacNaughton praised Mexico for the constructive role it has played in the NAFTA talks, saying the Mexicans “have come a long way … and made some really helpful suggestions” on Canadian auto proposals first made in Montreal to break the deadlock.
It is unclear, however, how extensive any deal announced next week will be. The United States has signalled it is willing to be flexible on its demands for a sunset clause and the abolition or gutting of NAFTA’s Chapter 19 and Chapter 20 systems of dispute resolution, said people with knowledge of the discussions.
But Ottawa and Washington remain far apart on Mr. Lighthizer’s demands for stringent “Buy American” procurement rules and the end of Canada’s protectionist system of supply management for dairy, poultry and eggs, the sources said.
Daniel Ujczo, an Ohio-based trade lawyer with Dickinson Wright, said the U.S.’s aim is simply to move NAFTA to the back-burner at a busy time – with the escalating Chinese trade war, and the looming Mexican presidential and U.S. congressional elections – and then come back to the deal later on.
“Lighthizer just wants to say we are going to have a NAFTA deal, and we’re working out the details,” he said.
Ms. Craft, who took up her new post six months ago, told the Empire Club of Canada that she was confident a pact could be reached. She stressed that it must be modernized in a way that lifts the standards of working people.
“Prime Minister Trudeau does not share all of President Trump’s policy prescriptions to be sure, but they both have that finger-tip feel, that visceral sense that we are in a period of great possibility which can turn into a period of great peril if we don’t respond to the demands from working people in our countries who want dignity that results from having a good job,” the U.S. ambassador said.
Ms. Craft also listed off a series of trade irritants – including supply management, the inability of U.S. telecoms to gain access to the Canadian market, Canadian generic drugs and Canada’s extremely low threshold for duty-free consumer goods – that should be remedied.
April 04, 2018 – Jenny Leonard
World Trade Online
U.S. Trade Representative Robert Lighthizer has decided against hosting an official eighth round of NAFTA negotiations and instead will hold ministerial meetings with his counterparts in Washington, DC, this week, hoping to make progress in the most sensitive areas and lay the groundwork for an agreement in principle by mid-April, sources close to the talks tell Inside U.S. Trade.
Canadian Foreign Affairs Minister Chrystia Freeland and Mexican Economy Secretary Ildefonso Guajardo will meet separately with Lighthizer, these sources said, with a trilateral meeting set for Friday. Both officials will come to DC with their chief negotiators and other senior political staff as well as several chapter leads, leaving some observers to argue this week’s meetings are akin to a negotiating round “but no one wants to call it that,” one source said.
“Effectively a round is occuring right now with so many tables meeting,” another source said. “It’s a round but it’s just not called that.”
The three countries are expected to flesh out an agreement in principle that President Trump, Prime Minister Justin Trudeau and President Enrique Peña Nieto could announce at the Summit of the Americas in Lima, Peru, which begins on April 13. Sources told Inside U.S. Trade Lighthizer will accompany Trump to the summit.
USTR’s chief agricultural negotiator, Gregg Doud, told stakeholders this week that the White House was pushing for an agreement in principle by then, people briefed on the conversation said.
The Lima summit will be the first and likely the last event the three heads of state will participate in together, as Mexico will elect a new president on July 1. Two planned state visits between Peña Nieto and Trump were canceled after Trump repeatedly insisted Mexico would pay for a planned border wall.
USTR for weeks has sidestepped questions posed by congressional staff, stakeholders and its trading partners about the timing and logistics of an eighth round, but sources said Lighthizer told his counterparts weeks ago that he was opposed to holding another formal negotiating session and said he prefered finalizing any outstanding issues at the ministerial level. USTR did not respond to a request for comment.
Some said it was not uncommon for ministers to handle the final stretches of negotiations this way and to seek a shortcut to a deal with so little time left in the political calendar.
“USTR can construe a mini-ministerial as news if it wants to build the narrative that the parties are close enough to conclusion to no longer need to conduct regular rounds and now are at a stage where ministers are engaging on final trade-offs,” one source said.
“If so,” the source added, “the agenda will be about the key sensitive issues and trade-offs between them.”
Some congressional staff members and stakeholders, on the other hand, believe the tactic is risky and flawed given what they perceive as a number of “process fouls” USTR has committed throughout the NAFTA negotiations — and given the proposals the administration put forward over the objections of key lawmakers and some administration officials.
A ministerial-level push without Capitol Hill involved is especially risky when engaging in final trade-offs, one aide contended, stressing that in a “normal” negotiation USTR is supposed to consult with Congress on compromises to gauge their feasibility for members and stakeholders as well as their impact on the whip count.
Republican and Democratic aides, however, said Lighthizer’s strategy to cut out Congress and stakeholders made sense because he is “calling [the Republicans’] bluff,” as one put it.
Lighthizer is facing pushback from the chairmen of the key congressional trade committees on a number of proposals he has advanced in the talks with Canada and Mexico, but observers from both sides of the aisle said they doubted the chairmen or a majority of GOP members — despite public criticism of Lighthizer’s approach — would in the end reject a deal if the president backed it.
Sources said the talks to date have advanced well in areas where all parties saw a need for modernization, but that negotiators remained stuck on a number of chapters in which USTR has not signaled it could make compromises.
Mexican and Canadian sources as well as many key players in the U.S. business community have faulted the Trump administration for what they see as a lack of political direction in the NAFTA talks.
These sources said direction from Lighthizer and his political team was needed to clear many outstanding roadblocks — either in chapters in which the countries have to hammer out so-called “endgame issues,” or in areas where USTR’s initial proposals were not workable for its trading partners but career staffers have not received guidance to move off those approaches.
“Canada and Mexico have nothing useful on landing zones,” one outside adviser said. “It seems to still be ‘take it or leave it.’”
One source close to the talks said the ministerial meetings this week “should lead to clear instructions for further technical meetings with all groups under one roof.” The source added that it was “imperative to have intense technical meetings if we are to advance.”
Many outside advisers and observers agreed that even if an agreement in principle was announced this month, a large amount of technical work would remain before a substantive agreement could be reached — and getting there, they say, will require unprecedented engagement from USTR at the negotiating table.
“The onus is on USTR to at least — they don’t have to back off their positions — but at least show some flexibility on the issues,” one private-sector source said. “I think there could be some positive momentum here, but real progress really depends on USTR.”
Mexico’s chief negotiator, Kenneth Smith Ramos, tweeted on Tuesday that the “NAFTA modernization process is entering a phase of intensive Ministerial engagement. #MX will continue to work constructively and it will be the substance of the #negotiation that drives any potential conclusion. Goal: a stronger and modern #NAFTA.”
Sources said the Trump administration, on the other hand, appeared to have been exerting pressure for a compressed time frame in an attempt to arrive at its desired conclusion — including extracting concessions from its neighbors in return for permanent exemptions from Section 232 tariffs on steel and aluminum.
Sources told Inside U.S. Trade last week that Lighthizer had been pushing for an agreement in principle to be announced by March 31 and that he wanted it finalized by May 1, the day Mexico and Canada’s exemptions for Trump’s steel and aluminum tariffs expire.
Mexican Economy Secretary Ildefonso Guajardo last month rejected the end-of-March deadline and the pressure that would come with an agreement in principle announced despite a raft of unresolved issues, they said. Instead, the three countries agreed to close out seven additional nearly completed “modernization” chapters by the end of this week.
A private-sector source said “those are not what you consider deal-breaking chapters, of course,” but several sources said wrapping up those chapters would send a positive message and lay more groundwork for an announcement at the Lima summit.
Sources disagreed on how much advancement would be beneficial to congressional Republicans who would be forced to make NAFTA an election issue and defend a deal that might fall short of some of their demands.
One source argued that even if the time line Lighthizer was pushing for was “partially aspirational, it shows the leverage USTR has over our trading partners with a crazy president.”
“In a way, Lighthizer has leverage on Trump to move quickly and be reasonable,” the source said. “If Trump can say he has achieved a good NAFTA it might help with the midterms. And Lighthizer can say it’s safer to get NAFTA done right now when [Republicans] control all the levers of power.”
Another said an agreement in principle was “the best thing that could happen” to those members because it would “keep the president happy” and would allow the countries to put the talks “on ice” for the foreseeable future and avoid making NAFTA a possibly “toxic” election issue.
An area that will be closely watched by many this week is NAFTA’s automotive rules of origin. USTR late last month floated a revised proposal that would factor wages into the regional value content metric that determines if a car qualifies for duty-free treatment under NAFTA.
Talks on the new autos proposal to date have been conducted largely bilaterally, and both Mexico and Canada have said they must further analyze the offer and consult with their domestic industries. People briefed on USTR’s proposal said it did not include a specific methodology and was lacking important information on how it would be implemented and administered — and that negotiators and stakeholders were looking for more detail on those in the meetings this week.
“Successful auto negotiations will depend on achieving clarity on rules of origin because the speed and scope of the industry makes it impossible to administer without them,” Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, told Inside U.S. Trade. “The question that remains unanswered is whether we are at a stage that the three parties can confidently provide that to the sector.”
Guajardo on Monday said USTR was looking for a “quick solution” and that the negotiating teams “made a lot of progress, but on the complex issues, well, it looks like there’s a willingness to be flexible.”
Leading up to the Lima summit, there could be “the principal lines of understanding for solving complex issues,” he added, but the three sides are “not there yet.”
“The ministers need to get working together to get things settled,” he added, according to Reuters.
One private-sector source said Guajardo’s comments were “essentially acknowledging reality.”
“They want a milestone. They buy themselves huge time and scope to work on technical details,” the source said of a potential announcement of an agreement in principle. “But there is a big gap between desire and execution.”
Over the weekend and earlier this week, President Trump has used Twitter to bash NAFTA and link the negotiations to other issues. This weekend, he tied the talks to immigration reform and threatened to use NAFTA as a bargaining chip should Congress not act immediately.
“Mexico is making a fortune on NAFTA…They have very strong border laws — ours are pathetic,” Trump tweeted. “With all of the money they make from the U.S., hopefully they will stop people from coming through their country and into ours, at least until Congress changes our immigration laws!”
But some sources question how credible those threats could be, especially in light of the administration’s recent trade actions against China — remedies that have already spurred Beijing to retaliate against U.S. exports and threaten more moves.
“As the trade war with China commences, it’s inconceivable that Trump could also withdraw from NAFTA,” said Jamie McInerney, executive director of the Trade Leadership Coalition, an industry-backed pro-trade and pro-NAFTA organization. “Doing so would mean that U.S. farmers lose access to their three largest export markets — China, Mexico, and Canada — all at once. This could throw the agricultural economy into a full-on depression and would certainly incite further sell-offs in the stock market.”
By David Akin, Chief Political Correspondent – Global News
April 4th, 2018
Canadian government and industry sources remain skeptical that the finish line on a NAFTA deal is anywhere in sight, despite reports from Washington that the Trump administration is hoping for a kind of deal-in-principle when the leaders from the three NAFTA countries meet in Lima, Peru next week.
Bloomberg reported Monday that the White House is keen to have U.S. President Donald Trump stand with Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto at the Summit of the Americas in Lima next week and announce that the three countries have agreed on the broad outlines of an updated North American Free Trade Deal. The idea, Bloomberg said, would be to have technical details sorted out in the months ahead.
Adam Austen, a spokesman for Foreign Affairs Minister Chrystia Freeland, would not comment on reports from Washington about a potential deal-in-principle other than to say, “Canada is committed to concluding a modern, mutually beneficial NAFTA as soon as possible.”
Freeland is expected to travel to Washington at the end of this week for one-on-one meetings with U.S. Trade Representative Robert Lighthizer.
Canadian auto industry sources are confident that the three countries are close to an agreement on the rules of origin for autos and automotive component.
“Right now where we are? I’m very positive,” said Flavio Volpe, president of the Automotive Parts Manufacturing Association of Canada.
READ MORE: Donald Trump tweets threat to pull plug on NAFTA in push for border wall
But other non-auto industry sources tell Global News that the gap has grown between the three countries in other areas. And while it’s possible Trump, Trudeau, and Nieto could announce an agreement on autos, it may not be in Canada’s best interest to have leaders announce sectoral agreements.
For Canada, the goal is an improved NAFTA, not simply to improve the deal for certain sectors, according to some sources who have been briefed by Canada’s negotiating team.
Trump, meanwhile, appeared to relish the idea of continuing to use the threat of walking away from NAFTA to accomplish his objectives in other policy areas, notably on the security of America’s southern border.
Speaking from the White House on Tuesday, Trump called NAFTA “a cash cow” and made some vague complaints that Mexico was not doing enough to prevent illegal migration from Mexico into the United States.
“We will be doing things with Mexico and they’re going to have to do it. Otherwise, I’m not going to do the NAFTA deal,” Trump said. “NAFTA’s been fantastic for Mexico and bad for us.”
Trump only briefly mentioned Canada in an extended six-minute monologue in which he mixed complaints about NAFTA with complaints about immigration control.
“We’re renegotiating the deal right now, but it’ll still be good for Mexico and Canada,” Trump said.
For Canada, the crucial outstanding issues include a dispute resolution mechanism and a sunset clause. Both issues were put on the table by the Trump administration.
Trump wishes to end the independent dispute resolution mechanism. He also wants a sunset provision in which NAFTA would automatically die if the deal was not reaffirmed by each country from time to time. Both ideas are non-starters for Canada.
There are also disagreements in agriculture — mostly over Canada’s supply management system in dairy and poultry — and government procurement, but those sorts of disagreements were common to other U.S. administrations.
By James Munson – Bloomberg
April 3, 2018
Canada’s climate change plan could be undermined U.S. vehicle fuel efficiency standards, Canadian officials said.
Canada’s vehicle standards, which are aligned with U.S. regulations, are central to the federal government’s plan to help bring the country within distance of its national greenhouse gas emission goals for 2030.
Canada is paying close attention while awaiting the U.S. Environmental Protection Agency’s final decision on the 2022-2025 light-duty vehicle standards, said Caroline Theriault, spokeswoman for Environment Minister Catherine McKenna.
“When we first adopted these fuel efficiency regulations aligned with the U.S., we committed to a public consultation in Canada after the U.S. midterm review concludes,” Theriault told Bloomberg Environment in an email. “Our review of the 2022 to 2025 standards will be comprehensive and thorough.”
Transportation Central to Climate Goal
The current U.S. standards for light-duty vehicles for the model years 2022-2025 are based on outdated information and might be too stringent, EPA Administrator Scott Pruitt said in the midterm final determination released April 2.
The U.S. is beginning a process to create new greenhouse gas and fuel efficiency standards.
Canada has long aligned its vehicle standards with the U.S. because of the countries’ integrated vehicle manufacturing sectors. Former President Barack Obama and Prime Minister Justin Trudeau said in March 2016 that both countries would work closely in the midterm review of the 2022-2025 standards.
Tougher tailpipe standards are among the policies Canada points to when defending its 2030 goal to bring greenhouse gases 30 percent below 2007 levels.
“Reducing pollution from transportation is an important part of Canada’s clean growth and climate plan to meet or beat our Paris commitments,” Theriault wrote.
The last amendments to the Canadian vehicle standards were expected to bring a cumulative decrease of 174 million metric tons in greenhouse gas emissions between 2017 and 2025, according to Environment Canada.
The 2022-2025 regulations require vehicle manufacturers to lower emission targets for models on average by five percent each year.
Automakers: Canada Should Follow U.S.
If the EPA rule-making process ends up with new standards, Canada should follow suit, said Mark Nantais, president of the Canadian Vehicle Manufacturers Association.
“If we were to break out on our own, and we were there at one point in time, that is a more costly way to go about it,” Nantais said.
Consumers will also hold on to older, higher-polluting vehicles if they can’t afford new ones, which would be bad for the environment, Nantais said.
“When we talk about greenhouse gas emissions, what we talk about in Canada doesn’t really matter,” he said. “What we do in North America does matter because GHG emissions cross borders and there are no boundaries.”
But making the rules less stringent will hurt the finances of car part manufacturers who have been preparing for the tougher standards, said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.
Two sets of standards will cause a “headache” for parts makers who will have to choose between focusing on the bigger market or the higher standard, Volpe said.
“We have been investing hundreds of billions of dollars in lightweighting and also alternative propulsion,” Volpe said. “If that standard is lowered, at this late stage, in some cases, it threatens to strand some of that advanced research and development spending.”
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.
By L. Ian MacDonald. Published on Mar 27, 2018
There have been two major developments in the last week on the NAFTA renegotiation front, both of them coming from Donald Trump himself. In his crazy Art of the Deal mode, he’s saying—chaos is good, chaos works.
First, Trump has extended the exemption of Canada and Mexico from his 25-per-cent tariffs on steel and 10 per cent on aluminum to include the EU, Australia, South Korea, Brazil and Argentina. But he also announced a May 1 deadline for progress in NAFTA talks, failing which the White House says it will instead impose quotas “if necessary and appropriate.”
This is also about Trump declaring a trade war against China, imposing $50 billion of tariffs against a country with which the U.S. has a $350 billion trade deficit. Which is why the stock market tanked last week, along with another increase in the Fed reserve rate, causing the Dow to lose over 1,400 points, or 5.7 per cent of its value.
What’s the Trump administration’s rush on NAFTA? The upcoming April round of NAFTA talks — the eighth set of meetings — is perhaps the last opportunity for a deal before the Mexican election on July 1. Not to mention the U.S. mid-term elections in November, where Trump and the Republicans are expected to lose control of the House of Representatives, and perhaps even the Senate, to the Democrats.
Trump does not want a NAFTA bill before a Democratic Congress next January, and he obviously wants to send them one by early June before the fall campaigns begin in earnest. Otherwise, it falls to 2019.
So Trump, to put it politely, is saying: “Let’s get this done in the next month.”
And second, Trump wants to limit health warnings in the NAFTA countries on surgary drinks and fast food, to which he is famously addicted. The New York Times reported the other day that the office of the United States Trade Representative wants to “limit the ability of any NAFTA member to require consumer warnings on the front of sugary drinks and fatty packaged foods.”
In this, Trump evidently has the support of the U.S.-based soft drink and fast food industries, but not of health advocates in any of the NAFTA countries. The Times reported that the USTR demand would ban “any warning symbol, shape or colour that a hazard exists from the food or non-alcoholic beverages.”
Really? Well, in Canada obesity is a growing problem and a major contributor to a diabetes crisis which puts one Canadian in three at risk.
This is not a deal-breaker for Canada; it’s a complete non-starter.
But there’s also some good news on the NAFTA front. USTR Amb. Robert Lighthizer says there’s been a “convergence” of views on rules of origin in the North American auto industry, until recently one the impasse items on the agenda. The Americans are now prepared to stand down from their demand for 50-per-cent U.S. content in North American assembled vehicles, and 85-per-cent North American content overall, rather than the current 62.5 per cent set out for inputs in the original NAFTA.
Actually, this is a no-brainer.
As both industry and labour have explained to Lighthizer, the U.S. is already there, at least in terms of American content in Canadian-assembled vehicles. Flavio Volpe, head of the Canadian Auto Part Manufacturers Association, has repeatedly made the point that U.S. content in Canadian-assembled vehicles is already at 63 per cent, with 40 per cent of U.S. content, even in Mexico. And Scotiabank Economics has pointed out that 75 per cent of NAFTA auto content is already North American-sourced.
Which may explain why Volpe, quite unusually, had a meeting with Lighthizer, which he says went quite well. It’s quite extraordinary that an industry representative from another country would have a sit-down with a USTR in the middle of trade talks.
Canada has also offered to include intellectual property, which strongly favours the U.S., as part of North American content. Good thinking.
For the rest, there are several poison pills still on the table, beginning with the American proposal of a five-year “sunset clause”, which would see NAFTA renegotiated every five years. But the language of the USTR position paper is much less objectionable, calling for “a mechanism for ensuring that the parties assess the benefits of the agreement on a periodic basis.”
Believe it or not, that is precisely what’s going on now, a quarter century after NAFTA was negotiated.
On government procurement, the U.S. is demanding access to Canadian and Mexican markets without offering reciprocity.bWhile the USTR position seeks to “ensure reciprocity in market access for U.S. goods, services and suppliers in Canada and Mexico”, it would “exclude sub-federal coverage from the commitments being negotiated,” as well as “Buy America” requirements for state and local projects and defence contracts. The Americans can’t have this both ways.
The Americans also want to eliminate supply management in dairy, eggs and poultry, which would be a political problem for any Canadian government. There may be only 12,000 dairy farmers left in Canada, but they can bring their cows to Parliament Hill any time they want. Which isn’t to say that supply management couldn’t be phased out over a decade or so, with government subsidies to farmers to help ease the pain.
And finally, the U.S. wants to replace the independent dispute settlement mechanism in Chapter 19 that is a deal-breaker for Canada, and has been since Brian Mulroney and Ronald Reagan negotiated the Canada-U.S. Free Trade Agreement in 1987.
The Trudeau government has been adroit and adept in its management of the NAFTA file, beginning with the prime minister creating a positive relationship with the mercurial Trump.
Trump has complained that the Americans have been outsmarted by the Canadians in the past. And he’s not wrong about that. Our trade negotiators have a history of being among the best in the world, because they have to be. For one thing, they’re sitting across from the Americans. For another, our living as a trading nation depends upon it.
David Ljunggren – Reuters
March 21, 2018
OTTAWA (Reuters) – Canadian Prime Minister Justin Trudeau said on Wednesday for the first time that a deal to renegotiate NAFTA was likely, amid signs negotiators may be closer to settling one of the regional trade pact’s most contentious issues.
“We remain very confident that a win-win-win deal is not only possible, but likely,” Trudeau told a Toronto business audience.
The head of Canada’s Unifor union – who has close ties to Ottawa’s negotiators – said the United States had dropped its insistence that all autos made in NAFTA countries have 50 percent U.S. content. The demand – rejected by Canada and Mexico as completely unworkable – had become a major sticking point.
“The United States withdrew it,” Unifor President Jerry Dias said by phone after speaking to Canadian government officials.
“NAFTA is going nowhere as long as they kept that there and I think they realized that,” he added, noting that U.S. auto companies had lobbied against the idea on the grounds it would disrupt a highly integrated industry.
An industry source familiar with the negotiations also said the United States had dropped its demand and added the “sides are still very far apart, but there’s movement.” Canadian officials were not immediately available for comment.
The news, first reported by Canada’s Globe and Mail newspaper, helped the Canadian dollar post its biggest gain against the U.S. dollar in nearly four months, while Mexico’s peso firmed more than 1.5 percent.
Officials are due to meet in April for an eighth round of negotiations on updating the $1.2 trillion North American Free Trade Agreement. Talks have bogged down as Canada and Mexico attempt to digest Washington’s far-reaching demands for changes.
U.S. Trade Representative Robert Lighthizer said on Wednesday the three countries in NAFTA were “finally starting to converge” on auto content requirements.
But he also attacked what he called Canada’s “Third World” intellectual property laws and demanded changes to Canadian tariffs and import curbs that protect domestic dairy producers.
Trudeau told reporters later he would continue to defend the system “because it works.”
TAKING NOTHING FOR GRANTED
The disagreement underlines how much work remains to be done, especially given that U.S. President Donald Trump has threatened to abandon NAFTA unless it is reformed to his liking.
A senior legislator from Trudeau’s ruling Liberal Party told reporters nothing could be taken for granted.
“There are good signs … (regarding) automobiles, but it’s too soon to declare any sort of progress that’s definitive,” said Andrew Leslie, parliamentary secretary to Foreign Affairs Minister Chrystia Freeland.
Flavio Volpe, president of the Toronto-based Automotive Parts Manufacturers’ Association, said the U.S. side had shown more willingness to compromise on content over the past month.
“Everything I hear and see supports the notion that we are collectively working toward a completion” of NAFTA rather than preparing for a U.S. withdrawal, he said by phone.
Mexican Economy Minister Ildefonso Guajardo plans to hold talks with Lighthizer this week, according to an official familiar with the matter.
Last week, Guajardo said if the three countries did not finish the talks by the end of April, the process would drag on at least until December.
Mexico’s presidential vote is to be held on July 1, while U.S. congressional elections are set for November.
Alicja Siekierska – Financial Post
March 21, 2018
The United States’ apparent willingness to soften its contentious proposal on automotive rules of origin has brought optimism to NAFTA talks, but there are still obstacles that remain before a deal can be reached.
U.S. Trade Representative (USTR) Robert Lighthizer told lawmakers in Washington on Wednesday that the U.S., Canada and Mexico were making progress on automotive rules of origin negotiations, which had previously been at a standstill due largely to a controversial 50 per-cent U.S. content requirement proposal made by the Americans.
“The United States had a proposal, Canada had a proposal and Mexico has been engaged on this issue. I think we are in a position where we are finally starting to converge,” Lighthizer told members of the House Committee on Ways and Means, adding that he had also been working with the U.S. auto industry in Detroit to work on details of the agreement.
“We’re in a pretty good place.”
Prime Minister Justin Trudeau said Wednesday he believes a NAFTA deal is “eminently possible” and that “there seems to be a certain momentum around the table now that I certainly take as positive.”
The comments from Lighthizer come the day after Canada’s ambassador to the U.S. David MacNaughton told reporters in Washington that recent discussions between the Canada, the U.S. and Mexico have been “more positive” than he’s seen before. He also said the U.S. brought forward “interesting ideas” regarding automotive rules of origin that would allow it to achieve the goal of safeguarding auto production without a strict 50 per cent American-made content requirement — something Canada and Mexico are adamantly against.
“I think it’s a potential turning point because it’s the first time we’re seeing that kind of flexibility on the five poison pill (proposals brought forward by the U.S.),” said Brett House, the deputy chief economist at the Bank of Nova Scotia. However, he noted that it should be considered a modest turning point, as the proposed 50 per cent U.S. rule of origin “was never really a feasible demand.”
“A lot hinges on whether the four-to-six-week (negotiation timeline) hope from Lighthizer is matched with greater flexibility from the U.S. and potentially a willingness to accept a more modest set of changes than laid out in the USTR’s negotiation objectives from last summer,” House said.
Flavio Volpe, the president of the Automotive Parts Manufacturers’ Association, met with USTR officials two weeks ago in Washington, where he said discussions progressed in a way that left him hopeful that a NAFTA deal could be reached.
“It’s one thing to speak with congressmen, senators and governors, but it ultimately comes down to the administration. For the first time the administration, via the USTR, has been willing to receive groups and individuals over the last month,” he said.
“I was hopeful when I left that meeting. We are dealing with people who are interested in a real solution.”
The revelation that NAFTA negotiations are progressing saw the Canadian dollar climb by a full cent to 77.5 cents US.
However, some economists and trade experts cautioned that there are still major obstacles that remain in NAFTA negotiations, including the USTR’s five-year “sunset clause” proposal and its desire to water-down the strength of NAFTA’s Chapter 11 dispute resolution panels.
While Lighthizer was largely positive on autos, he reiterated some grievances he has with Canada. He called Canada’s $20 duty-free limit as “just ridiculous” and something that “has to go up.” He also said that “Canada has Third World intellectual property protection.”
“The news on NAFTA is good, but maybe not that good,” CIBC Capital Markets chief economist Avery Shenfeld said in a note on Wednesday. “Not that there are still some major gaps between the parties, including Canada’s desire to retain dispute resolution panels (needed more than ever given recent U.S. actions against Canada on lumber, paper and pipe) and the U.S.’ much more protectionist stance on government procurement.”
Dan Ciuriak, a senior fellow at the C.D. Howe Institute and an international trade consultant, agreed and said while the flexibility on rules of origin is a sign of progress, “we’re not out off the woods yet on NAFTA.”
“I don’t see a clear landing zone for this negotiation yet,” he said. “While it’s positive to hear that one of these poison pills may have been taken off the table… we don’t have a resolution on several others. It’s progress, but let’s just say: curb your enthusiasm.”
With files from the Canadian Press.
ADRIAN MORROW , GREG KEENAN AND JUSTIN GIOVANNETTI – Globe and Mail
WASHINGTON AND TORONTO
PUBLISHED MARCH 21, 2018
United States Trade Representative Robert Lighthizer says the three NAFTA countries are “finally starting to converge” on the tough issue of automotive content rules, adding that the U.S. and Canada have the “similar objective” of repatriating more auto manufacturing jobs after years of watching them move to Mexico.
Mr. Lighthizer, President Donald Trump’s point man on trade, told a congressional committee Wednesday that Washington and Ottawa were becoming increasingly aligned at the bargaining table after months of acrimony.
“The U.S. had a proposal, Canada had a proposal, and Mexico has been engaged on the issue. And I think we’re in a position where we’re finally starting to converge,” he told the Committee on Ways and Means. “I think we’re in a pretty good place.”
As revealed Tuesday by The Globe and Mail, the U.S. has dropped its toughest demand: That vehicles made in Canada and Mexico for export to the United States contain at least 50-per-cent U.S. content. Canada and Mexico, for their part, have accepted Washington’s demands for tougher “rules of origin” ensuring more North American content in autos.
But other tough U.S. demands remain, including restrictions on Canadian and Mexican companies bidding on U.S. government contracts and the abolition or gutting of most of NAFTA’s dispute resolution provisions. Mr. Lighthizer said he also wanted smaller concessions from Canada, such as tightening its “third-world” rules on intellectual property and raising its $20 de minimis cap on the value of goods Canadian consumers can import without paying duty.
Mr. Trump is also facing increasing pressure from his own caucus to drop his proposal to opt out of Chapter 11, a NAFTA provision that allows companies to sue governments in front of special trade tribunals. Even as Mr. Lighthizer testified, 103 Republican members of Congress warned that, without Chapter 11, they would have a hard time approving any renegotiated agreement.
Cracking the auto issue, however, puts a deal within reach.
Sources with knowledge of the talks said the three sides are looking at ways to boost the amount of North American content in autos. The U.S. wants the percentage raised from the current 62.5 to 85.
The ideas in play are similar to compromise proposals Canada made in January, the sources said: Changing the way content percentages are calculated to include more items, such as software development and electronics, and giving companies credits against the content percentage for using North American steel or investing in research and development.
The idea is to ensure that the auto jobs of the future, which will become increasingly high-tech with the rise of electric and self-driving vehicles, are created in North America. Most of the high-tech jobs are expected to be created in the U.S., effectively boosting the American content percentage without implementing a hard-and-fast rule.
Another idea on the table, at the behest of the U.S., is to significantly stiffen the penalties for companies caught using less North American content than the requirement, one source said – fining or even barring them from shipping autos or components into North America.
One source said the objective of the eye-popping U.S. content requirement had been to shock its negotiating partners into taking the talks seriously. By that measure, the play worked. But the U.S. realized it had to drop the demand before any real discussion could happen, the source said.
The three sides are also nearing agreement on a U.S. demand for a sunset clause that would terminate NAFTA after five years unless all three countries agreed to keep it. Canada and Mexico have instead proposed creating an amending formula that would allow for changes to the agreement every five years but without the threat of termination.
“The NAFTA negotiations are rapidly entering the ‘close phase’ on automotive, a sunset clause and seasonal produce, with Canada and Mexico likely conceding on government procurement,” said Daniel Ujczo, an international trade lawyer with Dickinson Wright, which has clients in the manufacturing sector.
Flavio Volpe, president of the Automotive Parts Manufacturers Association of Canada, said there is a determined effort to reach a deal during the next official round of talks, in Washington in early April.
Prime Minister Justin Trudeau confirmed that negotiators were making progress but tried to temper expectations for an immediate resolution.
“There seems to be a certain momentum around the table now that I certainly think is positive, but we will see what new challenges will come up in the coming weeks,” he said at the Royal York Hotel in Toronto.
Mr. Lighthizer said earlier this month that he wanted a deal within four to six weeks, before the Mexican presidential election campaign begins in earnest.
And on Wednesday, he signalled that he was willing to put water in his wine to make that happen. He told legislators that his staff had been in Detroit this week for talks with the auto industry to work out details on how an agreement would function. The auto makers have generally been more aligned with the Canadian and Mexican positions in NAFTA talks, favouring freer markets.
He also tried to allay the committee’s fears over Mr. Trump’s repeated threats to tear up NAFTA.
“Our objective is not to withdraw. Our objective is to get a good and improved agreement,” he said.
Greg Gardner , CONTRIBUTOR – Forbes
MAR 21, 2018
The North American Free Trade Agreement’s prospects brightened after the U.S. dropped a demand that 50% of every vehicle assembled in Canada or Mexico be manufactured in the U.S.
“If true, that would be a very strong indication that we’re in deal-making mode,” says Flavio Volpe, president of the Automotive Parts Manufacturers’ Association of Canada.
The change came last week in talks between Chrystia Freeland, Canada’s Foreign Minister, and U.S. Trade Representative Robert Lighthizer, the Globe and Mail reported.
This is the second encouraging sign for NAFTA this month.
The first came when the Trump administration exempted Canada and Mexico from its 25% tariff on imported steel and 10% tariff on imported aluminum.
Preserving NAFTA in some form is important because millions of auto-related jobs depend on exports from the U.S. to its southern and northern neighbors. U.S. trades more with Canada and Mexico than with Japan, South Korea, China, India, Brazil, Russia and South Africa combined.
The potential breakthrough comes as new vehicle sales in the U.S. are falling modestly from record levels of 2016 and 2017. Interest rates are rising on auto loans, and about 4 million nearly-new vehicles are expected to flow into used car lots at the end of 2- and 3-year leases.
U.S. public opinion is moving against Trump’s protectionist approach and his description of trade as a war which the U.S. is losing. Support for the steel and aluminum tariffs are weaker than Trump’s approval rating.
Last November the Pew Research Center found that 56% of respondents said NAFTA is good for the U.S. while 33% said it was bad. That gap swelled to 69% for and 15% against among those between ages 18 and 29.
Automakers and suppliers have warned that if the U.S. was willing to kill the 24-year-old trade pact, it could cost 50,000 manufacturing jobs in North America and $10 billion a year in lost trade.
If the U.S. had not dropped the 50% demand, there was a strong possibility that manufacturers would choose to pay the 2.5% tariff on parts and vehicles produced outside the region such as Eastern Europe of China.
But despite the new flexibility on U.S. content, David MacNaughton, Canada’s ambassador to the U.S., cautioned that the path to a new NAFTA is still fraught with perils.
“They (the U.S.) put some interesting ideas on the table, which were actually quite creative,” MacNaughton said. “Did we get to somewhere where you could shake hands and say, ‘We’ve got a deal?’ Absolutely not.”
MacNaughton added Canada is willing to meet around the clock when talks resume next month in Washington.
Shares of General Motors and FiatChrysler were up more than 2% in mid-afternoon trading Wednesday. Share of Ford rose about 0.9%.
The Canadian Press and Reuters via Automotive News.
WASHINGTON — The U.S. government has dropped a demand that all vehicles made in Canada and Mexico for export to the United States contain at least 50 percent U.S. content, The Globe and Mail reported on Tuesday, citing sources.
The Trump administration had been seeking to raise the amount of total NAFTA content in light vehicles to 85 per cent from the current requirement of 62.5 per cent. It also suggested a new provision that would require 50 per cent of that total to originate in the United States.
President Donald Trump’s administration dropped the demand during the North American Free Trade Agreement negotiations in Washington last week, which included talks between Canada’s Foreign Minister Chrystia Freeland and U.S. Trade Representative Robert Lighthizer, the Canadian newspaper reported.
Freeland’s chief spokesman declined to comment on the report and said Canada and United States continued to work well together.
A potential breakthough to an impasse over automobiles has created a new sense of optimism in the NAFTA negotiations, with different players Tuesday declaring themselves more hopeful of a deal than they have been in some time.
Canada’s ambassador to the U.S., David MacNaughton, suggested his newfound optimism was based on two developments in recent days: progress on the top U.S. priority of auto-parts rules, as well as a more general thawing of the frosty tone in earlier talks.
This comes as the United States appears increasingly keen on securing a quick agreement, with an upcoming round in Washington expected to feature a final push to obtain a deal before election campaigns in Mexico and for the U.S. Congress to punt the process into 2019.
MacNaughton said the most recent American proposals could help the U.S. achieve its goal of safeguarding auto production there, potentially without a strict American-made content requirement in every car, an idea that has been a source of friction with Canada and Mexico.
The Globe and Mail newspaper reports the United States dropped its demand that all vehicles made in Canada and Mexico for export to the United States contain at least 50 per cent U.S. content.
MacNaughton cautioned that the autos impasse isn’t completely sorted out yet.
“They came back with some ideas that if you take them to their logical conclusion would mean that you wouldn’t need that (American content) requirement,” MacNaughton told reporters after speaking at a Washington gathering of the American Association of Port Authorities.
“They put some interesting ideas on the table … which were actually quite creative. To which we sort of said, ‘Yeah, we can work with that.’… Did we get to somewhere where you could shake hands and say, ‘We’ve got a deal?’ Absolutely not… Whether or not we can get there I don’t know. But I took it as being a positive thing that they had another way of getting at that issue.”
His assessment came after a discreet high-level meeting.
Foreign Affairs Minister Chrystia Freeland did not make any public appearances last week when she was in Washington to meet U.S. trade czar Robert Lighthizer, who has said he is hoping for an agreement in principle within weeks.
While cautioning that the talks can’t be bound by artificial deadlines, MacNaughton said there really is a good-faith effort to get as close to a deal as possible early next month: “We will meet seven days a week, 24 hours a day to make as much progress as we can.”
There are rumours of a lengthy, two-week round planned in Washington starting in early April. In the runup, MacNaughton said the countries have not only been meeting in person, but also in phone discussions.
“I must say that in the last two weeks the talks that we’ve had … have been more positive than I’ve seen them before,” MacNaughton told Tuesday’s conference.
“We still have a long way to go. But certainly the environment is one which is conducive to making a lot more progress in the next short while… I’m optimistic. I am confident that we are going to move forward. … Certainly the environment is conducive to making a lot more progress in the next short while.”
He cited two reasons for optimism. In addition to the autos progress, he lauded the attitude around the table recently: “I was encouraged as much by the tone as by the substance.”
One autos stakeholder said he’s newly hopeful, too.
“We’re optimistic. We’re hopeful about the timeline,” said Flavio Volpe of Canada’s Automotive Parts Manufacturers’ Association, whose group was recently invited by the U.S. to offer ideas for breaking through the impasse.
“Certainly I haven’t said that before.”
The White House on Tuesday said little in response to a public observation from Prime Minister Justin Trudeau that U.S. President Donald Trump seems to be more enthusiastic about completing a deal.
“The president is always enthusiastic about making a good deal, but that would be the key caveat to any conversation, is making sure that whatever deal he makes is good for Americans, and American workers,” said his spokeswomen, Sarah Sanders.
MacNaughton also shared an anecdote about the Trudeau-Trump relationship.
He described the prime minister attending a meeting of U.S. state governors last summer in Rhode Island, where he also met Mike Pence and he said the vice-president told Trudeau: “‘You know, the president really does like you.”‘
MacNaughton joked that the relationship is already good, with common collaboration all over the world, on issues ranging from North Korea to Venezuela, but added: “If they really want to make it an even better relationship we’ll agree on NAFTA.”
The Americans will get to tell their side of the story about the state of the talks. Lighthizer has two days of hearings scheduled before the U.S. Congress starting Wednesday, where he is sure to be asked about the NAFTA negotiations.
The Canadian Press and Reuters contributed to this report.
Alexander Panetta, The Canadian Press – Via CTV News
Published Tuesday, March 20, 2018 5:06PM EDT
WASHINGTON — A potential breakthough to an impasse over automobiles has created a new sense of optimism in the NAFTA negotiations, with different players Tuesday declaring themselves more hopeful of a deal than they have been in some time.
This comes as the United States appears increasingly keen on securing a quick agreement, with an upcoming round in Washington expected to feature a final push to obtain a deal before election campaigns in Mexico and in the U.S. Congress punt the process into 2019.
He cautioned that the autos impasse isn’t completely sorted out yet.
ADRIAN MORROW AND GREG KEENAN – Thew Globe and Mail
WASHINGTON AND TORONTO
PUBLISHED MARCH 20, 2018
The Trump administration has dropped a contentious demand that all vehicles made in Canada and Mexico for export to the United States contain at least 50 per cent U.S. content, removing a key roadblock to a deal for a new North American free-trade agreement.
Sources with knowledge of the talks said the United States took one of its toughest protectionist demands off the table during NAFTA meetings in Washington last week, which included a sit-down between Foreign Minister Chrystia Freeland and U.S. Trade Representative Robert Lighthizer. The people spoke on condition of anonymity in order to discuss the confidential discussions.
Autos have been one of the biggest sticking points in the talks. Washington had originally demanded both the 50 per cent U.S. content requirement and jacking up an existing requirement for North American content from 62.5 per cent to 85 per cent. Canada and Mexico flatly rejected the U.S. content demand, since it would give the United States a guaranteed economic advantage over its North American trading partners.
Canada’s ambassador to Washington, David MacNaughton, said on Tuesday that meetings over the past two weeks “have been more positive than I’ve seen them before.
“I can say in all honesty that there has been substantive progress made, certainly on the auto side,” he told a conference of the American Association of Port Authorities at a Washington hotel. “I am confident that we are going to move forward. I hope we can do so as quickly as possible.”
Mr. MacNaughton said Mr. Lighthizer and his team came to the table with a series of “constructive” compromise proposals aimed at reaching a deal on autos. He would not say exactly what the United States’ ideas are, but said that if adopted they would address President Donald Trump’s desire for more American content in cars without adopting a hard-and-fast U.S. content rule.
Other logjams have arisen over U.S. demands on procurement and dispute resolution.
At the conclusion of the last formal round of negotiations, in Mexico City earlier this month, Mr. Lighthizer said he wanted an agreement in principle in four to six weeks. One source with knowledge of the talks said the three sides are rushing to reach a deal by the end of April, before Mexico’s presidential election campaign begins in earnest.
Prime Minister Justin Trudeau hinted earlier this week that talks were speeding up.
“We’re renegotiating NAFTA, we’ve seen from the President he’s enthusiastic about getting to a deal,” he said.
The United States backing off its harshest demand would make the path to a deal much easier.
“If true, that would be a very strong indication that we’re in deal-making mode,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association of Canada.
Mr. Volpe said meetings he held recently with Mr. Lighthizer’s office have given him hope that an agreement can be reached, possibly during the next round of negotiations in Washington in April.
On the controversial auto-content proposals, U.S. officials asked “real questions about how things are made, from what and where,” Mr. Volpe said.
In a bid to solve the auto issue, Canada presented compromise ideas in negotiations in Montreal in January. Ottawa’s pitch included new incentives for automakers to use North American steel, invest in research and development, and build electric and self-driving cars. It also suggests changing the method for calculating North American content to include high-tech components that did not exist in vehicles when the original NAFTA deal came into force in 1994.
At the time, Mr. Lighthizer dismissed most of Canada’s proposals. But last week, said one source, he changed his stance and proposed ideas that build off Canada’s.
Mr. MacNaughton said he expected to know “later on this week, or early next week” how much progress was possible.
“What we’ve all agreed on is ‘Let’s do everything we can to get as far as we can, whether it be the end of March or early April or whatever. Let’s put a real push on to see how far we can get,'” he said.
The Canadian Press
March 18, 2018
OTTAWA — American trade officials are showing newfound interest in a Canadian proposal for revamping NAFTA’s automotive provisions as the U.S. seeks to swiftly conclude renegotiations of the continental free trade pact.
And that’s being taken in some quarters as a sign that the U.S. may realize it will have to settle for making only modest progress on a handful of American demands if there’s to be any hope of concluding a deal within the next few weeks.
At the conclusion of the last round of negotiations in Mexico earlier this month, U.S. Trade Representative said “time is running very short” to get a deal before “political headwinds” — Mexico’s presidential election in July, American midterms in November and provincial elections in Ontario and Quebec — start to complicate matters.
For the first time, Lighthizer made public his hope of completing a NAFTA deal — including the legally required six-month congressional consultation period and ratification vote – before a new Congress gets sworn in next January.
That would mean reaching a deal with Canada and Mexico during or very soon after the next round of talks, which have not yet been officially scheduled but are expected to start on April 8 in Washington and last at least 10 days.
Canadian government officials are privately skeptical that a deal can be concluded at such a breakneck pace, particularly since Mexico’s presidential campaign officially kicks off at the end of this month and no candidate can afford to be perceived as conceding anything to U.S. President Donald Trump, who is political kryptonite in that country.
They believe the only way it can happen is if the U.S. drops many of its controversial demands and accepts modest changes in just a few key areas – in particular on automobiles, which Canadian officials have believed from the outset would be the key to a successful renegotiation.
Lighthizer himself listed autos earlier this month as one of three priorities for the U.S.
Flavio Volpe, president of the Automotive Parts Manufacturers Association, concurs with the Canadian assessment.
“I would agree with all of that,” he said in an interview.
And the fact that USTR officials finally agreed to meet with him two weeks ago leads Volpe to suspect that they may have come to the same conclusion.
“That was a good meeting. It gave me hope,” he said, noting that U.S. trade officials had not accepted an invitation to meet with him during the first six months of the negotiations.
“If you look at the fact USTR was willing to receive me in Washington for a real meeting, it is the best signal to me that we could be in a phase where we get over the hump.”
In the meeting, Volpe said the Americans reiterated their opening demand – that vehicles must have 85 per cent North American content and 50 per cent American content to be eligible for duty-free movement across the three countries, up from the current NAFTA requirement of 62.5 per cent North American content — which has been rejected as a non-starter by Canada, Mexico and the industry.
But he said they were also “intellectually curious” about Canada’s counter-proposal.
Canada has proposed that NAFTA’s list of traceable components that go into cars and trucks be updated to include not just things like steel, aluminum and plastics but also intellectual property – like the software behind the computerized parts that are now integral to most vehicles and destined to become even more so as the industry embarks on an era of self-driving automobiles.
That would favour the U.S., Volpe said, because of the concentration of high-tech electronics clusters in that country.
When Canada first put its proposal on the NAFTA table back in late January, Lighthizer rejected it, predicting it would lead to more Asian content in vehicles – precisely the opposite of what the U.S. was trying to achieve.
But Jerry Dias, president of Unifor, the union that represents Canadian auto workers, said his read is that the proposal “wasn’t offensive to anybody” and that all three countries could live with it.
Nevertheless, he doubted that it provides sufficient basis to strike even a scaled-down deal by next month, unless Canada and Mexico both “capitulate” on other unpalatable U.S. demands. And that, he predicted, is “not going to happen,” particularly not with Mexico embarking on its presidential campaign in two weeks.
“My guess is this thing isn’t going anywhere,” Dias said.
The U.S. has proposed a number of so-called poison pills that Canada and Mexico have flatly rejected, including: elimination of NAFTA’s dispute resolution mechanisms; a sunset clause that would automatically terminate NAFTA unless it was renewed by all three countries every five years; and Buy American provisions to limit the number of American public contracts that could be awarded to Canadian and Mexican companies.
The U.S. has also demanded an end to Canada’s supply management system, which limits imports on milk, cheese and poultry, and sets minimum prices. Some trade experts suspect the Trudeau government may be willing to accept a small increase in U.S. dairy imports, similar to what was agreed to in the original Trans-Pacific Partnership, before Trump withdrew the U.S. from that trade deal.
The Canadian Press – March 1, 2018
WASHINGTON — Donald Trump has made clear his intention to lower the protectionist hammer. He announced plans Thursday to invoke a rarely-used legal provision allowing tariffs for matters of national security.
He says he wants tariffs of 25 per cent on steel, and 10 per cent on aluminum. It’s unclear if there will be any exception for Canada — the No. 1 U.S. supplier of both products. Trump says he’ll sign an executive order next week.
The news hit like a thunderclap — affecting the stock market and the Canadian dollar and prompting worldwide threats of retaliation. It also drew considerable pushback in Washington.
Some key quotes:
— “Twenty-five per cent for steel. It will be 10 per cent for aluminum. And it will be for a long period of time… So we’ll probably see you sometime next week. We’ll be signing it in. And you will have protection for the first time in a long while, and you’re going to regrow your industries. That’s all I’m asking. You have to regrow your industries.” Trump, announcing tariff plans during a meeting with industry representatives.
— “As a key NORAD and NATO ally, and as the number one customer of American steel, Canada would view any trade restrictions on Canadian steel and aluminum as absolutely unacceptable. Any restrictions would harm workers, the industry and manufacturers on both sides of the border… It is entirely inappropriate to view any trade with Canada as a national security threat to the United States … Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers.” Foreign Affairs Minister Chrystia Freeland.
— “If it happens (and there’s always an if with this president), this is the most consequential protectionist action by the U.S. since Nixon’s 10% across-the-board tariffs in 1971. And those didn’t last very long.” Edward Alden of the U.S. Council on Foreign Relations, in a tweet.
— “We strongly regret this step, which appears to represent a blatant intervention to protect U.S. domestic industry and not to be based on any national security justification … We will not sit idly … The EU will react firmly and commensurately to defend our interests.” European Commission chief executive Jean-Claude Juncker.
— “This action will cause aluminum prices to rise. It is likely to lead to job losses across the beer industry.” Beer-maker MillerCoors.
— “We are not protectionists. We want a level playing field … The trans-shipments (of Chinese steel) that go on … we call it the whack-a-mole game. It’s time for whack-a-mole to end. It’s time for some fairness here. It’s past time.” Dave Burritt, CEO of U.S. Steel Corporation, expressing support for tariffs.
— “Blanket tariffs that sweep in fairly traded products can backfire. They can actually hurt American jobs and workers … I think we’re all urging the president, ‘Look, continue to narrow this … Exempt those that are fairly traded.’ … You don’t want to set off a trade war.” Kevin Brady, Republican head of the House of Representatives committee overseeing trade.
— “I am very concerned … Any suggestion that Ontario-made steel or aluminum constitutes a ‘national security threat’ to the U.S. is false … I am asking my federal colleagues to continue to aggressively explore all options.” Ontario Premier Kathleen Wynne.
— “There is no standard operating practice with this administration. Every day is a new adventure for us.” Senior Republican Sen. John Thune, on the chaotic decision-making process that led to the announcement.
— “I commend @realDonaldTrump for announcing his intent to take action to protect our steelworkers from countries, like China, that cheat on trade … For years, foreign countries have been dumping steel into our markets and costing our workers their jobs and suppressing their wages.” Tweets from Bob Casey, a Pennsylvania Democratic senator.
— “The U.S. domestic (steel) supply is relatively inelastic in the short term and costly to ramp up in the long term. That makes the first target of U.S. tariffs on these imports the U.S. customer that is stuck paying them. The trickle effect to parts and cars that cross (the) border in the buildup process means we all get punished with higher costs.” Flavio Volpe of the Canadian Automotive Parts Association.
— “China fired the first shots in this ‘trade war’ more than a decade ago when Beijing added more steel production capacity than it could possibly use. The flood of imports devastated our steel industry and distorted the global market. No one did a thing. Until now.” — Tweet from Scott Paul of the Alliance for American Manufacturing.
— “Where exactly (this) leads is anyone’s guess, but it is certain to be a place less stable, less predictable, and less co-operative than the place we are right now … (It’s) a Pandora’s box.” Trade analyst Dan Ikenson, writing for Forbes.
ADRIAN MORROW AND GREG KEENAN – Globe and Mail
MEXICO CITY AND TORONTO
PUBLISHED Feb 27
The Trump administration is consulting U.S. auto companies about manufacturing rules that have been proposed during NAFTA renegotiations, providing an opportunity for the industry to push the government toward a breakthrough on one of the toughest issues in the talks, sources with knowledge of the consultations say.
Auto-industry insiders said the consultations in Washington with the Detroit Three – Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles NV – were called to talk about the NAFTA discussions and other trade issues, including possible tariffs on steel that President Donald Trump is considering, and an expected renegotiation of the country’s free-trade deal with South Korea. Among other things, the Trump administration is gathering the companies’ views on Canada’s NAFTA proposals, one source said.
Jason Bernstein, the lead U.S. negotiator on automotive-content rules, abruptly left the seventh round of North American free-trade agreement talks in Mexico City earlier this week to participate in the consultations, government and industry sources said. His departure put auto negotiations on pause.
The office of U.S. Trade Representative Robert Lighthizer did not respond to a request for comment on the developments.
The Trump administration has demanded that the percentage of North American content in vehicles made in the NAFTA zone be boosted from 62.5 per cent to 85 per cent, and that 50-per-cent U.S. content be required for autos made in Canada or Mexico that are destined for export to the United States. Both Canada and Mexico have rejected the demand.
Last month, in Montreal, Canada floated a potential compromise that would create incentives for auto companies to use North American steel and aluminum, expand existing plants in the NAFTA zone and build new ones, invest in research and development, and build electric and self-driving cars.
One source at an auto company said the industry has responded well to Canada’s suggestions. Last month, Fiat Chrysler chief executive Sergio Marchionne described the Canadian approach as “the beginning of a solution to this problem,” and the focus on new technologies in vehicles “a good thing.”
But a key issue, the auto-company source said, is that the Canadian ideas have no numbers attached, so it is difficult for companies to assess how the proposals would work.
The three governments renegotiating the trade agreement need to talk to the industry to determine if the proposals can be made to work, this source said, noting that the industry has made it clear that if new NAFTA content requirements and rules of origin are too strict, auto companies will not try to meet them and will simply pay the tariffs.
At the consultations, the U.S. government can expect to hear again about how important free trade is to the auto industry, said Mark Nantais, president of the Canadian Vehicle Manufacturers Association, which represents the Canadian units of the Detroit Three companies.
“The investments they make in Canada and Mexico are also vitally important to competitive supply chains,” he said.
Meanwhile in Mexico City, Mr. Bernstein’s absence froze auto negotiations after a single day of discussion on Sunday. Both Canada and Mexico plan to present more detailed proposals – based on Canada’s Montreal pitch – but it was unclear when they would have the opportunity.
Mexico’s chief NAFTA negotiator, Kenneth Smith Ramos, told reporters Tuesday that he hoped auto discussions could resume by the end of the week, and that Canada’s proposals would be more fully fleshed out.
“We are hoping that by the end of the week, we will have more clarity as to some of the ideas that Canada put forward in Montreal. We are discussing them with our industry with the hope of advancing,” he said.
Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, said any consultation between the U.S. government and the auto industry is “a substantively good development for Canada.”
Mr. Volpe said it is possible the three countries could reach a breakthrough on autos in the next few weeks. Negotiators could agree to a broad framework, he said, and leave technical details to be hashed out quietly afterward.
Daniel Ujczo, an international trade lawyer at Dickinson Wright, cautioned that it is not yet clear whether the Trump administration is seriously interested in incorporating the industry’s views into its negotiating position – or if its intention is to expound to the companies on its own protectionist viewpoint.
“Any time there’s consultation with industry on a presentation made in these talks, it’s a positive story,” he said. “The wild card is: Is the U.S. trade representative listening? Is it truly a dialogue, or just one side talking? That remains to be seen.”
Anthony Esposito and Sharay Angulo, Reuters Via BNN
MEXICO CITY – The United States called back its negotiator for the contentious issue of regional auto content rules from a round of NAFTA talks for consultations in Washington on Monday, delaying the ongoing conversations in Mexico City, three Mexican and Canadian trade officials said.
One of the officials said the negotiator, Jason Bernstein, had been called for meetings with U.S. automakers and U.S. Trade Representative Robert Lighthizer, and was due back later in the week.
U.S., Mexican and Canadian trade teams began a seventh round of talks to renegotiate the 1994 North American Free Trade Agreement on Sunday aiming to finish reworking less contentious chapters while also meeting to discuss the trickiest subjects.
The change in plans disrupted a schedule for talks early in the week about a proposal by the administration of U.S. President Donald Trump to make automakers source more parts from the region and specifically the United States, a major sticking point that the industry itself opposes.
However, it was not immediately clear if the disruption was a setback or could help lead to a breakthrough after months of talks to rework the trade pact the underpins US$1.2 trillion in annual trade between the three countries.
Mexican negotiators have said the auto content issue must be resolved in large part between the White House and the Big Three Detroit automakers who dominate the industry.
“What I’ve heard is that he’s back in Washington because apparently they are meeting with the Detroit three. If that’s the case, that’s really positive,” said Flavio Volpe, president of the Toronto-based Automotive Parts Manufacturers’ Association.
“The timing is awkward. But if USTR is finally talking to those companies it’s something that we’ve been asking for months,” Volpe said, referring to the United States Trade Representative (USTR)
Two auto lobbyists in the United States, who spoke on background, said they did not believe there was a joint meeting scheduled with the Detroit auto companies but individual consultations might happen.
Mexico’s government is concerned that a lack of progress on the automotive content issue could hurt the wider renegotiation, a former official still familiar with the process said.
Seeking to break the deadlock, the Mexican government has said it would put forward a proposal on rules of origin during the current round of talks, but a Mexican official said on Monday no new ideas had been presented so far.
The renegotiation began last year at the behest of Trump who said the agreement must be overhauled to better favor American interests or Washington would quit the accord. The latest round has been clouded by renewed tension between Mexico and Trump over his planned border wall.
Mexico has consistently rejected paying for the wall, and its government had hoped to arrange a meeting between President Enrique Pena Nieto and Trump in the next few weeks. However, a senior U.S. official said over the weekend that plan had been postponed after a phone call between the two soured over the wall earlier this month.
The trade negotiators have become used to such distractions, but the talks are increasingly centering on U.S. demands that officials say can be resolved only at the top political level.
Mexico’s government has not commented officially on the derailment of the Trump-Pena Nieto meeting, but Juan Pablo Castanon, head of the powerful CCE business lobby, was less reticent as he took stock of the unfolding NAFTA negotiations in Mexico City.
“Obviously, the cancellation of the Mexican president’s trip to the United States is an important element in the negotiations: it’s politics that can help us resolve the technical issues we’re moving forward on,” Castanon said.
Castanon said several chapters are close to being finished, including measures on e-commerce, telecommunications and sanitary standards for agricultural products. Others close to the talks believe the energy chapter could also be concluded.
Officials do not anticipate major breakthroughs on other intractable issues such as agriculture and dispute resolution mechanisms in the Mexico City round, due to run until March 5.
There was little sign of compromise on any issues early on, with a senior Canadian agriculture official pushing back against U.S. demands to dismantle Canadian protections for the dairy and poultry sectors known as supply management.
“When it comes to supply management, we believe there can be no concession,” said Jeff Leal, the minister of agriculture, food and rural affairs for the province of Ontario.
THE CANADIAN PRESS
Published February 21, 2018 – 12:08pm
OTTAWA — American imports into Canada could fall by $3.3 billion under the recently rebooted Trans-Pacific Partnership, the federal government has concluded, sparking fears the new pact could hurt the ongoing NAFTA renegotiation.
The text of the 11-country Pacific Rim trade deal — a pact President Donald Trump pulled the United States out of last year — was released late Tuesday, but a Global Affairs Canada analysis of the deal also delves into the impact on the North American Free Trade Agreement talks, which are to resume in five days in Mexico City.
The Trump administration has blasted trade deficits with Canada as an underlying reason for wanting to renegotiate or tear up NAFTA. The Canadian government rejects that position, saying the statistics don’t back the U.S. deficit assertions.
But the most recent analysis of the new TPP — known by the acronym CPTPP — predicts lower U.S. imports into Canada.
“Under the CPTPP, Canadian exports to the United States are not expected to change significantly as the United States is not party to the CPTPP. However, there would be a decline in imports by Canada from the United States, resulting from erosion of U.S.’s NAFTA preferences in the Canadian market,” the analysis says.
“Total Canadian imports from the United States are projected to fall by $3.3 billion, led by a decline in automotive products imports.”
Flavio Volpe, the president, of Canada’s Automotive Parts Manufacturers Association, says that will hurt Canada at the upcoming NAFTA round, where auto remains a major obstacle between Canada and the U.S.
“The report states that U.S. imports into Canada would drop $3.3 billion, mainly in automotive. If true, that is a gap smart U.S. negotiators could then be seeking to close in NAFTA 2.0,” said Volpe.
Canadian auto workers and manufacturers have been critical of the new TPP, including the government’s assertion that it has gained more access to the protected Japanese market.
International Trade Minister Francois-Philippe Champagne has said a side letter with Japan guarantees greater access and enshrines a dispute resolution mechanism. But that side letter and others with Malaysia and Australia have yet to be made public.
The government’s analysis also says, “production in the automotive sector is expected to rise very modestly, by $206 million.”
The analysis concludes: “The impacts on the automotive sector are slight, with a small increase in output and exports.”
Volpe dismissed those predicted gains as insignificant. He said the gain would amount to only $171 million by 2040.
“Contextually, the Canadian auto sector ships about $85 billion in goods annually. This 22-year increase represents approximately 0.2 per cent on that number and when one accounts for inflationary dynamics, this represents a serious decline in real dollars.”
The government analysis also concluded that the agreement would generate long-term economic gains for Canada totalling $4.2 billion, up from the $3.4 billion that was expected under the old TPP. The increase is due to improved access to member nations in the absence of U.S. competition.
Champagne said now that the full text of the 11-nation trade pact has been released, it will be signed March 8 in Chile.
The analysis suggests that the net benefits are greater for Canada now that the United States has withdrawn from the agreement.
The destiny of the trade pact was cast into doubt late last year after Trump pulled the U.S. out. But Canada and the remaining members of the old TPP agreed to a revised trade agreement on Jan. 23 that would forge ahead without the U.S.
The U.S. pullout left Japan as the largest player in the revised 11-nation pact that spans two hemispheres and includes both U.S. neighbours.
“Through the CPTPP, Canada will soon have preferential access to half a billion consumers in the world’s most dynamic and fast-growing market,” Champagne said in a statement late Tuesday.
“We wanted a good deal, and that’s what we got for Canadian workers and their families.”
The analysis also said the gains would cover a broad range of sectors, including some agricultural products such as pork and beef, wood products, machinery and equipment, and transportation equipment.
The federal government says the trade pact covers 495-million people with a combined gross domestic product of $13.5 trillion, or 13.5 per cent of global GDP.
The 11 nations in the CPTPP are Canada, Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
Mike Blanchfield, The Canadian Press
February 1, 2018
ROBERT LIGHTHIZER, the United States Trade Representative, wants renegotiation of the North-American Free Trade Agreement (NAFTA) to speed up. When the sixth round of talks ended on January 29th with only three chapters agreed, he griped: “We owe it to our citizens, who are operating in a state of uncertainty, to move much faster.” But given the changes he wants, any more speed risks a crash.
One of the biggest fights is over Mr Lighthizer’s desire to rewrite NAFTA’s rules about cars. Seen one way, the deal has been a boon for the industry. Trade in vehicles and their parts accounts for a quarter of America’s two-way trade with Mexico and Canada. But NAFTA’s critics see it as a big reason for America’s trade deficit with Mexico, and for its falling share of car assembly (see chart). Rules riddled with holes should be rewritten, they think, to yank back American jobs.
Any amendments would be to NAFTA’s rules of origin, which define what counts as a North American car—ie, one that can take advantage of zero tariffs. If the rules are too strict, car companies face a nasty choice between overhauling supply chains or absorbing the non-NAFTA tariffs of 2.5% for cars and 25% for light trucks. Too lenient, and foreign parts-producers will sneak their wares into North American cars, benefiting from tariff-free access that their governments did not negotiate.
The current rules specify that at least 62.5% of a car must come from within the region, excluding costs such as marketing or shipping. Tougher standards apply to parts on a special “tracing” list, such as axles, brakes and tyres. For them, only the regional value-added can contribute to the 62.5%. Items left off this list are easier to count as North American, as only minor processing will be enough for them to be deemed as originating from the region.
The Trump administration wants three big changes: a higher regional-content requirement of 85%; a new requirement that 50% of content is American; and a vast expansion of the tracing list to include everything. The higher content requirements should shelter local component-makers from foreign competition, and could encourage companies like Toyota, Nissan and Volkswagen to source more of their parts regionally. Updating the tracing list to include steel and electronic components, which are mostly made in Asia, should also encourage regional sourcing. The American-content requirement is supposed to ensure that any returning jobs do not flow to Mexico, where wages are lower.
Canada and Mexico have greeted these proposals with derision. An America-specific content requirement is politically impossible. And including all of a car’s thousands of components in the tracing list would be a bureaucratic nightmare and is “absolutely unrealistic”, says Eduardo Solis, president of the Mexican Association of the Automotive Industry. For components where the car industry makes up only part of overall demand, as with lithium-ion batteries, extracting the necessary information from suppliers could be tough. Flavio Volpe, president of the Canadian Automotive Parts Manufacturers’ Association, an industry group, points out that it could lead to “absurd” questions. “Is the raw material petroleum? Or do you have to know where the dinosaurs died?”
Ramping up regional-content requirements quickly would wreak havoc on the industry’s supply chains, especially given how tight the existing rules are. The costs of compliance already mean that 20% of drive-axles and 25% of radiators by value of imports move within the region without NAFTA benefits they are in theory entitled to. A severe tightening would make it harder for North American carmakers to compete with Asian exporters, who were responsible for 15% of American car sales in 2014. American-negotiated deals since NAFTA have involved less stringent rules.
Keen to keep the talks moving, the Canadian side at the sixth round suggested the “creative” solution of expanding the scope of regional content to include things like research and development. By drawing high-value-added investments to the region (and probably to America) that could entice good jobs. But Mr Lighthizer rejected this gear shift as “the opposite of what we are trying to do”. He warned that by allowing new things to count towards the regional-content requirement, the old criteria could become less onerous, making it easier for Chinese exporters to suck away North American jobs. He later added that he was “always one to talk”. With such high-level disagreements remaining, progress towards sealing a deal this year is, in effect, parked.
This article appeared in the Finance and economics section of the print edition under the headline “Rule brakers”
January 29, 2018
MONTREAL — It ain’t over. The North American Free Trade Agreement slogs ahead with minor progress and no withdrawal notice — yet — from United States President Donald Trump.
“I am, without being overly optimistic, I am heartened by the progress, as stated today, which we have made here in Montreal,” said Canadian foreign minister Chrystia Freeland during a press conference Monday.
Despite harsh, but not unexpected, words from U.S. Trade Representative Robert Lighthizer, the sixth round of renegotiating the trilateral trade deal was not without its moments of optimism.
Canada and Mexico, at least, expect a late-February meeting in Mexico City. Lighthizer demanded progress before then, and though he didn’t commit to a “see you next month,” neither did he indicate any plans for withdrawal from the agreement.
Now being discussed are what Freeland is calling “creative” Canadian proposals to meet “unconventional” U.S. demands — a step down from the language she was using late last year to describe then-“unworkable” American requests for new rules of origin for automobiles, the dismantling of dispute settlement processes and a five-year sunset clause.
This proposal, I think if the United States had made it, would be dubbed a poison pill.
-U.S. Trade Representative Robert Lighthizer
Based on the public statement their boss offered, the U.S. will put up a fight on Canada’s idea to include emerging technologies and intellectual property as auto parts in a rules-of-origin assessment.
But Flavio Volpe, representing the auto parts industry on the margins of the talks in Montreal, exuded optimism on this front, theorizing that Lighthizer is just trying to be a tough negotiator. He suggested the U.S. auto industry will be on board and will lobby for the idea’s approval — it was, after all, consulted on the construction of the proposal.
“I think the signal here is probably the Canadian proposal is so good for industry, and you’ll hear from all the industry commentators, that it might be difficult to say that that idea came from somebody else.”
Lighthizer’s harshest remarks were about a Canadian proposal to match any restrictions the U.S. places on the services market, according to Freeland’s interpretation. He had said, “This proposal, I think if the United States had made it, would be dubbed a poison pill.” Freeland explained in a subsequent press conference that Canada’s original position was to open up the services trade but that it was the Americans who wanted to impose new limits.
Upon his arrival in Montreal, Lighthizer joked that he loves Quebec’s motto, “Je me souviens,” and maybe it should hang in his office.
He and his two counterparts seem to have good memories indeed. The three have repeated each other at each round with similar rhetoric. Freeland and Lighthizer have again sparred with the same she-said, he-said arguments over who has a trade deficit with whom and whether the balance of trade is even a valid way to judge the effectiveness of an agreement.
The two sparred — again — on softwood lumber and Canadian litigators seeking a settlement after new tariffs and countervailing duties were imposed by the U.S.
Freeland repeated Monday a phrase she has previously used to indicate the minor progress that each round has produced on “bread-and-butter” aspects of the deal.
It’s true that some such progress appears to have been made. A third chapter, on anti-corruption, has been concluded. Several more, on telecommunications, digital trade, sanitary and phytosanitary measures and customs and trade facilitation, are nearing conclusion.
But a slow-and-steady approach that has led to just three chapter conclusions in six negotiating rounds might no longer cut it.
“We finally began to discuss some of the core issues, so this round was a step forward, but we are progressing very slowly,” Lighthizer said. “We owe it to our citizens, who are operating in a state of uncertainty, to move much faster.”
Mexico’s next general election is scheduled for this summer and a new president won’t come into office until the beginning of December. Mid-term elections in the U.S. this fall, in the meantime, will see a lame-duck Congress operating until January.
If negotiations extend that far into the future, domestic political situations would likely shift the NAFTA negotiating calculus. A new deal won’t come into effect without ratification by each nation’s legislature and a different composition in the U.S. Congress could mean that different ideas are prioritized at the negotiating table.
Freeland agreed with Lighthizer that all three countries are looking for a deal “as soon as possible.”
Alexander Panetta and Mike Blanchfield
January 29, 2018
MONTREAL — The NAFTA train remains on track — for now.
The U.S. trade czar Robert Lighthizer says enough progress has been made over the past week to warrant moving forward with a fresh round of talks in Mexico, but he’s also making it clear that more work needs to be done in the coming weeks.
Lighthizer is unsatisfied with Canadian proposals aimed at breaking a logjam on autos, and levelled multiple complaints about Canadian behaviour, including a wide-ranging complaint to the World Trade Organization he described as a “massive attack” on the American trading system.
On balance, he sounded like a man willing to give NAFTA a chance.
“Some real headway was made here,” Lighthizer said after a week-long round of talks concluded Monday.
“The United States views NAFTA as a very important agreement. We’re committed to moving forward. I am hopeful progress will accelerate soon. We’ll work very hard between now and the beginning of the next round — and we hope for major breakthroughs in that period. We will engage both Mexico and Canada urgently, and we will go where these negotiations take us.”
Lighthizer’s long-awaited verdict on the sixth round of marathon talks in Montreal came at a public event alongside Foreign Affairs Minister Chrystia Freeland and Ildefonso Guajardo of Mexico. The three held a series of face-to-face bilateral meetings before their final closed-door, three-way huddle.
It was the first such group appearance since the trio’s memorably tense encounter in the fall.
We’ll work very hard between now and the beginning of the next round — and we hope for major breakthroughs in that period
But Lighthizer sounded multiple alarm bells.
He panned Canada’s proposal on autos, saying it would do the reverse of what was intended, and would lead to more Asian content in North America. He called a Canadian proposal on services trade a poison pill, blasted Canada’s international trade complaint, and demanded a rebalancing of the trade deficit in goods.
Freeland and Lighthizer went to great lengths to dispel the notion that the two don’t actually like each other, an impression created by frosty body language and rhetoric that last time the two shared the NAFTA stage last fall.
Lighthizer offered smiles and fond memories of vacationing in the Montreal area with his family in the past. Freeland was asked whether her relations with her U.S. counterpart might derail the talks and offered a one-word reply: “No.”
“Without being overly optimistic, I am heartened by the progress,” Freeland said, citing the closing of an anti-corruption chapter and other constructive conversations.
With just eight weeks left in the current schedule of talks — and with U.S. President Donald Trump frequently threatening to blow up the deal — all eyes were indeed on Lighthizer.
One prominent stakeholder described Lighthizer’s remarks as purely tactical.
“I think he’s a good negotiator,” said Flavio Volpe of the Canadian Auto Parts Manufacturers Association.
“I don’t really take a lot of the stuff at face value. But it’s important for us to understand the sentiment. And the sentiment is, ’We’re not satisfied, we’re not going to put our guard down, and we’ll see you in four weeks.”’
Dave Reichert, an American lawmaker who spoke with Lighthizer, said he sounded hopeful. But Reichert warned not to expect too much enthusiasm given the U.S. trade representative’s famously gruff style.
Important decisions about NAFTA’s future are now in the hands of Trump’s administration. American negotiators passed the baton on Sunday to political decision-makers how to major discussions about autos, dispute resolution and a five-year review clause.
The Montreal round represented a new phase for the negotiations.
It included a first significant back-and-forth dialogue on autos and other major sticking points. Sources say there were three hours of talks over two days about the autos proposal.
Earlier rounds had effectively hit a roadblock because of scant engagement on the most serious files. After the U.S. made proposals that shocked Canada and Mexico, they responded by insulting the U.S. ideas and even devoted one round to describing reasons why the American proposal on cars was so impractical.
The revised Trans-Pacific trade deal, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, was finalized in Japan on Tuesday, a reality few thought possible a year ago when President Donald Trump pulled the United States from the agreement.
But the remaining nations, led by Japan, revived the pact with negotiations producing a finalized trade agreement, billed as the largest in the world.
“It’s a great day for progressive trade around the world,” Prime Minister Justin Trudeau told a business audience in Davos, Switzerland, where he is attending the World Economic Forum.
“The agreement reached in Tokyo today is the right deal,” said Trudeau, who stayed away from a meeting of TPP leaders in November in order to press for better terms.
“Our government stood up for Canadian interests, and this agreement meets our objectives of creating and sustaining growth, prosperity and well-paying middle-class jobs today and for generations to come,” Trudeau added.
When finalized, it will give Canada favoured market access to the TPP member nations. Japan is seen as the most valuable market, but the partnership also includes Australia, New Zealand, Brunei, Chile, Malaysia, Peru, Singapore, Vietnam and Mexico.
It may have initially been a political and psychological boost to the Canadian team in Montreal as a sixth round of trade talks with the United States and Mexico to rewrite the North American free trade pact get underway in earnest.
But critics say it actually undercuts their attempts to work out a better deal with the U.S.
Canada’s minister of international trade, François-Philippe Champagne, said the Trans-Pacific Partnership will make Canada part of the largest trading agreement in the world, covering 500 million people, representing about 14 per cent of the global economy.
He said it will provide billions of dollars in economic benefits to Canadians.
While declining to link the announcement to the troubled NAFTA talks, which formally resumed Tuesday, Champagne said the announcement couldn’t have come at a better time.
“The United States is our largest trading partner and will always be there… our relationship is providing millions of good, middle-class jobs. But when you have more than 70 per cent of your exports to one country, I think people realize that it’s in Canada’s best interest to look west and to look east, Champagne said.
“When you are looking at a fast-growing economy like Vietnam, like Malaysia, Japan, the third-largest economy of the world, I think it makes sense for Canada as a Pacific Nation to position itself for success for decades to come,” he told reporters at a Toronto news conference.
“We wanted to make sure that Canada would be the first mover in one of the fastest-growing regions in the world, ensuring not only our current prosperity but obviously for decades to come.”
He pointed to specific industries in Canada that will see improvement: Vietnam’s steel tariff will drop to zero in 10 years from about 40 per cent today. Aluminum tariffs will go down by 30 per cent.
News of a deal sparked a range of reactions across Canadian business. Pork producers — who already export 70 per cent of their products to 100 different countries — cheered the agreement, saying it would open up new markets. The Forest Products Association of Canada said their industry stands to benefit too by knocking down tariffs as high as 40 per cent across Pacific nations.
But Unifor President Jerry Dias condemned it as the “worst trade deal ever.”
“Rebranding of TPP as Progressive Agreement for Trans-Pacific Partnership is a joke. With this deal it’s the same old story. Shameful broken trade promises. This isn’t progress for workers it’s a mockery,” he said on Twitter.
Speaking in Montreal after being briefed on the deal, Dias said he was furious and said “everybody” in Canada’s automotive industry feels the same.
He now fears Canadian autoworkers will have to compete with “cheap labour” in Asia and suggested Toyota and Honda would be thrilled because they’ll be able to make cheaper cars in Japan and ship them for sale in North American markets.
“We have such a trade imbalance with Japan right now it’s ridiculous. For every car we ship to Japan, they send 600 back, so this doesn’t change it at all,” Dias said.
“So now I’ve got Ford, GM and Chrysler saying, ‘why would we invest in Canada when they continue to sign trading deals with other nations that completely undermine the investments that we’re making?’” he said.
That concern was echoed by other auto sector stakeholders who said the federal government needs to ensure reciprocal access to foreign markets. And until those concerns are put to rest, they want autos excluded from the trade pact.
“We’re going to insist on it,” Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.
He said rules of origin for autos and parts under TPP mark a “much lower barrier to entry” and will allow imports to be sourced from foreign markets, likely China.
“You’ve just handicapped your own domestic market,” he said in an interview.
Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association, said terms of the TPP could in fact lead to job losses as auto manufacturers move production to lower cost jurisdictions.
“All indications are that it fails miserably… it will disadvantage companies that have invested in job-sustaining manufacturing,” he said in an interview.
Moving ahead with TPP is not helpful at a time when Canada is trying to negotiate new trade rules with the U.S. and Mexico under a new North America trade arrangement that will also include autos, he said.
Champagne tried to tackle those worries head-on, saying the revised pact includes improved arrangement on autos with Japan, including an effort to dismantle non-tariff barriers that have stood in the way of selling Canadian-made autos in that market. Canada’s regulatory standards, for example, will now be recognized the same as the United States and the European Union.
“We have provided the auto sector for the first time, meaningful market access by removing these trade barriers that were present,” Champagne said.
Jacques Lefebvre, head of the Dairy Farmers of Canada, said Canada’s agreement to open up its dairy sector in the TPP when the U.S. isn’t part of it “doesn’t make sense.”
He noted that Canada’s original concessions — to allow an additional 3.25 per cent of foreign imports of dairy — were made when the U.S. was at the table.
He said “the markets available to us through TPP today are 60 per cent smaller than what they were with the U.S. How is that going to create options or opportunities for Canadian dairy?”
He said he hoped the Liberal government would uphold the previous government’s promise of a $4.3 billion, 15-year compensation package for farmers hurt by the TPP.
Christopher Monette, spokesman for Teamsters Canada which represents 125,000 workers in affected sectors such as dairy and transportation, expressed surprise at the deal.
“We’re disappointed Canada is giving away even more dairy market access. The government is going to have to make sure dairy workers in processing plants are fairly compensated just like dairy farmers.”
He flagged the labour protections in TPP as weak.
“Canadian workers are now going to be competing with cheap labour from around the Pacific Rim, especially in Vietnam and Malaysia. This signals a race to the bottom for wages, working conditions, environmental standards.”
January 23, 2018
Click here to watch video.
January 17, 2018
DETROIT — Cautious optimism about the future of the North American Free Trade Agreement is beginning to replace the gloom and doom of recent months among auto industry leaders.
Panelists at the Automotive News World Congress here put the odds of successful renegotiations between the U.S., Canada and Mexico at better than even now that President Donald Trump can show voters enough concrete successes on the economic front to pull back from his threat to scotch the deal.
“I think with passage of the tax reform package, some of pressure is off the White House,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association in Canada. Trump “has got some good news. He doesn’t need to use NAFTA to punish” a trading partner to demonstrate that he’s helping middle-class workers and creating jobs.
Trump has championed the cause of displaced manufacturing workers in the heartland and decried trade deals such as NAFTA for making it easy for companies to outsource production to low-cost countries such as Mexico.
Fiat Chrysler Automobiles’ announcement last week that it is moving Ram production from Mexico to Michigan and the decision by Toyota and Mazda to invest $1 billion in a joint Alabama assembly plant give the administration two victories to claim for U.S.-based manufacturing.
Some U.S. businesses, including FCA US, are also paying employees bonuses that they say are attributable to savings from the $1.5 trillion tax cut law Trump signed last month.
“If his surrogates can find a way to stitch those stories together, they can find a way to back off the boiler on NAFTA, and say we’re getting the action we want” on reshoring manufacturing, Volpe said.
The chances for negotiating success are now 90 percent, he said. He added that the talks have been aided by quiet meetings among professional trade negotiators without the presence of political leaders over the past month.
Last week, Trump also signaled that he might be flexible on his threat to walk away from NAFTA and be willing to resume negotiations after Mexico’s upcoming presidential election. Volpe suggested that would open the door to postpone talks until after the U.S. midterm congressional elections in November.
Óscar Albin, president of the National Auto Parts Manufacturing Association in Mexico, said there is only a 25 percent chance that NAFTA talks will fall apart, despite hard-line positions put forward by the U.S. on rules of origin and other issues. He reached that conclusion, he said, after meeting last week with Mexico’s minister of economy, Ildefonso Guajardo Villarreal.
“I think we’re going to muddle through. I give it a 60 percent chance that we’ll have a modified, improved NAFTA,” Rob Wildeboer, executive chairman, Martinrea International, told the audience.
Alicja Siekierska – Financial Post
January 15, 2018
A major, government-backed investment in Ontario by Linamar Corp. is a “vote of confidence” in Canada’s position in the ongoing North American Free Trade Agreement negotiations, according to the president of the Automotive Parts Manufacturers Association.
“They could have waited to make these announcements and decisions, so I think it is a clear indication of what this sector thinks is going to happen with NAFTA and with the Canada-U.S.-Mexico partnership on a go-forward basis,” said the APMA’s Flavio Volpe, in a phone interview from the North American International Auto Show in Detroit on Monday.
“That the second biggest auto supplier is doubling down on Canada, I think it’s a vote of confidence in what the company thinks is going to happen with NAFTA and a vote of confidence of the value of the auto business in Canada.”
On Monday it was announced that Guelph, Ont.-based Linamar will receive $99 million in funding to support the expansion of advanced manufacturing technology through the opening of a new innovation research and development centre in the province.
The federal government is providing a $49 million grant towards what it says is a $750 million total investment. The grant is the first to come out of the Strategic Innovation Fund, a $1.26 billion program that will provide repayable and non-repayable contributions to Canadian companies in the hopes of spurring innovation.
According to the federal government, the new funding will help create 1,500 new jobs in Canada while “maintaining” about 8,000 more by “supporting advanced manufacturing processes.” At the same time, the Ontario government said it will provide Linamar with a conditional grant of up to $50 million through its Jobs and Prosperity Fund, as part of a project with overall costs of up to $500 million.
Speaking at the company’s Frank Hasenfratz Centre of Excellence in Manufacturing, chief executive officer Linda Hasenfratz said the expansion will allow Linamar to be more competitive and innovative, while providing more high-skilled, high-paying jobs.
“Manufacturing companies have to constantly strive to improve competitiveness on a daily basis in order to continue to grow globally,” Hasenfratz said.
“We plan to continue to invest in this evolving factory of the future in many different ways with a focus on areas such as vision systems, collaborative advanced robotics, incorporating sensors into our products, and collecting that data to help us improve product design.”
The announcement comes as some automakers look to expand operations in the U.S. in light of President Donald Trump’s repeated threats to terminate NAFTA. Last week, Fiat Chrysler Automobiles announced it will relocate Ram Heavy Duty truck production from Mexico to Michigan in 2020, adding 2,500 U.S. jobs.
Linamar is one of many Canadian companies that stands to be affected by NAFTA negotiations, particularly if there are substantial changes to automotive rules of origin, which stipulate how much North American-made content must be in a vehicle. According to data analysis compiled by Bloomberg, Linamar, which has manufacturing facilities in North Carolina, Kentucky, Illinois and Arizona, remains vulnerable to a 50 per cent U.S.-specific rule of origin, something the Americans have demanded. Bloomberg said just 27 per cent of Linamar’s North American fixed assets are concentrated in the U.S.
Speaking to Bloomberg ahead of the Detroit auto show, Canada’s innovation minister Navdeep Bains said that in order to maintain momentum in the automotive sector, “we need to continue to support NAFTA.”
“The investments that we make in the automotive sector are also good for the U.S. as well,” he said. “It speaks to our integrated supply chains.”
However, the announcement was slammed by Canadian Taxpayers Federation federal director Aaron Wudrick, who says public dollars should not be going towards a company like Linamar, which announced last month it would be making a $1.2 billion acquisition of a Winnipeg-based agricultural equipment maker.
“It’s clear this is politically motivated. Linamar is a growing company. It’s a great company for politicians to stand up and say ‘we’re helping you’, but this is not a good use of taxpayer money,” Wudrick said, adding that when it comes to NAFTA negotiations, he believes it doesn’t help Canada’s case.
“You already have a very protectionist administration south of the border. They’re just going to use this as a bigger stick to beat us with …. I see this as a short-term, good news headline. I don’t see how this benefits Canadians more broadly.”
The sixth round of NAFTA negotiations are scheduled to begin in Montreal on Jan. 23.
ADRIAN MORROW , GREG KEENAN AND BILL CURRY
WASHINGTON, TORONTO AND LONDON, ONT.
PUBLISHED JANUARY 11, 2018
Globe and Mail
Canada is working on a proposal to boost the amount of North American-made content in cars and trucks manufactured in the NAFTA zone, sources say, in a bid to break the deadlock over one of the most contentious subjects in the trade deal’s renegotiation.
Ottawa is also crafting a series of potential compromises on the North American free-trade agreement’s dispute-resolution provisions, another major sticking point in the talks between Canada, the United States and Mexico.
But even as Canada offers President Donald Trump an olive branch, it is serving notice that it will not be pushed around: Trade Minister François-Philippe Champagne said a World Trade Organization case made public earlier this week was about winning the United States’ “respect” by firing a shot across its bow.
In the case, Ottawa accuses Washington of breaking international trade rules with the punitive duties it has slapped on Canadian softwood lumber as well as a host of products from other countries.
“When you stand strong in sending a message that says we will stand up for our forestry industry, we’ll stand up for our aerospace industry, we’ll stand up for Canadian workers, you get respect,” Mr. Champagne said Thursday at a cabinet retreat in London, Ont. “When people see that you’re firm, you get respect. And I think that the message that has been sent [Wednesday] is one of firmness.”
The prospective NAFTA proposals, according to sources with knowledge of the discussions, are aimed at salvaging the acrimonious negotiations by offering the Trump administration compromises to back off its tough protectionist demands. The sources spoke on condition of anonymity to describe confidential discussions of proposals that have not yet been tabled.
The auto and dispute-settlement propositions are likely to be put on the table at the next round of talks, slated to start Jan. 23 in Montreal. Mexico has also been working on an auto compromise since at least last fall.
Canada has so far flatly rejected all of the United States’ most nationalistic demands. Mr. Trump has proposed forcing all Canadian and Mexican vehicles exported to the United States contain at least 50 per cent U.S. content or pay punitive duties, abolishing or gutting NAFTA’s dispute-settlement mechanisms and capping the amount of U.S. procurement Canadian and Mexican companies can bid on.
But now, Ottawa will seek common ground. “We’ve been talking with Canadian stakeholders and we have some new ideas that we look forward to talking with our U.S. and Mexican counterparts about in Montreal,” Foreign Affairs Minister Chrystia Freeland said Thursday.
The draft auto proposal would see changes made to the formula for calculating the North American content of vehicles. Currently, vehicles made in the NAFTA zone must contain 62.5 per cent North American content to be shipped between the three countries without paying duties. But that content requirement only applies to some components, codified on what is called the “tracing list.” Canada is considering proposing that the content requirement instead be calculated on the total value of the vehicle, which would ensure that some things currently not covered – such as the development of software that runs the computer systems in vehicles – is included in the total, said sources familiar with the draft proposals.
Another possibility, one source said, is to exclude from the calculation components that are commodities, such as brakes, wheels and windows, but include spending related to research and development and software. Such an approach would capture content that is more crucial as technology related to self-driving vehicles becomes more important.
Yet, another option under consideration is to adopt the content formula that was negotiated for autos in the Trans-Pacific Partnership. Under such a system, content from outside North America could be considered North American content if it undergoes “substantial transformation” in a NAFTA country. For instance, an auto part made from steel imported from outside North America that is stamped, forged, or formed into parts could qualify as North American content if this sort of proposal were adopted, said one source.
As The Globe and Mail revealed in November, Mexico has been working on an auto counterproposal that would offer to significantly tighten the rules on North American content in vehicles in exchange for Mr. Trump dropping the U.S. content requirement.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association of Canada, said whatever ideas Canadian officials intend to raise in Montreal should remain confidential. “You don’t really play poker with your cards up,” Mr. Volpe said.
And he cautioned that sorting out the automotive chapters of a new NAFTA agreement will be laborious.
“I think it would be naive for any of us to think we’re going to walk out of Montreal with an auto solution,” he said.
One source said Canada is also mulling various ideas on NAFTA’s dispute-settlement provisions – chapters 11, 19 and 20 – but has not decided what exactly to propose. Canada is adamant about keeping in Chapter 19, in which NAFTA tribunals can overrule punitive anti-dumping duties. The United States wants to delete Chapter 19 entirely; allow countries to opt out of Chapter 11, which permits companies to sue governments for hurting their business; and allow countries to disregard the decisions of Chapter 20 panels, which adjudicate disputes between governments.
Mr. Trump on Thursday offered an olive branch of his own. In an interview with the Wall Street Journal, he hinted that he would extend negotiations beyond their current March timeline to after the Mexican presidential election in July, saying he was “leaving it a little bit flexible.” In that vote, the governing Institutional Revolutionary Party faces an uphill battle against, among others, leftist firebrand Andres Manuel Lopez Obrador.
“I understand that a lot of things are hard to negotiate prior to an election,” the paper quoted Mr. Trump as saying. “They have an election coming up fairly shortly. I understand that makes it a little bit difficult for them.”
He also told the Wall Street Journal that Mexico would pay for his promised wall along its border with the United States through NAFTA. Mr. Trump did not appear to specify how such an arrangement would work.
“We make a good deal on NAFTA, and, say, ‘I’m going to take a small percentage of that money and it’s going toward the wall,'” he said. “Guess what? Mexico’s paying.
The Canadian Press
Alexander Panetta – December 14, 2017
WASHINGTON — NAFTA negotiations are approaching a new phase of talks after early rounds marked by acrimony, inflexibility and finger-pointing.
It’s the search for solutions.
Negotiators gathered at an informal session in Washington this week are considering ways to work around a main impasse of the talks so far, a U.S. demand on auto parts deemed unfeasible by Canada, Mexico and the industry.
The other countries intend to ask the U.S. whether there might be a way to rework the proposal in a manner palatable to everyone, while still achieving America’s goal of bolstering domestic auto production.
Time constraints are intensifying pressure to find solutions: Rounds are currently scheduled only into March, Mexico and the U.S. have national elections thereafter and President Donald Trump has threatened to start the withdrawal process to get a quick deal.
One Canadian official said that a spirit of problem-solving has permeated this informal round.
“The mood has lightened a bit since the Mexico round (last month),” he said.
“It was a bit acrimonious.”
The main goal this week was to chip away at less-controversial chapters. But the Canadian side has some ideas for a new path forward on automobiles, a key priority for the Trump administration, elected on a promise to strengthen manufacturing.
The Canadian side thinks that goal can be achieved by moving away from the traditional method of calculating the content of a car. For instance, the current NAFTA says that a car’s pieces must be 62.5 per cent North American to avoid a tariff and the U.S. called for a ramp-up to 85 per cent, plus a U.S.-specific 50 per cent requirement, with virtually no adjustment phase-in period, to the dismay of other parties.
But what if the formula were completely overhauled?
Canada is weighing a new calculation method that takes into account the full cost of a vehicle, including the most valuable components of modern cars — which, increasingly, are new digital technologies, light-weight composite materials and other intellectual property, for which the United States is a world-leading hub.
“Evaluating the entire value … rather than some of the components that are currently spelled out. (Things like) digital inputs,” is how one official explained it.
“It’s important to recognize that what goes into a car has changed since NAFTA was signed.”
Canada has not yet presented the proposal to the U.S., its side said late Thursday.
The context for the idea is outlined in a recent paper by the government-and-industry-funded Center for Automotive Research in Michigan, which describes how a technological revolution is already underway, spurred by autonomous cars; new fuel-efficiency standards; improved safety and computer connectivity.
It says the accelerated rate of innovation will last at least three decades.
It estimates that while mild steel and high-strength alloys made up 80 per cent of a car’s materials in 2010, that fell to barely 60 per cent in 2015; will fall to barely 30 per cent in 2020; just over 20 per cent in 2030; and less than 10 per cent in 2040.
A Canadian auto-parts representative said these changes are partly driven by tough new international fuel standards.
Flavio Volpe said companies are spending hundreds of billions of dollars to double fuel efficiency through everything from lightweight materials to internal components: “Start-stop technology. Hybrid technology. Batteries, electric, fuel cell… Material sciences.”
He said the U.S. is currently a hotbed of these technologies. And he said it might make sense to design incentives to keep production of emerging technology on this continent, so that the research and production are clustered here.
He called the tracing requirements in NAFTA a tool designed for the cars of 1994.
“I think we have to have a fresh look at the way that works,” Volpe said.
“(So) can you devise a formula that captures the hundreds of billions of dollars currently being spent to meet advanced fuel-efficiency and safety regulations? If you can, then we can all negotiate the numbers (later).”
There might not be much time.
Trump has repeatedly said he might start withdrawing from NAFTA to press the other countries into making concessions; Mexico has said that, if that happens, it would leave the negotiating table and some decisions will need to be made by March, when the current schedule of talks ends.
That places extra pressure on countries to make progress at the January round scheduled in Montreal.
There are other small, emerging slivers of potential compromise: insiders familiar with U.S. negotiating positions said they anticipate room for negotiation on the controversial idea of a five-year review clause. The part deemed a non-starter by Canada and Mexico is the idea that NAFTA should end in five years, unless everyone extends it.
Both Mexico and Canada have said they’re willing to live with a less-aggressive review clause.
Published December 1, 2017
By Jessica Stone
This week, Prime Minister Justin Trudeau is in effect Canada’s salesman-in-chief — with many Canadians betting he’ll announce the beginning of a free trade agreement with Beijing. Howard Balloch is a former Canadian ambassador to China, now doing business there.
“I think there’s no question that both sides are interested in engaging in free trade talks or talks on a comprehensive economic agreement of some sort. I think this visit will kick it off, and I hope it does. I think this will be welcomed by business in both sides,” Balloch said.
The five-day visit to China by Trudeau beginning on Sunday comes just as the U.S. toughens its positions against Canada and Mexico in negotiating a new North American Free Trade Agreement. The talks have underscored Ottawa’s need to diversify its trading partners – the U.S. is Canada’s largest trading partner.
“We’ve already seen a very significant increase in Canadian exports of lumber wood to China at a time when the U.S. has repeatedly challenged Canadian exports into that country. In some sectors, the replacement is more direct, but generally, it’s healthier for the Canadian economy to be less reliant on the U.S.,” Balloch said.
Since taking office, U.S. President Donald Trump has exited a major trade agreement and taken a more protectionist stance on global trade, even as China’s President Xi has pursued more globalization. Canadians see an opportunity for Ottawa to become China’s open door to the North American market – both for imports and exports, especially in the auto sector.
“If we engage them early and show them they can access that great market in NAFTA by investing in Canada, I think what we can do is we can cover off some of the Canadian decline in Canadian production that has happened over the last 20 years,” Flavio Volpe from Automotive Parts Manufacturer’s Assoc. said.
And Volpe adds while North America remains a potential fertile ground for Chinese automobiles, Canada’s abundant natural resources are a match for China’s industrial needs. A win-win proposition.
“China has signaled it needs potash, it needs petroleum. It needs fuels to supply its growth. It’d be great to have a discussion to say look, under that premise, we’ve got an abundance of natural resources, You’ve got an abundance of industrial capacity, Why don’t we see if we can find a deal that works for both,” Flavio Volpe from Automotive Parts Manufacturer’s Assoc. said.
Neither Balloch nor Volpe said China is likely to replace the U.S. as Canada’s primary trading partner any time soon. Washington has geographic proximity and close cultural ties. But China is Canada’s second largest trading partner and could be a significant economic partner down the road.
November 21, 2017.
Flavio Volpe speaks to BNN about NAFTA.
Alexander Panetta · The Canadian Press via CBC
November 20, 2017
The Canadian and Mexican governments are pressing the U.S. explain its auto proposal at the current round of NAFTA talks.
Those countries are not making a counter-offer to the plan, but will instead demand details on how it would work and deliver a presentation on how they believe such an idea would harm the U.S. itself.
They say parts of the plan lack basic clarity.
During the last round of talks, the U.S. stunned its partners with a demand that auto companies quickly transform their supply chains to benefit U.S. parts suppliers, and that the formula for calculating a car’s origins be expanded to include raw materials.
One stakeholder advising the Canadian government says the proposal was written in vague language, without a hint of how to apply it.
Flavio Volpe of the Auto Parts Manufacturers’ Association cites the examples of windshields and plastic components, which are made of sand, oil, and — going back further — carbon-based life forms that died in the soil millions of years ago.
“So if I’m a glass-maker, my raw material is sand. How am I going to trace (where) sand (comes from)?… Do you do that on the granule level? Do you do it by bag? Or do you have to send a picture of the beach?” Volpe said.
“So I think it’s important we get some technical advice from the experts at [the U.S. Trade Representative] on how exactly we’re going to do that… A lot of plastics are petroleum-based. So what’s the methodology there — are we tracing back to bitumen, are we tracing back to sweet crude?
“When you say you’re going back to the base raw materials that’s what you’re talking about. So when did the dinosaurs die? And where did they die? And can we claim ownership of that?”
Critics of the U.S. proposal say it’s so unworkable it will merely shift production to Asia, and encourage them to simply pay an import tariff.
Multiple sources say the Canadians want to press the U.S. to refine its own offer on autos, before making a counter-proposal. Canadian officials have noted the internal U.S. opposition to the American proposal, including from six-dozen American lawmakers who wrote a letter last week blasting it.
The group discussing auto parts is meeting today and tomorrow, when the Mexico round wraps up.
Officials from Canada say the current round has seen some progress on less-controversial chapters like digital trade but none on the hardest issues — where Canada and Mexico have refused to counter the most controversial American positions.
GREG KEENAN – AUTO INDUSTRY REPORTER
November 20, 2017 – The Globe and Mail
The termination of NAFTA would deal sharp blows to the auto industry and agriculture – two key sectors of the U.S. economy – setting off a battle between the Trump administration and the two industries and Congress, which will try to save the deal.
That’s one of the conclusions of a forthcoming study done by the C.D. Howe Institute on the effect of the end of the North American free-trade agreement on the economies of the three NAFTA partners.
The United States would sustain more economic damage than Canada, while Mexico would suffer most, the study concludes. If the pact were allowed to lapse, gross domestic product in each of the three countries would take a hit, with exports of goods and services within the region slumping by about $110-billion (U.S.) or 9 per cent by 2023, the study says.
Negotiators from the three countries are meeting in Mexico City in the fifth round of talks on the future of the 23-year-old deal amid widespread concerns that U.S. demands in key areas are so onerous on Canada and Mexico that the Americans are effectively forcing termination.
U.S. President Donald Trump has criticized the deal as one of the worst his country has ever signed.
The C.D. Howe study ran economic models to assess the impact of three possible outcomes from the negotiations: the pact lapsing and the relationships among the three countries reverting to World Trade Organization rules; an end to the tripartite deal but the prior Canada-U.S. free-trade agreement remaining in place; and a Canada-U.S. free-trade deal supplemented by a separate Canada-Mexico agreement.
Although the effect on the U.S. economy would not be particularly heavy, the damage would be acute in agriculture and autos, the study says, causing the auto industry, the farm lobby and Congress to unite to try to save the deal.
“This battle will be fought within the United States, between U.S. stakeholders, Congress and the White House, not between Canada and Mexico and the Trump administration,” says the study, titled Nafta Requiem: What if the U.S. walks away?
The effects on agriculture and autos amount to “poison pills” that Congress would be unable to swallow, said Dan Ciuriak, lead author of the study and a former chief economist with the Department of Foreign Affairs and International Trade who now heads his own consulting firm.
“How would the Trump administration roll over the agriculture lobby plus the auto lobby to withdraw from NAFTA?” Mr. Ciuriak asked in an interview. “I just don’t see the politics working for the administration on that.”
Terminating the agreement would cost Mexico $25-billion in economic welfare, or the combination of a reduction in wages and increases in prices as tariffs rise.
The comparable figures for Canada and the United States are $14.5-billion and $20-billion, respectively, the models in the study show.
“Mexico is by far the most exposed economy to NAFTA lapsing. Mexico put its economic eggs in the NAFTA basket and thus faces outsized risks from losing its gamble,” the study says.
Mexico has been the target of much of Mr. Trump’s rhetoric denouncing the deal, based on his perception and that of his supporters that millions of jobs have shifted to Mexico from the United States because of the elimination of tariffs on most goods and services when NAFTA came into force almost 25 years ago.
The impact on Canada from termination would be less drastic in part because 75 per cent of Canada’s tariffs are at zero under the Most Favoured Nation (MFN) regime that would apply if there were no free-trade agreement.
But some sectors in Canada would take billion-dollar hits, the study notes, including business services, autos, and chemicals, rubber and plastics, whose exports to former NAFTA partner countries would decline.
U.S. bilateral auto exports would slump by $13.2-billion.
The beef, pork, poultry and dairy industries in the United States would each take hits of about $1-billion in exports.
The auto sector would be hit hard in Mexico as well, the study finds, in part because of the so-called chicken tariff of 25 per cent that the United States levies on pickup trucks imported from non-NAFTA countries.
Pickup assembly “would likely immediately pack up and move into the United States to avoid the 25 per cent if NAFTA lapses,” the study says.
There is a debate among auto industry officials about what would happen to production of General Motors Co. pickup trucks in Oshawa, Ont. – scheduled to begin in January – if there is no NAFTA and the tariff regime reverts back to MFN status and the 25-per-cent chicken levy.
The study says the Trump administration would achieve its goal of reducing its trade deficit “but not because of improved trade balances with its NAFTA partners, but because the negative impact on its economy drives down overall imports from all sources compared to exports.”
The U.S. Chamber of Commerce issued a report on Friday that said the 12 U.S. states most hurt by that country’s withdrawal from NAFTA all voted for Mr. Trump a year ago.
Michigan, home to the head offices and several manufacturing operations of the Big Three auto makers, topped the list.
MEXICO CITY – November 20th, 2017
Negotiators are making progress on less contentious portions of the North American free-trade agreement – such as slashing red tape for exporters and standardizing food-safety regulations between the three countries – while punting the more difficult ones to future rounds of talks.
The fifth session of the NAFTA renegotiation in Mexico City has taken on a workmanlike tone, with the three sides prioritizing easier parts of the deal. It is a sharp contrast with the previous round near Washington last month, which was marked by non-stop tension as the Trump administration hammered Canada and Mexico with a string of tough protectionist demands.
Sources with knowledge of the negotiations said the United States’ tone has shifted over the last month, and Washington seems more interested than before in making a deal. It was Robert Lighthizer, Mr. Trump’s trade czar, who suggested that he and his counterparts from the other two countries not attend this round of talks in a bid to turn the political temperature down, the sources said.
“The work is moving forward,” Juan Carlos Baker, Mexico’s top trade official, told reporters as he left negotiations at the Camino Real Polanco hotel Saturday evening. “The atmosphere is good.”
Other areas the trading partners hope to advance before the round ends on Tuesday include an expansion of the deal to cover digital commerce and provisions to make it easier for financial services companies to do cross-border business.
But the sides remain deadlocked over the tough proposals advanced by the United States: A 50-per-cent American-content requirement for all vehicles made in Canada and Mexico, gutting or abolishing the deal’s dispute-resolution mechanisms, limiting the amount of U.S. government contracts Canadian and Mexican firms can bid on and automatically terminating the deal in five years unless all three sides agree to extend it.
Canada and Mexico have flatly rejected all of these demands. People with knowledge of the talks say the Canadian and Mexican position is that the United States must back down from these hard-line proposals before any deal can be made.
When the three sides discuss autos in this round, for instance, Canada plans to deliver the United States a lecture on why Mr. Trump’s protectionist proposals will hurt American industry, sources said. The Canadians contend that stringent vehicle content requirements will make the U.S. auto sector less competitive with its European and Asian counterparts, and will move jobs out of the United States as firms choose to simply ignore the rules and pay tariffs instead.
Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, said Ottawa’s decision to give no ground on these demands but still remain at the table appeared to have forced the United States to get serious about negotiating.
“There is some positive movement on the stuff that isn’t so controversial. This is a real working round,” Mr. Volpe, who was in Mexico for the talks, said in an interview. “We’re back into an adult discussion.”
But the head of Canada’s largest private-sector union said there was no hope for a deal as long as the U.S. demands on autos and dispute resolution remained on the table.
“To be perfectly candid with you, talks are really not going anywhere,” Unifor president Jerry Dias said Sunday morning after emerging from a meeting with Canadian chief negotiator Steve Verheul. “The Canadian team is not going to move at all as long as the United States continues to hold some ridiculous proposals.”
Mr. Dias said the United States is “flirting with danger” because Canada will never give in to their demands – a scenario he predicted would lead to the demise of the deal.
“The odds of NAFTA succeeding, I will say, are something less than zero,” he said. “[Canada is] not going to be bullied into a bad deal.”
Other sources, however, played down Mr. Dias’s doom-and-gloom warnings, saying it will not be clear until further along in talks whether a deal can be made. It will largely be a question of whether the United States is willing to compromise on the protectionism in order to get Canada and Mexico to deal, the people said.
Negotiators will reconvene for more technical discussions in Washington next month, followed by the next full round of talks in Ottawa in January.
Sunday, November 19, 2017 – CTV News
Vicente Fox, who was president from 2000 to 2006, made the biblical reference in an exclusive interview with CTV’s Washington correspondent Richard Madan, as trilateral talks continue in Mexico City.
“He should open his eyes because sometimes what I get from him is that he will protect Canada even by sacrificing Mexico,” Fox said of Trudeau.
“He might, like Judas, give us our strength and go with (the) United States and leave us aside,” he added. “I warn Trudeau and I warn Canada: you will not make it.”
Canada’s charm offensive with U.S. President Donald Trump has created speculation that the U.S. may prefer working out a bilateral trade deal with its northern neighbour over Mexico.
White House Press Secretary Sarah Huckabee Sanders told CTV News on Sunday that while no decision has yet been made, Trump is open to drafting a trade deal with Canada that excludes Mexico.
There has been some ambivalence among Canadian officials on separate deals with Mexico and U.S.
Foreign Affairs Minister Chrystia Freeland has routinely said that she is committed to working trilaterally to renew NAFTA as a three-country agreement.
A spokesperson for the Foreign Minister said Sunday: “As we have said from day one, we are committed to modernizing NAFTA as a strong trilateral agreement that is a win-win-win for all three countries.”
Meanwhile, top U.S. sources tell CTV News that American negotiators are frustrated with Canada for constantly rejecting proposals, such as those regarding the auto and dairy sectors, without offering any counter-proposals.
Analysts like Automotive Parts Manufacturer’s Association president Flavio Volpe say Canada is playing the long game against an unpredictable administration.
“This could stretch right through 2018,” Volpe told CTV News. “And if you’re going to do that, don’t waste any moment to introduce some actual logic and quantitative analysis.”
So far, all sides remain deadlocked.
Using rather undiplomatic language, Fox blamed Trump’s protectionist vision for the current stalemate, which he calls “stupid.”
“Trump, he says America (is) great! We will make America great again and the rest of the world, f— you,” Fox said.
“Also we will never pay for that f—ing wall,” he added.
NOVEMBER 19, 2017 – Reuters
Anthony Esposito, David Lawder
MEXICO CITY (Reuters) – Divisions over updating the NAFTA trade deal showed no sign of easing on Sunday as Mexico and Canada signaled they would not offer counterproposals to U.S. demands for far stronger automotive content rules, people with knowledge of the talks said.
The lack of movement on major issues such as autos rules of origin could put the North American Free Trade Agreement negotiations in danger of grinding to a stalemate as an early 2018 deadline for revising the pact approaches.
A source close to the negotiations said Mexico had serious problems with a number of U.S. proposals, including Washington’s demand that regional content for autos be raised to 85 percent from 62.5 percent, with 50 percent coming from the United States.
The source also said that Mexico could not accept a U.S. proposal that would restrict imports of some Mexican produce at certain times to protect growers.
Mexico does not plan to make counterproposals in those areas, the source said, adding that the U.S. autos proposal was “unviable” and would “make the region less competitive.”
A Canadian source with knowledge of the negotiations said Canada also intended to refrain from offering an autos counterproposal and instead make a presentation on Monday arguing that the U.S. demands would cause serious damage to both U.S. and North American automotive manufacturing.
The United States, Canada and Mexico are holding the fifth of seven planned rounds of talks to modernize NAFTA, which U.S. President Donald Trump blames for job losses and big trade deficits for his country.
“The talks are really not going anywhere,” Jerry Dias, president of Unifor, the largest Canadian private-sector union, told reporters after meeting with Canada’s chief negotiator on Sunday.
“As long as the United States is taking the position they are, this is a colossal waste of time,” said Dias, who is advising the government and regularly meets the Canadian team.
‘NO SIGNS OF FLEXIBILITY’
Hanging over the negotiations is the threat that Trump could make good on a threat to scrap NAFTA.
Canada and Mexico object to a number of demands the U.S. side unveiled during the fourth round last month, including for a five-year sunset clause that would force frequent renegotiation of the trade pact, and major changes to dispute- settlement mechanisms.
“Our internal view as of this morning is that if any progress is to be made, the United States needs to show some flexibility and a willingness to do a deal,” said a Canadian source with knowledge of the talks.
“We are seeing no signs of flexibility now,” added the source, who requested anonymity given the sensitivity of the situation.
U.S. officials declined to comment.
Mexico is expected to offer an alternative to the U.S. sunset clause proposal that would offer periodic reviews of the trade pact but without an automatic expiration.
U.S. negotiating objectives that were updated on Friday appeared to accommodate the Mexican proposal, saying the revised NAFTA should “provide a mechanism for ensuring that the Parties assess the benefits of the Agreement on a periodic basis.”
By Alexander Panetta — Nov 19 2017
MEXICO CITY — Canadian negotiators intend to provide a briefing to their American peers on how their auto proposals would devastate their own domestic industry, in an effort to reset one of the most difficult conversations looming over the renegotiation of NAFTA.
Multiple sources say that at the current round Canada will not deliver a counter-proposal — but a presentation. They expect Mexico will also delay a counter-offer on auto parts, amid hope the U.S. might revise its own position.
They say the countries are making progress at the current round in Mexico City on less-controversial files while saving the thornier ones for later in the negotiations, with auto parts decidedly parked in that difficult category.
The U.S. proposal at the last round drew a backlash from Canada, Mexico, the auto industry, and from dozens of American lawmakers who released a public letter blasting it.
The American proposal had four main components: insisting half of a car’s parts be from the U.S. to avoid a tariff, drastically increasing the amount of content required from North America overall, toughening the method for calculating the parts percentages, and insisting that companies implement all those changes within a year.
Some auto-parts representatives say that package is so unrealistic it would prompt companies to move production out of North America, build in Asia, and just pay the import tariff, which starts at 2.5 per cent for cars entering the U.S.
The Canadian side will lay all that out in an exhaustive presentation Monday.
”What they’ve put forward is completely unworkable. It doesn’t even achieve their own goals. We intend to walk them through that in extreme detail,” said one Canadian official, arguing that the U.S. should take another stab at presenting something viable.
Canada’s presentation was developed in consultation with industry players.
One of them is present at the talks in Mexico and he welcomes the Canadian approach. Flavio Volpe says the U.S. proposal never made commercial sense, and appeared designed to shock other countries’ negotiating parties.
So he says it’s logical those other countries would try to reset the conversation — rather than engage on unrealistic terms.
”You turn around and say, ‘Okay, guys, if we accept your proposal as your real intention, your real intention is hurtful to your own interests. Do you know that?”’ Volpe said in an interview at the hotel where talks are being held through Tuesday.
”You want to hit us? You hit your own (sector) by 20 per cent — that’s ridiculous.”
The current round of NAFTA talks in Mexico City will include four days of discussions on rules of origin for different products, including auto parts. The auto component will come up Monday, the day before talks wind up.
Politicians will not attend this round.
After an acrimonious round in Washington last month, there has been an attempt to lower the political temperature of the process, and give negotiators space to work. For starters, the target deadline has been pushed back a few months, into next spring. Also, the countries’ lead NAFTA ministers, Chrystia Freeland, Robert Lighthizer and Ildefonso Guajardo, will skip this round.
A union leader representing auto workers agrees with Volpe, who represents the companies that make parts. Unlike the companies, Unifor leader Jerry Dias welcomes more stringent domestic content requirements.
But he agrees the American proposal, as designed, should not be the baseline for a discussion.
Dias asked: why would Canada engage in a serious back-and-forth on auto parts as long as U.S. demands, like a 50 per cent American content requirement per vehicle, are seen as so impractical they’re being derided even within the U.S.?
After speaking with Canada’s negotiating team in Mexico, he’s confident they share his view. Different government sources have also confirmed to The Canadian Press that no major counter-proposals on hot issues will be made at this round.
”As long as the United States has those types of proposals on the table, Canada will not move at all,” Dias told reporters staked out in the hotel lobby.
”As long as they are not being flexible then I would expect nobody is going to be flexible. Because why bargain with yourself?… You can’t even have a sensible discussion about rules of origin as long as there’s a 50-per-cent U.S. content (demand).”
Volpe said the big wild card resides in the White House.
He said the Canadians face a unique challenge in dealing with seasoned, professional negotiators from the office of the United States Trade Representative, while aware that those negotiators could be blind-sided by a president who has repeatedly threatened to start cancelling NAFTA as a negotiating tactic.
He suspects that might be the motive for last month’s shock-and-awe U.S. demands. Volpe says the president would be perfectly happy if the other countries left the table, and gave him an excuse to invoke NAFTA’s withdrawal clause, as President Donald Trump has frequently said he wants to do.
”The strategic objective was to rupture the talk dynamics, maybe have Canada and Mexico leave. That didn’t happen,” Volpe said.
”The (auto) proposal itself is commercially illogical. It doesn’t mean the tactic was without merit. It just didn’t work… So they had to come to a reset.”
Alexander Panetta, The Canadian Press
By DANIEL DALE, Washington Bureau Chief
Fri., Nov. 17, 2017 – Toronto Star
WASHINGTON—The end of NAFTA would be bad but far from devastating for the Canadian economy, reducing growth but not stopping it, several economists have concluded.
With a big dose of caution.
Experts are hesitant to make grand predictions because there are so many unknowns involved. One of them is that nobody knows what U.S. President Donald Trump would do after striking the death blow.
Once strictly hypothetical, the question of what termination would mean for Canada has taken on increasing urgency in boardrooms around the country as North American Free Trade Agreement negotiations have faltered on account of Trump’s protectionist demands. The fifth round of talks began Friday in Mexico City.
Trump could potentially terminate the deal, as he has repeatedly threatened to do, and simply move on to other matters. Or he might throw a “tariff tantrum,” in the words of economists at the Royal Bank of Canada, starting a trade war by slapping import duties on all sorts of Canadian goods.
The tantrum scenario is “remote,” RBC says and other experts agree, given the legal and political constraints Trump faces. There are two things that experts believe are far more likely.
The first possibility is that Trump allows the Canada-U.S. Free Trade Agreement, which NAFTA replaced in 1994, to come back into effect. Since that agreement is similar to NAFTA, though it excludes Mexico, the overall impact of NAFTA itself going away would likely be small.
The second possibility — the one that Canadian companies are planning and bracing for — is that Trump decides to kill the Canada-U.S. deal as well. In that case, long-abandoned tariffs could be brought back into force.
That’s where things would get difficult for Canada.
After shipping goods south without these added costs for a quarter-century, Canadian companies would suddenly have to figure out how to be profitable and globally competitive with them in place. And after being able to invest in Canada for a quarter-century with the certainty that they would have tariff-free access to the U.S. market, foreign companies would suddenly face more costs and more risks.
Companies doing everything from selling car parts to selling pig parts would be hurt, some of them badly. Jobs would be cut. Growth would slow. The average Canadian would likely experience some increase in prices on a variety of goods.
But it would probably not be a calamity.
In general, economists and analysts say, people outside of the most trade-sensitive sectors would be unlikely to immediately notice the impact of NAFTA vanishing. The effects would more likely be gradual, they say, as businesses decide not to make the investments in Canada they would have made if NAFTA were still around.
“It’s not like they come in and just shut down the auto industry in Ontario and move it wholesale,” said Philip Cross, a senior fellow at the Macdonald-Laurier Institute and former chief economic analyst for Statistics Canada. “These plants are worth something, these workers are trained. So they just gradually run it down. They don’t invest anymore. And then you wake up after 10 years and go, ‘Gee, we used to have a good auto industry in Ontario, what happened?’”
In the return-of-tariffs scenario, RBC predicts a loss of 1 per cent of Canada’s economic growth over 5 to 10 years, so 0.1 per cent or 0.2 per cent per year. The Conference Board of Canada forecasts a hit of 0.5 per cent in the first year, said director of economics Matthew Stewart.
Scotiabank expects growth to fall to 1.2 per cent in 2019 rather than the 1.5 per cent expected under NAFTA, then 1.3 per cent in 2020 rather than the 1.5 per cent expected under NAFTA, said deputy chief economist Brett House. There would be a 30 per cent chance of a short recession right after termination, he said, but he emphasized that this is unlikely.
Exports to the U.S. made up a fifth of Canada’s economic activity last year — more than $400 billion in total. If we’re so dependent on this trade, why would NAFTA dying not be crippling?
First, many of the tariffs would be relatively low. The U.S. tariffs that would be coming back into force, known as Most Favored Nation (MFN) rates, have fallen substantially since NAFTA came into effect, and they now average less than 4 per cent for goods entering the U.S. in 2017. For many Canadian companies, then, the MFN rates would be a difficult but surmountable obstacle.
Second, Canada’s dollar is widely expected to fall in response to a Trump termination. That would help make Canadian exports more competitive again — compensating, though probably not fully, for the return of the tariffs. House said he would also expect the Bank of Canada to cut interest rates, further stoking the economy.
Still, particular export-focused industries, which are disproportionately located in Ontario, would likely take significant hits.
The auto and auto parts industries are chief among those at risk. Even 2.5 per cent, the average MFN tariff on cars and parts, could make numerous Canadian parts companies uncompetitive, said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association — their primary advantage, of being located in a tariff-free American “satellite,” suddenly gone.
“The vast majority of firms, the hundreds of firms that are in the small- and medium-sized volume space, would be hard pressed to be able to compete on price with an increasingly higher-quality Asian automotive sector,” Volpe said.
Other industry representatives, some of which are facing MFN tariffs much higher than the average, also warn of severe damage to their companies.
A return to U.S. tariffs on exports of Canadian beef would be so painful for Canadian cattle farmers that many might decide to give up and retire, possibly creating a “mass liquidation of cattle herds,” said Canadian Cattlemen’s Association executive John Masswohl.
Bob Kirke, executive director of the Canadian Apparel Federation, said the revival of U.S. clothing tariffs as high as 27 per cent would likely prompt bigger Canadian companies to shift the rest of their production to facilities offshore, smaller companies to shut down.
Ron Lemaire, president of the Canadian Produce Marketing Association, said any tariff at all could be calamitous to fruit and vegetable growers already operating on margins below 5 per cent. The end of NAFTA, he said, “could wipe out entire produce sectors in Canada.”
Karl Littler, a vice-president at the Retail Council of Canada, said the industry could conceivably lose roughly 40,000 to 50,000 of its two million employees.
“Your cost of goods is getting squeezed at the one end and consumer wallets are getting squeezed at the other. So you’ve got two effects happening,” Littler said.
The fourth round of talks, last month, ended with Canada and the U.S. trading public accusations. The fifth round started on a more conciliatory note, with Canada and Mexico signalling a willingness to at least talk about contentious U.S. proposals they had dismissed as non-starters.
Tariffs would not be the only concern in the event of a termination. Without NAFTA guarantees, companies would be plunged into an environment in which non-tariff rules of all kinds could be suddenly changed during the course of, say, a three-year manufacturing contract.
“Does the U.S. start putting extra inspections on Canadian imports? Do we get to the stage where they want more information on Canadian travellers coming in?” said Paul Ashworth, chief North American economist for Capital Economics.
Not everyone is terrified of a Trump withdrawal. Jerry Dias, president of the Unifor union that represents Canadian Auto Workers, said he would prefer a Trump termination to the status quo. “Overall, it’s been a colossal disaster,” Dias said, citing the increasing share of auto production being done in Mexico.
Industry representatives expressed optimism that termination could be avoided. Several noted that legal challenges would be sure to follow any Trump attempt to kill the deal, since it is not clear if he has the power to do so without congressional approval.
Between the unresolved questions of Trump’s desires and Trump’s powers, House said there is an “extremely low probability” that tariffs on Canada will actually end up being increased. He warned against a sensationalist panic over a future that probably will not be a whole lot different than the present.
ADRIAN MORROW , GREG KEENAN AND STEVEN CHASE
NOVEMBER 13, 2017
Canada will give no ground on the Trump administration’s protectionist demands when the renegotiation of the North American free-trade agreement resumes this week in Mexico City, but will try to quickly reach deals on easier issues in hopes of showing goodwill, sources familiar with Ottawa’s strategy said.
The Trudeau government is well aware that taking a hard line on Washington’s “poison pill” proposals risks blowing up the talks, said the sources, who spoke on condition of anonymity to describe confidential discussions. But Ottawa believes failing to reach a deal on NAFTA is better than agreeing to a bad one.
Mexico is in a similar place. One source characterized Enrique Pena Nieto’s administration as being in the fifth stage of grief: acceptance that there may be no avoiding the end of the deal.
NAFTA, Trump and Canada: A guide to the trade file and what it could mean for you
Outside the talks, Canadian officials will continue their long-running outreach campaign to NAFTA-friendly U.S. businesses and politicians, in hopes of both cranking up domestic pressure on the White House to back off its toughest demands and mobilize Congress to oppose President Donald Trump if he tries to pull the United States out of the pact, the sources said.
No matter how badly talks go, the sources said, Canada is determined to stay at the table and force the Trump administration to decide whether it will pull the plug. One person said that if negotiations become permanently deadlocked – or Mr. Trump ends up in a standoff with Congress on whether he has the unilateral power to pull the United States out of the pact – this would not be the worst outcome for Canada as the current deal would simply remain in place.
Now, a pact governing $1.3-trillion in annual trade hangs in the balance as Canada braces for a bargaining table showdown with the world’s most powerful country and sets a collision course with its volatile President.
“The Canadian government has shown that it is tough at the negotiating table, at the same time showing a willingness to continue with the process. But it’s been faced with aggressive and unyielding U.S. demands,” said Lawrence Herman, a veteran Toronto-based trade lawyer. “We’ll know what the likelihood is of these negotiations going further in the Mexican round. The prognosis is not good.”
In Ottawa’s view, Washington’s main protectionist demands are so far beyond the pale of any modern free-trade agreement that – at least for now – negotiators must continue to hold a hard line against them all, according to sources with knowledge of the Canadian thinking. These include proposals to require that vehicles made in Canada and Mexico contain 50-per-cent U.S. content; gut or eliminate the dispute-resolution mechanisms in Chapters 11, 19 and 20; severely limit the amount of U.S. public procurement Canadian and Mexican firms can bid on; and add a sunset clause that would kill NAFTA in five years unless all three countries agreed to keep it.
Canada does, however, believe it can build negotiating momentum by swiftly reaching agreement on less contentious issues, such as slashing red tape at the border and facilitating international e-commerce, the sources said. Some negotiators see a third category in between the non-negotiable proposals and the easy ones: matters that will be tough but that Ottawa might be willing to deal on.
These include raising Canada’s $20 cap on duty-free online purchases, tightening intellectual-property protections and granting more access to Canada’s protected dairy market. It will, however, be tough for the Canadians to make any compromises on such matters while the first set of protectionist U.S. demands remains on the table, sources said.
The Trudeau government has for weeks been fully prepared for the United States to tear up NAFTA. Sources with knowledge of Ottawa’s thinking said some officials were bracing for the Trump administration to trigger the Article 2205 withdrawal procedure during the fourth round of talks last month near Washington. Instead Robert Lighthizer, Mr. Trump’s trade czar, surprised Canada when he opened an Oct. 17 meeting with Foreign Minister Chrystia Freeland at his office by announcing he wanted to scrap the U.S.-imposed year-end deadline for a deal, extend talks to March and take more time between negotiating rounds.
Meanwhile, Ottawa is continuing its push to get free-trade-friendly American business and politicians to knock the Trump administration off its hardline positions. The idea is to use this pressure strategically, said people with knowledge of Canada’s plans. Rather than have U.S. companies bombard the White House all at once, the plan is to line up American allies and keep them on standby, ready to jump in at the right moment. When negotiators are discussing procurement at the bargaining table, for instance, that would be the time for American firms with Canadian government contracts to launch a lobbying blitz.
The U.S. business community has been making a full-court press, trying to show the White House that its protectionist ambitions would hurt American industry. But the administration does not seem to be getting this message.
“I don’t know that we’ve heard any particular acknowledgment of the arguments that we’ve made at a political level,” said Christine Bliss, president of the Coalition of Services Industries, which represents companies from high-tech to insurance to finance. “Where is this going and what’s the strategy? We honestly don’t know.”
Ms. Bliss said a vast swath of the U.S. service industry would be hurt if markets between the three countries closed up. American firms, for instance, provide insurance for three-quarters of Mexican government employees, she said. But she said the administration’s consistent response in meetings is that the White House is mostly focused on the manufacturing sector, which it believes has suffered because of NAFTA.
Even in manufacturing, however, American firms are alarmed at what Mr. Trump is trying to do. Several U.S. auto-industry trade associations last month joined together for what they said was the first time in their history to defend NAFTA. Groups representing the Detroit Three auto makers and their global rivals said seven million auto jobs are at risk if the deal is terminated. The group has formed a coalition called Driving American Jobs, with a website that provided a form letter for members to download and send to members of Congress.
“When you examine the data, there’s no question that NAFTA has helped advance the global competitiveness of the U.S. auto industry,” Matt Blunt, president of the American Automotive Policy Council, said in a statement. In a presentation in Washington last week he warned that, without NAFTA, tariff and other costs would be equivalent to “a $10-billion tax” on U.S. consumers buying cars.
The President’s own congressional caucus could also prove a counterweight to the White House. Unlike Mr. Trump, most of the Republican Party hews to a traditional pro-business line on free trade.
During Prime Minister Justin Trudeau’s meeting last month with the House ways and means committee, not a single member advocated tearing up NAFTA, said one person who was in the room. Members of the committee, which has jurisdiction over trade, suggested various ways to improve the deal, but all were supportive of largely keeping the open market in place, the source said.
Republican Senator Pat Roberts of Kansas last month said he has personally lobbied Mr. Trump on the benefits of free trade on three occasions. “We are fighting a pervasive view that our economy has not benefited from NAFTA and that is simply not right. We are coming to a crossroads,” Mr. Roberts said in a speech at the U.S. Chamber of Commerce. “Saddle up.”
Mr. Roberts said “it might be an option” for Congress to craft legislation that would restrain Mr. Trump from pulling the United States out of NAFTA, but he still hoped U.S. business could talk him down from the ledge: “Let’s hope we don’t get to that.”
Given the chasm between the Trump administration’s demands on one side and the Canadian, Mexican and U.S. industry position on the other, some observers said it was hard to imagine how the talks could come back from the brink.
Flavio Volpe, president of the Automotive Parts Manufacturers Association of Canada, said the U.S. desire to extend the talks is at odds with its stringent demands. “If you put that many poison pills on the table, it says to me that you wanted the result of that to be people leaving the table,” Mr. Volpe said. “When they don’t leave the table, you’ve got a major rethink.”
Robert Holleyman, a high-ranking trade official in the Obama administration, said Mr. Lighthizer seems to be serious about getting a deal, but it’s an open question whether he can find an agreement everyone – from Canada and Mexico to Mr. Trump – can get behind.
“How the United States squares its differences is difficult to see,” he said. “We are in a time of significant uncertainty and potential peril if we cannot find a way through.”
November 8, 2017
Eric Kulisch – Automotive News
DETROIT — A panel of trade experts on Wednesday urged auto suppliers to mobilize politically and rescue the North American Free Trade Agreement as negotiations with Canada and Mexico continue to sour over hard-line U.S. positions.
“The U.S. productive sector — from agriculture to technology to autos — has to raise its voice together and just say this agreement works for our benefit and it needs to be maintained,” Kellie Meiman, managing partner at Washington, D.C.-based McLarty Associates and a former U.S. trade negotiator, said during a breakfast discussion here organized by Automotive News.
The message needs to be simple and clear, leaving rules of origin and other details to be hashed out later, she added.
The automotive supply chains that have evolved over the past 23 years under duty-free shipping rules that encourage cross-border investment are in jeopardy from a Trump administration focused on economic nationalism and reducing the manufacturing trade deficit.
Private sector interests now realize they can’t convince the White House of NAFTA’s economic benefits and are looking toward Congress as a bulwark against any potential attempt to withdraw from NAFTA.
Meiman said automakers, suppliers and other industries must band together and make the case to members of Congress, especially those on the Senate Finance Committee and House Ways and Means Committee, and delegations from states that rely heavily on trade with Mexico and Canada.
Congress could hold the keys to any ultimate disposition of NAFTA because even if President Donald Trump executes a withdrawal provision, only Congress could unravel domestic laws that implemented U.S. obligations, but how such an unprecedented process would unfold is legally murky, according to trade attorneys.
Emilio Cadena, CEO of Mexican auto consultancy Grupo Prodensa, also urged suppliers to make their case to governors, who often wield political power that presidents respond to.
“Support your associations on the lobbying effort. Activate your local congressman to make sure they protect you,” he said.
Canadian Tier 1 supplier Magna International has met with U.S. senators, congressmen and governors, Scott Paradise, vice president of marketing and business development for the Americas, remarked from the audience.
The experts said NAFTA supporters also need to be more vocal in their advocacy because lobbying quietly behind the scenes has not worked.
Business groups made a strategic decision early on to downplay the negative implications of the Trump positions in hopes a deal could be salvaged, but are now organizing a public defense because “the negotiations are in bad shape. We need to assertively and realistically make the case,” Meiman said.
Flavio Volpe, president of Canada’s Automotive Parts Manufacturer’s Association, said he is making frequent trips to Washington and using the media to let lawmakers know that taking protectionist measures against Canadian imports will injure U.S. companies, too, noting that Canadian suppliers have established 150 plants with 46,000 jobs since NAFTA was enacted.
“We don’t fly our flag in front of our shops, but we point out to them that the plant in their district employs many Americans and that you can’t put a fence around the different national interests” when the industries are so integrated, Volpe said.
U.S. politicians need to realize that if NAFTA unravels, China will be the big winner and the domestic auto industry will suffer, Volpe said. He warned that the rapidly growing Chinese auto industry will corner the market on electric vehicles that can be sold at mass-market prices, as it did with solar panels, and import them to the U.S. in large quantities.
GTSI, a family-owned tooling manufacturer for the auto industry in Laredo, Texas, has created a YouTube channel to promote the importance of trade to the city and the need to defend NAFTA, GTSI President Alma Acevedo said after the event.
The fifth round of NAFTA negotiations is scheduled to take place Nov. 17-21 in Mexico City.
By Josh Wingrove
October 27, 2017, 12:00 AM EDT
President Donald Trump wants to shrink the U.S.’s half-trillion-dollar trade deficit in goods and services in part by rewriting the North American Free Trade Agreement’s “rules of origin.” Those rules dictate how much of a product must be made in the three Nafta countries — Canada, Mexico and the U.S. — to qualify for the treaty’s free-trade benefits. Trump is asking Canada and Mexico to tighten considerably the regulations for autos. He hopes this will bring car manufacturing jobs back to the U.S., though such a step also could backfire.
1. What are the rules of origin now?
Generally speaking, a car is subject to Nafta’s preferential trade terms if at least 62.5 percent of it comes from the U.S., Canada or Mexico. (The threshold is generally 60 percent for individual parts not yet attached to a vehicle.) Automakers must specifically prove where some parts come from; that amounts to red tape, they say. And yet there’s something of a loophole: Not all parts and components are on the so-called tracing list, which determines which products’ origins must be tracked. Anything not on the list isn’t tracked, so it’s effectively treated as domestic content, even if was made abroad.
2. Why aren’t all car parts counted?
As time goes by, the original Nafta accord becomes less and less comprehensive in what parts it accounts for. While still considered restrictive, the list is now outdated, opening the door to foreign parts that weren’t in cars built in 1994, such as complex computer systems. In other words, under the existing tracing list, a Nafta car can get more and more of its pieces from overseas and still get the pact’s preferential treatment.
3. How does Trump want to change this?
bump the auto minimum threshold from Nafta countries to 85 percent from 62.5 percent.
add a U.S.-specific requirement of 50 percent — unprecedented under the current pact.
expand the tracing list to include nearly everything.
strengthen verification of where parts came from, rather than deeming some to be from North America.
Trump’s proposal would mean tougher rules and more legwork for companies to comply, and a complete disruption of existing production systems. He also wants swift implementation of the new rules, giving automakers as little as one year to adapt.
4. Wouldn’t that make it more expensive to make cars?
Yes, for companies doing business under a revised Nafta. While cheaper parts and Mexican labor have caused U.S. job losses under Nafta, they also have made U.S. cars more affordable to consumers, who could suffer from sticker shock if Trump gets his way. There could also be substantial costs for automakers to re-orient supply chains to comply with Trump’s rules-of-origin changes. In the end, automakers may not bother with the new rules.
5. What else could they do?
Automakers might abandon Nafta altogether, choosing instead to build abroad and pay an import tariff to bring vehicles into the U.S. For cars, the tariff is just 2.5 percent — likely far cheaper than contorting an existing supply chain on short notice. For trucks and SUVs, the tariff is higher, 25 percent, so there’s more incentive for Nafta compliance in those categories. Automakers could also avoid Nafta rules by manufacturing and selling exclusively within the U.S. — but that, too, would raise the price of a vehicle.
6. Have carmakers indicated how they’d respond?
The Motor and Equipment Manufacturers Association has warned that Trump proposals would lead to higher costs and ultimately risk jobs. Flavio Volpe, who represents Canadian parts makers, said of the proposed new rules, “At some point, with the layering of all these things in it, you’d say, ‘I’m not going to try.’” Then there’s the example of what Ford Motor Co. did. After being criticized by Trump for planning to move production of its second-best-selling U.S. car to Mexico, Ford instead is moving it to China.
7. Why is Trump doing this?
For him, Nafta talks are all about trade deficits. The U.S. trade deficit with Mexico is fueled in part by manufacturers moving plants south of the border, and automakers are a poster child for that. U.S. Commerce Secretary Wilbur Ross has argued that the share of U.S.-produced content in goods imported from Mexico was only 16 percent in 2011, down from 26 percent in 1995, while Chinese content is rising. He partially blames the rules of origin.
8. Will Mexico and Canada agree to this?
Not so far. Along with a U.S.-requested sunset clause and changes in dispute settlement, dairy trade and government procurement, the proposed revisions to rules of origin were flatly rejected during the fourth negotiating round, which ended Oct. 17.
9. Would Trump’s changes narrow the U.S. trade deficit?
Maybe. They also could raise it. That’s because the tougher standards would give companies an incentive to import cars to the U.S., rather than make them in the U.S. Ross, for one, has downplayed that scenario. “I don’t think it’s that hard at all,” he said during a discussion of the Nafta proposals in Washington on Oct. 11. “I think you will find we will get increased percentages in the rules of origin and I think you’ll find the car companies will adapt themselves to it.”
October 23, 2017 – Automotive News
By: Flavio Volpe, President of the Automotive Parts Manufacturers Association
In a July interview with a respected business daily about then-upcoming North American Free Trade Agreement talks, I was asked about whether the auto industry had reason to worry about the protectionist rhetoric in Washington.
Convinced that all three countries understood how interwoven the North American industry was, I said, “Americans do well to have Mexican and Canadian supply when we compete” against other major auto jurisdictions around the world, such as Germany and Japan. Perhaps prematurely, I added that I was not “concerned that anybody is going to shoot themselves in the foot” regarding the automotive sector. It appears I was wrong.
In the fourth round of the NAFTA negotiations this month in Washington, the U.S. proposed new automotive rules of origin. A proposed new 85 percent regional content requirement to avoid duties (up from an already highest-in-the-world NAFTA level of 62.5 percent) together with a 50 percent U.S. content requirement for goods built only in Canada and Mexico got the most attention.
New proposals that include tracing the origin of all raw materials to their primary source to verify their country of origin, presumably including granules of sand for glass production, and the elimination of tariff shifting were just as difficult to anticipate. With a two-year timeline to enforcement, many observers gauged the U.S. position as an invitation to Canada and Mexico to leave the table rather than as a serious opening commercial position.
How do you have protectionism in a free-trade agreement? The career negotiators at the Office of the U.S. Trade Representative presumably know this is an oxymoron. Less than two years ago, during the Trans-Pacific Partnership negotiations, they proposed a significant lowering of regional content to 45 percent on vehicles and allowed for those cars to be made in nine new countries and still meet the threshold to be sold tariff-free into the U.S. This incredible paradox must mean that U.S. negotiators are getting their orders straight from the White House. “America first” is the core doctrine and “bring back our jobs” is the second, damn the torpedoes.
Do the new proposals really put America “first”? In targeting Canada’s and Mexico’s assembly sector with a 50 percent U.S. content demand, the proposal hurts U.S. automakers operating in those countries directly. Domestically, it may be worse. Content levels only matter if your product crosses a border to reach a customer. Without an incentive to consider all three NAFTA markets in their production plans, U.S.-based assembly could plan for a car to not have to cross a border.
The U.S. already buys 5 million more cars than it manufactures annually. A U.S. vehicle assembly plant geared strictly to domestic consumers could allow for sourcing cheaper auto parts from anywhere in the world without regional or domestic content requirements. The big loser here might just be the U.S.-based auto parts manufacturing sector and hundreds of thousands of American workers in towns such as Northwood, Ohio; Springfield, Tenn.; and Bowling Green, Ky.
American protectionism that leaves U.S .companies unprotected in Canada and Mexico while also incentivizing parts sourcing from China, Eastern Europe, Vietnam and Malaysia for U.S.-based auto assembly isn’t protectionism at all. It’s untested political ideology that damages U.S. interests in an effort to punish others for the natural effects of globalization and automation.
While the U.S. picks a fight with its best friends, it has proposed new rules that could attract foreign interests to enter the U.S. with minimal assembly investment, committed to bringing in cheaper parts from their price-competitive home bases. That will hurt U.S. interests.
Sometimes it takes an intervention of sorts to remind people who their friends really are. Friends don’t let friends harm themselves. Perhaps we could have been there more often when you felt you weren’t getting a fair share, to show our concern and commitment. But we are here now and you’ve made a hole in your foot — let’s help mend it together. We continue to have hope for NAFTA, but we have to start looking out for each other too. The wolves are circling.
Flavio Volpe, president of the Automotive Parts Manufacturers Association (APMA), is back from D.C. and Mexico City. He offers his first-hand look at the talks.
BY LETHBRIDGE HERALD OPINON ON OCTOBER 18, 2017.
U.S. demands increasingly strict
As the Major League Baseball playoffs continue, the United States is playing a little hardball of its own during NAFTA negotiations with Canada and Mexico.
An analysis of the U.S.’s ever-increasing demands at the negotiating table raises the question of whether the Americans grasp the concept of compromise. Perhaps the U.S. negotiators prepared for the talks by reading Donald Trump’s “The Art of the Deal,” or more likely, they boned up by watching some classic Abbott and Costello skits such as “Have you got two tens for a five?”
The recently begun fourth round of talks was forecast to be the most contentious yet, and the U.S. wasted little time before firing several salvos over the bow of Canada’s NAFTA negotiating team. The U.S. ended the previous round by proposing much stricter “Buy American” rules, then followed that up with a tough “Made in America” requirement for the auto manufacturing sector, with virtually no grace period to allow companies time to adjust.
The demands on automakers prompted talk that either the Americans were trying to deliberately sabotage the talks or were hoping to shock the other parties into making concessions.
In a Canadian Press story Friday, Flavio Volpe, a Canadian auto-parts representative, suggested it was the latter case. “My instinct is this is, ‘Art of the Deal.’ There are those who think these are poison pills designed … to get the partners to leave the table.”
Whichever it is, the U.S. isn’t backing down on its approach. In fact, it’s continuing to drop more bombshells on Canadian negotiators. Now the U.S. is demanding an end to the supply management system for dairy, chicken, eggs and turkey.
The U.S. has made its position very clear – it wants strong barriers to protect its own trade sectors while calling for the elimination of similar barriers in those same sectors in Canada. The Americans want to hang onto their own cake while demanding Canada’s cake, too.
Such tactics might have worked for Bud Abbott in his dealings with the gullible Lou Costello, but let’s hope they prove less effective against Canadian negotiators.
Earlier this month, during a visit to Washington where he met with Trump, Prime Minister Justin Trudeau acknowledged that getting a new NAFTA deal wasn’t going to be easy.
“… we are ready for anything and we will continue to work diligently to protect Canadian interests, to stand up for jobs, and look for opportunities for Canadian business and citizens of all of our friends and neighbour countries to do well,” Trudeau said.
Eric Miller, a Canadian consultant who advises Industry Canada, noted back in July that Canada would “have to fight hard for issues it cares about.”
That has certainly become evident as the NAFTA talks proceed. The Hamilton Spectator, in an August editorial, declared “No deal is better than a bad deal.” That seems like good advice. As important a trading partner as the United States is, Canada would not be doing itself any favours by allowing itself to be bamboozled or bullied into a deal that lets the U.S. take advantage of us. That would be bad for the Canadian economy and bad for Canadians.
Baseball might be the Americans’ game, but Canada’s negotiators need to show their U.S. counterparts that we can play hardball, too. By the time this game is over, we’ll see who’s on first.
ADRIAN MORROW, Globe and Mail
October 16, 2017
The Trump administration has thrown down all of its major demands in the renegotiation of the North American free-trade agreement, pushing for sweeping protectionist changes that would decisively tilt the playing field in favour of the United States at the expense of Canada and Mexico.
In the fourth and most substantial round of talks so far, at a Washington-area hotel, American negotiators formally presented demands for U.S. content in autos, the gutting of the deal’s dispute-resolution system and a sunset clause that would terminate NAFTA in five years unless the three countries agree to keep it. The United States had previously laid out a demand to restrict Canadian and Mexican access to American government contracts.
The United States also privately acknowledged that its deadline for finishing discussions by the end of the year might be unrealistic. One source said U.S. officials floated scheduling negotiations as late as February, 2018, to their Canadian and Mexican counterparts.
But while the U.S. agenda has been spelled out in detail, Washington’s ultimate aim remains murky.
Government officials, members of industry and expert observers could not agree whether the United States’ tough demands are designed to extract concessions or provoke the collapse of talks.
One source contended the United States itself does not know and is simply throwing out as many demands as possible while it tries to sort out a plan. Another person, who had been briefed on the American negotiating position, said the United States seems content with either a revised deal or tearing up NAFTA. “It’s ‘my way or the highway.’ Both options would be acceptable,” this person said.
Both Canada and Mexico are determined to hold the line against the U.S. onslaught and not walk away from the table, the sources said. The aim is to keep the ball squarely in the United States’ court, forcing the Trump administration to decide whether it is willing to bargain down to make a deal or make good on threats to tear up the pact.
On Sunday night, Mexican Economy Secretary Ildefonso Guajardo visited the hotel for a closed-door pep talk with his negotiating team. Loud cheering and applause could be heard from the room as he spoke.
“Mexico will not leave the table,” he told reporters after emerging from the session.
For now, the toughest sessions mostly consist of Canadian and Mexican negotiators trying to convince their U.S. counterparts that their positions are bad and would hurt the economies of all three countries, one source said.
The American demands are so protectionist that even the U.S. trade negotiators, mostly career civil servants rather than political staff, often do not seem to agree with them, said two people briefed on the talks. One person said U.S. officials will often simply present the proposals but not make much effort to defend their merits when challenged by Canadian and Mexican counterparts. Another person said some U.S. negotiators have tried to distance themselves from the demands by explaining they are only following the White House’s orders.
Flavio Volpe, president of the Automotive Parts Manufacturers Association, said the U.S. demands were designed to knock Canada off its game in hopes of either triggering concessions or the collapse of the talks. He predicted they would not succeed.
“The [American] proposals appear to be geared to sow an emotional response from Canada and Mexico. I was reminded that it’s a negotiation, and I think they will learn about us in our response,” said Mr. Volpe, who was in Washington to advise the Canadian government.
In an Oval Office meeting with Prime Minister Justin Trudeau on Wednesday, the first day of the current round of negotiations, U.S. President Donald Trump threatened to pull out of NAFTA.
But some stakeholders dismissed much of Mr. Trump’s rhetoric as negotiating bluster.
“There’s a lot of posturing,” Ken Neumann, Canadian director of the United Steelworkers, said in an interview at the union’s Washington office as negotiations unfolded across the river. “When you get up in the morning and listen to Twitter, it doesn’t quite translate into what the real world’s all about.”
Congress could also prove a check on Mr. Trump’s ability to shred NAFTA: If Mr. Trump pulled out of the deal, legislators would likely have to pass a law repealing its provisions, such as lower tariffs. And members of the House ways and means committee, which handles trade, expressed no interest in blowing up the deal.
“We didn’t talk about anything imploding,” said Dave Reichert, a Washington State Republican who chairs the trade subcommittee, following a meeting with Mr. Trudeau on Wednesday.
Negotiations continue Monday. On Tuesday, Canadian Foreign Minister Chrystia Freeland, Mr. Guajardo and U.S. trade czar Robert Lighthizer will meet in Washington to conclude this round. The three sides will reconvene in Mexico City later this month.
The top American demand in this round was that vehicles made in Canada and Mexico contain at least 50-per-cent U.S. content in order to qualify for duty-free shipment throughout the NAFTA zone, a requirement that would not apply to vehicles made in the United States, while North American content in all NAFTA zone autos would rise from 62.5 per cent to 85 per cent and every component of a vehicle – down to the steel – would count toward that total.
The United States also formally demanded countries be allowed to opt out of Chapter 11 dispute-resolution panels, which allow corporations to sue governments for political decisions that hurt their business; and that Chapter 20 panels, which adjudicate trade disputes between governments, be demoted to an advisory role, allowing a losing country to disregard their decisions and retaliate against the other country.
In the first round, the U.S. demanded that all of Chapter 19, which governs dispute panels that Canada has successfully used to challenge American tariffs on softwood lumber, be simply struck from the agreement.
In the third round in Ottawa, it demanded that Canada and Mexico be barred from receiving any more in government contracts, dollar-for-dollar, than American companies receive in those two countries.
By Alexander Panetta — Oct 13 2017
ARLINGTON, United States — The United States is presenting a quadruple-whammy demand on auto manufacturing at the NAFTA negotiations, including a strict “Made In America” requirement with virtually no grace period to give car companies time to adjust.
The proposal is viewed as a non-starter by virtually every party involved in automobile production: Canada, Mexico, U.S. industry and even labour groups were calling the proposal completely unattainable.
It’s one of the biggest issues of the talks and it’s sure to provoke a backlash on multiple fronts.
The U.S. negotiating team showed industry representatives their proposal to Canada and Mexico and it contained four ideas that would complicate auto production, several sources said Friday.
First, it requires all cars to include 85 per cent North American content to avoid a tariff, up from the current 62.5 per cent; 50 per cent of a car’s content would have to come from the U.S.; and it would toughen the way content is calculated, with a list upgraded to include parts that didn’t exist in 1994 when NAFTA was originally implemented.
A fourth irritant is the minuscule proposed phase-in period.
Automakers would have one year to comply with the American-made quota and two years to comply with the overall North American content requirement under the proposal, which is a radical departure not only in substance but also in the timing of phase-in periods normally included in trade agreements.
The demands are deemed so impractical the talk in the hallways at the conference site revolves around which of two objectives the Americans are trying to achieve: Sabotage the talks, or shock other parties into concessions.
A Canadian auto-parts representative said he tends toward the latter.
“My instinct is this is, ‘Art of the Deal,'” said Flavio Volpe. “There are those who think these are poison pills designed … to get the partners to leave the table.”
The proposal came as the U.S. made its first significant move on dairy, a traditional sticking point with Canada. Several insiders said Friday the U.S. has asked Canada to scrap its special classifications benefiting domestic producers for things like diafiltered cheese-making products.
The U.S. also wants a veto power over future Canadian classification changes.
What’s already proposed would lead to changes in Canada’s supply-management system. The U.S. has not yet made any explicit request for a percentage of Canada’s protected dairy market. But that request could still come at any time.
Earlier U.S. demands include a termination clause that would cancel NAFTA after five years, unless all parties agree to extend it, and a Buy American rule that would make it far more difficult for non-U.S. companies to bid for public projects.
The auto proposal is so controversial, organizations that are normally rivals are allied against it. Volpe’s Automotive Parts Manufacturers’ Association says it could create a perverse incentive for producers to leave the continent.
Their argument is that it’s far easier to ignore the NAFTA rules and simply pay the U.S. 2.5 per cent import tariff: “It’s not good for the Americans,” Volpe said. “It just doesn’t make sense from a business perspective.”
The union representing Canadian auto workers agrees.
Unifor’s Jerry Dias says the U.S. would never have the power to enforce the proposed changes because companies would just ignore it: “All this argument about 50 per cent, 70 per cent, 85 per cent, it means nothing as long as the U.S. has a 2.5 per cent tariff. It’s like the emperor with no clothes,” Dias said.
“They can yell, scream, threaten, then people say, ‘Okay, here — I’ll pay the 2.5 per cent’.”
He said it’s a moot point anyway because there’s no chance Canada or Mexico will ever agree to a NAFTA that looks like what the Americans are proposing.
“Get it out of your head. That’s never gonna happen,” Dias said. “This is a deal that is going nowhere very quickly.”
Scotiabank analysts agree the proposals would hurt their author.
Car companies would have an incentive to move production away from the U.S., and Canada, either to Asia or Mexico, and pay a tariff rather than deal with the rules being proposed by the U.S., said its deputy chief economist.
“If accepted, the U.S. (proposal) would be a pyrrhic victory,” said Brett House.
House called the proposal a poor solution to a non-existent problem. Growth in auto employment since the Great Recession has skyrocketed in the U.S. to six per cent a year and he said North American content is on the rise in cars produced in Canada and Mexico, contrary to figures being floated by U.S. Commerce Secretary Wilbur Ross.
“There’s no problem here to address,” he said.
One real problem, however, is stagnant wages: U.S. auto salaries have not seen an appreciable increase for years, according to data from the U.S. Bureau of Labor Statistics. Dias says that’s the problem everyone should be attacking — by increasing labour standards, especially in Mexico.
GREG KEENAN AND ADRIAN MORROW
TORONTO AND ARLINGTON, VA.
October 14th, 2017
Globe and Mail
The United States is proposing to exempt itself from a key automotive provision it has tabled in the North American free-trade negotiations – a move that experts say would seriously threaten Canada’s ability to land new investment by auto makers.
The Americans have proposed that vehicles shipped to the United States from Canada or Mexico contain 50-per-cent U.S. content, but would not apply that requirement to vehicles made in the United States that are exported to the other two NAFTA countries, according to sources familiar with the negotiations.
Such an exemption would make one of the most protectionist demands the United States has put on the NAFTA table even more stringent, and would divert investment by auto makers in new assembly plants to the United States and away from Canada and Mexico, auto industry officials and trade experts say.
Read more: No more NAFTA: Canada can thrive without the trade pact (for subscribers)
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Auto industry officials believe such a proposal also poses a danger to existing assembly plants in Canada – which employ more than 20,000 people – in particular because auto makers could theoretically source parts from anywhere in the world, driving down the costs of making vehicles in the United States.
The boom in automotive investment in North America since the Great Recession has already largely bypassed Canada. The last new auto plant to open in Canada was in the depths of the recession in December 2008, while several plants have begun production in Mexico this decade.
Canada would be harmed more than Mexico because the vast majority of vehicle production in Canada is intended solely for the U.S. market.
Mexico also ships millions of vehicles to the United States annually, but it has free-trade agreements with 44 other countries. That gives car companies making vehicles in Mexico more diverse export opportunities than auto makers in Canada have.
In addition, some of the vehicles made in Mexico are for cars that are popular around the world – the Volkswagen Beetle, for example – while cars made in Canada are generally aimed at Canadian and U.S. buyers.
The demand, part of a series of U.S. proposals made at the fourth round of NAFTA negotiations in Alexandria, Va., on Friday, is so obviously unacceptable to the other two countries that it is unclear whether the Americans are trying to shock Canada and Mexico into submission or deliberately scuttling the talks.
Under one potential scenario, Canadian and Mexican refusals to accept the tough measures could be used as a pretext for the Americans to tear up NAFTA, as President Donald Trump has repeatedly threatened to do.
“It’s a revelation of the degree to which the United States wants these negotiations to be totally one-sided and favourable to them at the expense of the other NAFTA partners,” said veteran trade lawyer Larry Herman.
“What [the Americans] are doing – based on what you tell me – is saying, ‘We don’t have to abide by these rules but Canada and Mexico do,'” Mr. Herman said. “It’s highly preferential and favours production in the United States over the other NAFTA trading partners.”
Mr. Herman believes the talks will fail.
Mark Warner, a lawyer who specializes in Canada-U.S. trade, said the entire U.S. content requirement appears to be a negotiating ploy to push the other countries to accept stricter rules of origin on NAFTA-zone content.
“My general approach to the 50-per-cent requirement is that it’s all theatre. It’s not a bombshell to blow up the talks,” he said in an interview. “It’s meant to get Canada and Mexico to agree to the 85 per cent.”
Mr. Warner said a U.S. content requirement would likely break World Trade Organization rules and subject all three countries to a lawsuit by industry. He said American negotiators – led by trade czar Robert Lighthizer, a trade lawyer with four decades’ experience in the field – probably realize this, and only put the demand on the table to make it clear to Canada and Mexico that they are serious about getting tougher rules of origin.
“As a negotiating tactic, it’s not a bad one,” he said.
The proposal, if it comes to pass in a new North American free-trade agreement, could run counter to the Trump administration’s goal of repatriating both assembly and auto parts jobs that it believes have stampeded out of the United States and into Mexico since NAFTA took effect 23 years ago.
If vehicles made and sold in the United States are not subject to a rule requiring a minimum amount of regional or U.S. content, auto makers could import parts from low-cost countries in Asia, eastern Europe or elsewhere instead of buying them from relatively higher-cost U.S. suppliers.
“If true, this American protectionist proposal only works for the auto makers and leaves their entire supply sector unprotected,” said Flavio Volpe, president of the Automotive Parts Manufacturers Association of Canada, which represents Canadian suppliers. “How does this make sense?”
He noted that the U.S. vehicle market is large enough that demand for a particular vehicle can be satisfied by plants that make vehicles only for the domestic market.
That’s not the case in Canada, where the overall market is smaller. The best-selling Canadian-made vehicle is the Honda Civic, whose sales of 64,552 in 2016 represented only about one-quarter of the sales needed to sustain typical production of 250,000 annually at an assembly plant.
The U.S. content requirement was part of a package of tough auto demands presented by American negotiators to their Canadian and Mexican counterparts Friday at the Sheraton Pentagon City in a Washington suburb.
Another U.S. demand is that vehicles exported from one country to any of the other countries in NAFTA contain 85-per-cent North American content, compared with the current NAFTA level of 62.5 per cent.
And the Americans want every component of a car or truck – down to the steel and aluminum used in chassis or body parts and the sand used to make glass – to count toward the 85 per cent requirement.
That’s not the case under the current NAFTA regime.
By DANIEL DALEWashington Bureau
Fri., Oct. 13, 2017
The Trump administration has made another demand that could destroy NAFTA talks, this time unveiling a protectionist auto manufacturing proposal considered outlandish and unpalatable by Canada, Mexico, unions and car companies.
The new U.S. proposal creates yet more pessimism about the chances for a successful renegotiation of the continental free trade pact. It is the second major U.S. proposal in two days that Canada and Mexico are unlikely to even consider endorsing.
The latest proposal has experts wondering again whether the Trump team is making unrealistic demands as a bargaining ploy or whether the president who has threatened to terminate NAFTA is deliberately trying to sabotage the negotiations.
“I think it’s one of these poison pills. I just think there’s no way, at all, ever, not-no-how, that Mexico and Canada can accept it. I don’t know what they’re thinking. The auto industry hates this,” said Jon Johnson, a C.D. Howe Institute senior fellow who worked on auto issues during the negotiation of the original North American Free Trade Agreement.
The long-rumoured proposal, discussed at NAFTA renegotiation talks on Friday, would make a car need to be composed of 50 per cent American content to avoid tariffs. At present, there is no American-content rule: NAFTA requires only that a car include 62.5 per cent content from North America as a whole.
The U.S. also proposed to raise that North American requirement to 85 per cent. This, too, is considered an unreasonable threshold by the industry given the importance of Asian electronics and other elements found overseas.
Further, the timeline proposed by the U.S. was extraordinarily aggressive. Companies would have just one year to meet the 50 per cent U.S. requirement, two years to meet the 85 per cent North American requirement — an unusually rapid implementation period for an industry in which it takes years for companies to turn an idea into a product.
The proposal for 50 per cent U.S. content was described as “madness” by Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, and “completely ridiculous” by Jerry Dias, president of the Unifor union representing Canadian autoworkers. The Canadian government views it as so bad and so important that Foreign Affairs Minister Chrystia Freeland’s office issued its first written denunciation of a U.S. demand.
“On NAFTA, we are working for a good deal, not just any deal. That means that we will continue to defend our national interest and stand up for Canadian values. We will not accept proposals that put Canadian jobs at risk,” said Freeland spokesperson Adam Austen. “We will continue to make clear, reasoned arguments based on fact and to put forward pragmatic, mutually beneficial proposals.”
Trump’s negotiators formally unveiled the proposal late Thursday at the fourth round of NAFTA talks in a suburb of Washington. It came a day after the Trump team proposed a “sunset clause” that would automatically terminate the deal in five years if all three countries did not approve it again.
Experts say the proposal is unwise since it would likely lead carmakers to simply choose to get their components from outside the NAFTA zone, killing jobs throughout North America, rather than attempting to meet the overly onerous thresholds.
The tariff on cars that do not meet NAFTA thresholds is a mere 2.5 per cent — hardly enough to compel carmakers to stay put in North America, industry players said Friday.
“They’ll just say, ‘You know what, I don’t need to comply with NAFTA. If my price advantage of sourcing out of South Asia is 7 per cent, why wouldn’t I pay the 2.5 per cent tariff?’” said Volpe.
For that reason, Volpe said, a proposal supposedly designed to protect U.S. jobs would actually hurt them.
“The only ones who are going to win are non-North American suppliers,” he said. “Never mind Canada and Mexico — I know (Trump officials) don’t care. But if you game it out for U.S. industry? Anybody who’s making cars or car parts right now under this scenario, if it was accepted, would be hurt, including workers.”
Johnson said the content proposals are particularly confusing because U.S. demands for auto trade are usually in line with the wishes of the U.S. auto industry. In this case, the industry is aghast.
“Any increase in the rules of origin would add complexity, burden and cost, thus reducing Canada’s competitiveness as well as the competitiveness of the trade bloc as a whole,” the Canadian Vehicle Manufacturers’ Association, which represents General Motors, Ford and Fiat Chrysler, said in a statement.
Dias said the auto proposal, like the sunset clause proposal, is evidence the U.S. is not really interested in making a deal.
“I spend a lot of time with the Canadian team. They view the U.S. proposals as as foolish as I do. So they’re not going anywhere. This deal is falling apart,” he said. “There’s not going to be a NAFTA.”
The U.S. team also proposed Thursday to include steel, for the first time, on the list of components that count toward the content threshold, an idea designed to boost the U.S. steel industry.
Speaking to the media at a meeting with Mexican President Enrique Pena Nieto on Thursday, Prime Minister Justin Trudeau said Canada remains committed to the talks and “will not be walking away from the table based on proposals put forward.”
In a speech to the Mexican Senate on Friday, Trudeau promoted gender equality and warned of a rising tide of isolationism.
“Isolationism is taking hold in too many corners of the world, but our people must not succumb to fear. We, as leaders, must not succumb to fear,” he said.
Viernes, 13 de Octubre de 2017
La Asociación de Manufactureros de Partes Automotrices (APMA) de Canadá rechazó hoy la propuesta de Estados Unidos de incrementar a su favor el contenido regional en los vehículos producidos en la zona del Tratado de Libre Comercio de América del Norte (TLCAN).
El presidente de la APMA, Flavio Volpe, señaló que la intención de Estados Unidos de incrementar a 50 por ciento el contenido regional de autos en Norteamérica para estar libres de arancel puede crear un “incentivo perverso” al hacer que los productores simplemente saquen su producción de la región.
Los productores automotrices podrán ignorar las reglas del TLCAN y pagar el 2.5 por ciento de tarifa de importación, agregó Volpe, quien dijo que la propuesta no tiene ningún sentido desde una perspectiva de negocios y no es buena para los americanos.
En un sentido poco más optimista, Jerry Dias, líder de Unifor, uno de los sindicatos más grandes e importantes de Canadá, aseguró que el gobierno estadunidense no tendrá el poder de imponer esos cambios, pues las compañías los ignorarán.
“Todo este argumento sobre el 50 por ciento, el 70 por ciento, el 85 por ciento, no significa nada, cuando Estados Unidos tenga un arancel del 2.5 por ciento”, añadió.
Dias, quien representa a 310 mil trabajadores y quien ha estado presente en las cuatro rondas de negociación para reformar el TLCAN como asesor de la delegación canadiense, refirió que los negociadores estadunidenses “pueden gritar y amenazar, pero las compañías automotrices optarán por pagar el 2.5 por ciento'”.
El líder sindical se mostró seguro de que ni Canadá ni México aceptarán dicha propuesta. “Sáquenlo de su cabeza, porque eso no va a pasar”, dijo refiriéndose a la propuesta estadunidense.
Brett House, analista del banco Scotiabank, coincidió en que la propuesta de Estados Unidos sería un incentivo para que los productores automotrices elevaran su manufactura fuera de Estados Unidos o Canadá y la instalaran en Asia o en México.
Esa propuesta “es una solución pobre ante un problema que no existe”, porque los empleos en la industria automotriz estadunidense han crecido desde la Gran Depresión 6.0 por ciento en promedio, mientras que el contenido norteamericano sigue creciendo en autos producidos en Canadá o México, contrario a lo que asegura el secretario de Comercio, Wilbur Ross, detalló House.
Industry sources who have seen the demands say they are so damaging many auto makers will ramp up production in Asia and just pay the tariff.
The Canadian Press Via the Financial Post
ARLINGTON, United States — The United States is presenting a triple-whammy of a demand on auto parts at the NAFTA negotiations, including a strict “Made In America” requirement that’s viewed as a non-starter by virtually every party involved in automobile production.
It’s one of the biggest issues of the talks and it’s sure to provoke a backlash on multiple fronts: Canada, Mexico, U.S. industry, and even some labour groups were calling the proposed numbers completely impractical.
Two sources say the U.S. negotiating team has been showing industry representatives the proposal they are expected to present Canada and Mexico as early as Friday.
It contains three ideas that automakers say would complicate production.
So impractical are the U.S. demands, the talk in the hallways at the conference site involves trying to decipher which of two objectives the Americans are trying to achieve: Sabotage the talks, or shock other parties into concessions.
A Canadian auto-parts representative tends toward the latter.
“My instinct is this is, ’Art of the Deal,”’ said Flavio Volpe. “There are those who think these are poison pills designed … to get the partners to leave the table.”
Earlier U.S. demands include a termination clause that would cancel NAFTA after five years, unless all parties agree to extend it; and a Buy American rule that would make it far more difficult for non-U.S. companies to bid for public projects.
The auto proposal is so controversial organizations that are normally rivals are allied against it. Volpe’s Automotive Parts Manufacturers’ Association says it could create a perverse incentive: producers might simply shift away from North America, and hurt the entire continent.
The argument is that it’s far easier to ignore the NAFTA rules and simply pay the U.S. 2.5 per cent import tariff: “It’s not good for the Americans,” Volpe said. “It just doesn’t make sense from a business perspective.”
“They can yell, scream, threaten, then people say, ’Okay, here — I’ll pay the 2.5 per cent.”’
He said it’s a moot point anyway because there’s no chance Canada or Mexico will ever agree to a NAFTA that looks like what the Americans are proposing.
“Get it out of your head. That’s never gonna happen,” Dias said.
“It’s not going to happen. I know for sure that Canada will never accept (this)… None of these things are going anywhere… This is a deal that is going nowhere very quickly.”
Car companies would have an incentive to move production away from the U.S. and Canada — either to Asia or Mexico — and pay a tariff rather than deal with the rules being proposed by the U.S., said its deputy chief economist Brett House.
“If accepted, the U.S. (proposal) would be a Pyrrhic victory,” he said.
House called the proposal a poor solution to a non-existent problem. Auto employment since the Great Recession has skyrocketed in the U.S. to six per cent a year, and he said North American content is on the rise in cars produced in Canada and Mexico, contrary to figures being floated by U.S. Commerce Secretary Wilbur Ross.
One real problem, however, is stagnant wages: U.S. auto salaries have not seen an appreciable increase for years, according to stats from the U.S. Bureau of Labor Statistics. Dias says that’s the problem everyone should be attacking — by increasing labour standards, especially in Mexico.
Author: Francesco Veronesi
TORONTO – Un fronte comune tra Canada e Messico per arginare le pressioni americane sul settore auto. È quanto è stato discusso ieri a città del Messico dal primo ministro Justin Trudeau e il presidente messicano Enrique Peña Nieto in un incontro bilaterale che ha anche registrato la presenza del ministro degli Esteri Chrystia Freeland e del ministro del Commercio internazionale Francois-Philippe Champagne. Il summit coincide con l’inizio del quarto round di negoziati per il rinnovo del Nafta e secondo le previsioni gli Stati Uniti coglieranno l’occasione per il tanto temuto giro di vite sul “local content” nel settore automobilistico e nella componentistica auto. Washington, come aveva confermato al Corriere Canadese Flavio Volpe, presidente Automotive Parts Manufacturer’s Association, starebbe pensando di inserire un’ulteriore clausola, quella relativa al materiale realizzato e prodotto negli Stati Uniti. Un vincolo questo ritenuto inaccettabile sia da Ottawa che dalla controparte messicana, perché si andrebbe a destabilizzare un settore che negli ultimi venticinque anni si è sviluppato su scala continentale.
Ora, nella difficile partita a scacchi che si sta consumando lungo sette round di negoziati che dureranno per tutto il 2017, il primo ministro canadese sta cercando di capire se vi sia la possibilità di proteggere il comparto dell’auto, un settore chiave per l’economia canadese, magari facendo delle concessioni agli Stati Uniti.
È ipotizzabile che Ottawa si dimostri più possibilista su un’eventuale apertura nei meccanismi di tutela e garanzia per il settore dei latticini, che gli americani vorrebbero liberalizzare completamente sua scala continentale. Il Canada fino a questo punto ha difeso il “supply management”, il meccanismo che permette ai produttori esteri di latte e derivati di entrare nel nostro mercato fissando delle quote limite: superate queste, scattano dei dazi doganali altissimi che affossano la competitività dei prodotti che arrivano dal sud del confine.
Fino a questo momento il settore caseario non ha fatto parte del Nafta, ma i negoziatori americani stanno facendo un pressing forsennato per inserirlo.
In ogni caso, il Canada e il Messico stanno studiando le contromisure da prendere di fronte all’intransigenza degli States. Un approccio questo ribadito anche mercoledì in occasione della visita di Trudeau alla Casa Bianca, durante la quale Donald Trump ha paventato, per l’ennesima volta, l’ipotesi di un’uscita unilaterale degli Stati Uniti dal Nafta.
Il primo ministro canadese ha invece respinto questo scenario che ovviamente avrebbe delle ripercussioni estremamente negative per l’economia canadese.
Insomma, il percorso che porterà alla nascita del Nafta 2.0 continua ad essere pieno di ostacoli da superare, come era facile aspettarsi alla vigilia del negoziato. Resta da capire fino a che punto Washington sarà disposto a tirare la corda e se le minacce dell’inquilino della Casa Bianca siano semplicemente uno strumento da usare nella trattativa o se veramente Trump sia disposto al grande salto nel buio con l’uscita degli Usa dal Nafta.
THE CANADIAN PRESS via iPolitics/Sean Kilpatrick
October 10th, 2017
It’s highly unusual for a Canadian prime minister to schedule a bilateral meeting with an American president at the White House while trade talks with the U.S. are being held in Washington at the same time.
But that’s the set-up for Wednesday’s meeting between Justin Trudeau and Donald Trump, which occurs as the U.S. hosts the fourth (and possibly pivotal) round of NAFTA talks with Canada and Mexico.
Trudeau also will meet with the 39-member House Ways and Means Committee, the rules-maker on trade in the House of Representatives. That’s a smart move — a necessary step in making Canada’s case to Congress and the states, as well as to the Trump administration.
Members of Congress know exactly how many jobs in their districts depend on exports to Canada: nine million. And two-thirds of U.S. states call Canada their biggest customer.
Trudeau might politely remind Trump of that, but the prime minister’s real objective is to get a sense of where Trump is coming from on NAFTA, and where he wants to go. Never mind the trash talk on Twitter about “terminating” NAFTA “at some point.” What are Trump’s real bottom lines?
Trudeau’s significant interpersonal skills have enabled a surprisingly positive relationship with Trump since their first White House meeting in February, and subsequent encounters during the NATO, G7 and G20 summits in Europe. Trudeau also had the presence of mind to call Trump and offer Canada’s help and best wishes in the wake of Hurricane Harvey in Texas.
Team Trump has made some big asks on rules of origin in the auto industry, which currently require 62.5 per cent North American content in cars and light trucks. The Canadian Press has reported that the Americans this week will demand 50 per cent U.S. content and 85 per cent North American content in vehicle assembly.
That benchmark would be challenging to meet — not only for Canada and Mexico but for the highly integrated North American auto and parts industry itself, which sends cars across the borders six or seven times during assembly. CP’s Joan Bryden spoke to Flavio Volpe of the Canadian Automotive Parts Manufacturers Association, who noted that “studies have found Canadian-produced vehicles already contain 63 per cent American content, while those produced in Mexico contain 40 per cent.” And a research note from Scotiabank Economics puts current North American content at 75 per cent.
If we’re already at 63 per cent U.S. content in Canadian assembly lines, Trump’s 50 per cent American ask might be acceptable to us, as would 75 per cent North American content (though not 85 per cent). That would give Trump bragging rights in the automotive and steel states of Michigan, Ohio and Pennsylvania — the three swing states that put him in the White House. After campaigning against NAFTA as “the worst trade deal ever,” Trump desperately needs a couple of wins in re-negotiating it.
But the Americans are also behaving boorishly on a number of stand-alone trade issues, notably aerospace and softwood lumber.
The U.S. Department of Commerce has slapped 300 per cent preliminary duties on Bombardier’s CSeries aircraft. Boeing, in its complaint against Bombardier, asked for only 80 per cent. In its first ruling, the Commerce Department hit the CSeries with a 220 per cent countervailing duty because the Quebec government took a 49.5 per cent interest in the project and Ottawa has made a $370 million repayable loan.
Adding insult to injury, the Commerce Department ruled that Bombardier dumped the price on its sale of up to 125 CSeries to Delta Airlines. Boeing wasn’t even bidding against Bombardier for the Delta deal and — except for the Boeing 737 — doesn’t even make single-aisle aircraft any more. But it doesn’t like foreigners invading American airspace, as Airbus did decades ago.
Boeing is bringing corporate hypocrisy to a new low. The U.S. Export-Import Bank is known as “Boeing’s Bank” because it receives about 40 per cent of the bank’s grants to subsidize sales to foreign airlines. And on the R&D side of the business, Boeing has for generations been the recipient of Pentagon largesse in developing military aircraft — like the 18 Super Hornets that Ottawa will not be buying for $6 billion as replacements for CF-18s as long as Boeing is trying to put Bombardier out of business.
And the CSeries isn’t just being built in Canada. Bombardier’s Belfast plant is the largest employer in Northern Ireland, and British Prime Minister Theresa May needs the support of 10 Northern Irish Unionist MPs to keep her minority Conservative government in office.
Trudeau also may wish to point out to Trump that Bombardier has an annual U.S. payroll of $2.4 billion, employing nearly 23,000 people in 10 states, including Learjet in Kansas and business jet service centres in several states.
On softwood lumber, the Department of Commerce put a 27 per cent preliminary countervail and dumping duty on Canadian imports in the spring. This is the latest eruption of a decades-old American grievance — that stumpage fees on Crown-owned Canadian forests constitute government subsidies of softwood exports to the U.S. Driven by the U.S. Lumber Coalition, the U.S. has been litigating on softwood for decades … and it keeps losing one case after another.
Softwood should not be an irritant in the middle of the NAFTA talks. There’s a do-able deal here: The Americans lift the preliminary duties in return for Canada accepting a cap on U.S. market share a few points below the 34 per cent in the last softwood lumber agreement, which expired in 2015. Call it 30 per cent — about where we are now, with demand ramping up to rebuild in Texas, Florida and Puerto Rico following the hurricanes.
Meantime, softwood might give Trudeau the opportunity to remind Trump that this is precisely the sort of situation the independent dispute settlement mechanism in Chapter 19 of NAFTA, carried over from the original Canada-U.S. FTA of 1987, was designed for. Thirty years ago last week, it was the deal-breaker for Brian Mulroney. So it is today for Justin Trudeau.
It’s not personal, Donald. It’s business. It’s the Canadian national interest; defending it is Trudeau’s job. Have a good meeting.
The views, opinions and positions expressed by all iPolitics columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of iPolitics.
DEREK H. BURNEY AND FEN OSLER HAMPSON
SPECIAL TO THE GLOBE AND MAIL
October 10, 2017
Derek H. Burney was Canada’s ambassador to the United States from 1989-1993. He was directly involved in concluding negotiations of the free-trade agreement with the United States. Fen Osler Hampson is Chancellor’s Professor at Carleton University and the author of the forthcoming book Master of Persuasion: Brian Mulroney’s Global Legacy.
Prime Minister Justin Trudeau’s two-day trip to Washington comes none too soon. Canada is being whipsawed by Donald Trump’s administration on many fronts. Relations are in a deep dive as Canada gets hit by punitive measures on softwood lumber (initiated by the Obama administration) and, more recently, by the outlandishly harsh tactics by the Trump administration against Bombardier, Canada’s aerospace giant, amid allegations of unfair subsidies.
A thickening fog is now enveloping the North American free-trade agreement, a cornerstone of Canadian prosperity, as talks bog down over extreme U.S. demands on procurement, content rules for autos and dispute arbitration. The next round of NAFTA talks begins in Washington on Wednesday, so the Prime Minister’s visit is timely and necessary.
In fact, despite all the American yammering about trade “deficits,” and the initially tough rhetoric directed at China, Japan and Germany, each of which have much larger trade deficits than Canada (where the United States is actually running a modest surplus) or Mexico, the only country really being hit with punitive trade measures is Canada.
Direct contact between the two leaders is the only way to clarify objectives and identify the critical ingredients for political and economic success.
Mr. Trudeau is Canada’s most powerful card. Only he can make a deal with the biggest wild card, President Trump himself, whose motives other than “make America great again” remain unclear.
The Prime Minister has assiduously courted the American President from his first day in office and from all reports has a good personal rapport with Mr. Trump. With all the turbulence in Washington, he and his officials have chosen their words carefully, displaying discipline, tact and self-restraint.
But the Prime Minister is going to have to use more than his charm when he meets with the U.S. President. He may need his boxing gloves, too.
His first challenge is to find out what Mr. Trump’s view is of the political and economic ingredients of a successful negotiation. Mr. Trump’s repeated insinuation that NAFTA is “the worst trade deal ever” raises suspicion about his real intent. The Prime Minister will have to probe his true motives – concluding a mutually satisfactory deal in revising NAFTA or abrogation.
If the President wants a deal, the Prime Minister must nail down a common understanding with Mr. Trump about what constitutes “success.” That includes being clear to the President about Canadian objectives and what a “win” means for us, for example, better, more certain market access.
But Mr. Trudeau should also be firm with Mr. Trump about what demands will be show-stoppers. He should make it clear that we do not naively believe that any agreement is better than none. Mr. Trudeau should resist any pressure to make unilateral concessions while signalling that he reserves the right to say, “No thanks.” Given the propensity for protectionist, U.S. trade “remedy” measures, the dispute-settlement mechanism is more vital than ever and should be a “show stopper.”
The Prime Minister has a strong hand. There is a presidential election in Mexico next year and Mr. Trump’s failure to secure a new deal will have a negative impact on Republicans in the 2018 congressional elections. If Mr. Trump decides unilaterally to abrogate NAFTA, unscrambling the NAFTA omelette will require congressional approval as well as time-consuming legislative change, which will be much harder if the Democrats win either or both houses.
As demonstrated more than two decades ago in both the negotiation of the Canada-U.S. free-trade agreement (FTA) and NAFTA, success depends upon deep political engagement and linkage at the top leadership level. On the FTA, for example, when negotiations were deadlocked, it took direct intervention by former prime minister Brian Mulroney with former president Ronald Reagan to break the impasse. Mr. Mulroney did the same with former president George H.W. Bush in 1990 when the Americans tried to shut Canada out of NAFTA negotiations with Mexico. North America’s leaders then had a common pro-trade vision. That is not the case today and represents the biggest obstacle to success.
Mr. Trudeau’s message when he goes to the White House should be friendly, but also prudently calculated to impress upon Mr. Trump that it takes two to tango and, in this case, three to make a deal.
ADRIAN MORROW AND BARRIE MCKENNA
WASHINGTON/OTTAWA — The Globe and Mail
Published Friday, Oct. 06, 2017 3:47PM EDT
The top American business lobby group is calling on the Trump administration to back off its “highly dangerous” demands in the renegotiation of the North American free-trade agreement with Canada and Mexico.
The U.S. Chamber of Commerce fired a stunning shot across the administration’s bow on Friday, arguing that President Donald Trump’s tough demands, including for a U.S. content requirement on cars and trucks made in the NAFTA zone, risk destroying the trade pact and throwing hundreds of thousands of Americans out of work.
“We see these proposals as highly dangerous,” John Murphy, the chamber’s senior vice-president for international policy, told a roundtable with reporters at the organization’s Washington offices. “These proposals, if adopted, will do harm, most likely leading to a failed negotiation that we just can’t afford.”
The stark warning comes ahead of the fourth round of NAFTA talks, next week in the Washington suburb of Arlington, Va., when the United States is expected to present some of its toughest proposals to the other two countries.
Prime Minister Justin Trudeau is also meeting with Mr. Trump at the White House that day, and hunkering down with the powerful House of Representatives ways and means committee.
Mr. Murphy said the chamber is particularly alarmed by the administration’s demands for increased barriers to Canadian and Mexican companies bidding on American government contracts; a sunset clause that would automatically terminate NAFTA in five years unless all three countries reached an agreement to keep it; and a major toughening of the so-called rules of origin on autos.
A source with knowledge of the rules-of-origin demands said the U.S. is mulling a proposal that 50 per cent of the value of any auto made in the NAFTA zone come from the United States in order to be shipped tariff-free between the three countries.
The proposal would also boost the required amount of North American content to 85 per cent from 62.5 per cent, the source said.
Mr. Murphy contended such policies are not only bad for business but could unravel the talks because Canada and Mexico would not agree to them. Mr. Trump has repeatedly threatened to tear up NAFTA if he cannot get the other countries to accept major changes.
“Withdrawing from NAFTA would immediately blow up in the face of the administration,” Mr. Murphy said, pointing out that Republican states in the U.S. Midwest rely heavily on trade with Mexico and Canada. “Those who would feel the pain most thoroughly and immediately are in states that voted for the President, and they would know who brought this about.”
But one powerful congressman said Canada is responsible for thwarting progress in negotiations by dragging its feet. Michael Conaway, a Texas Republican and chairman of the House agriculture committee, said Canada must take “meaningful” steps to open its protected dairy and poultry markets to foreign imports as well as address U.S. complaints involving wheat, potatoes and lumber.
“Our side is real serious, and we need the Canadians to be serious as well,” Mr. Conaway said in an interview Friday in Ottawa, where he is leading a delegation of farm-state members of Congress pushing for a speedy NAFTA renegotiation. “One of the reasons why we’re up here … is to try to communicate a sense of urgency to our Canadian counterparts.”
He rejected the notion that the Trump administration’s hardline demands are jeopardizing the talks.
“We are all going to get our feelings hurt. But the deal is too important to let that squirrel it,” said Mr. Conaway, who is slated to meet Canadian Agriculture Minister Lawrence MacAulay on Sunday. “If Canada doesn’t want to negotiate and change anything, our President has shown himself to be a pretty good negotiator.”
While U.S. business has long been largely aligned with Canada and Mexico in wanting to preserve as much of NAFTA’s market access as possible, it has so far mostly chosen to press the administration behind the scenes, making Mr. Murphy’s blunt public warning extraordinary.
The auto industry fears tougher rules of origin would be too onerous a burden on manufacturers, putting them at a cost disadvantage compared with their overseas competition. Matt Blunt, president of the American Automotive Policy Council, said in a statement Friday that he was concerned the administration’s approach “would be harmful to the short- and long-term competitiveness of the North American auto industry.”
Geronimo Gutierrez, Mexico’s ambassador to the U.S., reiterated that his country was “prepared” for the possibility the U.S. will pull out of NAFTA. “Mexico’s position will continue to be serious and constructive, but we have also been very clear about the fact that we [would] rather leave the negotiating table than accepting a harmful deal,” he told The Globe and Mail.
Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, suggested the response of U.S. business to Mr. Trump’s proposals could ultimately rein them in. “The most important consideration is what the feedback will be from the domestic industry in the U.S., and how that will effect what is tabled this week.”
But Mr. Murphy said Friday that companies’ warnings have often seemed to fall on deaf ears. “The expert analysis and the view of industry have too often been just brushed aside,” he said.
JOAN BRYDEN / THE CANADIAN PRESS
OCTOBER 6, 2017 03:17 PM
OTTAWA — Pessimism about the fate of NAFTA is mounting amid dismay that the U.S. wants to impose stringent new American content requirements on vehicles that are allowed duty-free movement across North America.
The United States is set to propose that cars and trucks must have at least 85 per cent North American content and at least 50 per cent specifically American content to qualify for duty-free status, according to a report by Inside U.S. Trade.
The rules of origin proposal is expected to be tabled next week in Washington during the fourth round of negotiations to rewrite the North American Free Trade Agreement.
Canada and Mexico have, from the outset of talks, been adamant that they won’t agree to a specific American content requirement that would bolster the U.S. industry at the expense of automobile and auto parts manufacturers in the other two countries.
And Canada’s automotive industry agrees.
“You can’t have protectionism within a free trade agreement. It’s an oxymoron,” Flavio Volpe, president of the Automotive Parts Manufacturers Association, said Friday.
Studies have found that Canadian-produced vehicles already contain 63 per cent American content, while those produced in Mexico contain 40 per cent, Volpe noted. But he said casting an American content requirement in stone would handcuff the industry’s ability to pivot to suppliers in other countries — including Canada and Mexico — should they be able to offer a better product at a better price.
“If the U.S. becomes less competitive and you’re tied to doing it in the U.S., then you are less competitive,” Volpe said, adding that in the meantime the industry’s global competitors, like China, will be “eating your lunch.”
Even without a specific American content requirement, the reported proposal to hike the North American content requirement to 85 per cent — up from the current 62.5 per cent — is stoking fears in all three countries that their fully integrated supply chain would be disrupted, manufacturing costs would skyrocket and the North American automotive industry would be left unable to compete with auto makers in Europe and Asia.
“We are such a highly integrated industry, I think numbers of this nature would be highly problematic … and it would really tend to undermine our competitiveness as an industry within North America, let alone Canada,” said Mark Nantais, president of the Canadian Vehicle Manufacturers Association.
Matt Blunt, president of the American Automotive Policy Council and former Missouri governor, echoed that concern.
“We share the goals of the (Trump) administration to strengthen the U.S. manufacturing sector, grow the U.S. economy and American jobs,” he said in an email statement to The Canadian Press.
“We, however, are concerned the approach they are taking would be counterproductive to achieving those shared goals, including significant changes to rules of origin that would be harmful to the short and long-term competitiveness of the North American auto industry.”
Unifor president Jerry Dias, whose union represents Canadian auto workers, said he sympathizes with what the U.S. is trying to do: stop the exodus of manufacturing jobs, particularly in the auto industry, to low-wage Mexico.
But he said imposing stringent North American and American content requirements, without simultaneously raising the 2.5 per cent tariff on vehicles imported to the U.S. outside NAFTA, would backfire. He predicted auto makers would forgo their duty-free status under NAFTA, move their operations to Mexico and pay the tariff.
“Ultimately, unless they deal with the 2.5 per cent tariff, it’s all worthless.”
As for a specific American content requirement, Dias said that simply “won’t fly.”
“For the U.S. to think that Canada is somehow just going to be bullied and is going to roll over and not protect their key industries while the U.S. is trying to do the same makes no sense,” he said, noting that autos remain Canada’s top export.
The protectionist line on auto rules of origin comes after the U.S. tabled an equally unpalatable proposal on government procurement at the third round of negotiations last week in Ottawa. The U.S. is looking to severely restrict the ability of Canadian and Mexican companies to win contracts on government-funded infrastructure projects in the U.S.
The mood among stakeholders during the third round was glum but Dan Ujczo, an Ohio-based trade lawyer with clients in both Canada and the U.S., said it’s about 10 times worse now, with most expecting the talks to end in failure.
While the political leaders still talk about creating a “win-win-win” for all three countries, Ujczo said the only ‘Ws’ on stakeholders’ minds during the fourth round will be “who will withdraw” and “when will withdrawal” occur.
A senior Canadian government official, not authorized to speak publicly on the matter, said Canadian negotiators will keep meeting and talking, even if it means repeatedly rejecting hardline American proposals.
Adam Austen, a spokesman for Foreign Affairs Minister Chrystia Freeland, declined to comment on the auto content requirement issue because an American proposal has still not been put on the table.
“We will continue to work for a good deal, but not just any deal. We will continue to make clear, reasoned arguments based in fact.”
CONTRIBUTED TO THE GLOBE AND MAIL
October 3, 2017
Flavio Volpe is president of the Automotive Parts Manufacturers’ Association of Canada.
Trade negotiations are always a mix of politics and commercial reality. Those affected in the negotiations sometimes overstate their potential injury. In the end, negotiators usually back up their rhetoric with statistics as a means to identify their national interests and focus on the priorities identified by their respective governments.
Recently, U.S. Commerce Secretary Wilbur Ross spoke about the relationship between the Canadian, U.S. and Mexican automotive sectors using arguments focused on trade deficits, which he pointed out were not in the United States’ favour. Lately, to some, this is an important metric in judging bilateral and trilateral relationships. Others have countered this new argument by pointing out that those deficits are offset by a lot of embedded U.S. content coming back the other way. Unbowed, Mr. Ross’s department produced a new report that argues that the United States is getting a continuously diminishing portion of this coming from the other two countries since the signing of the North American free-trade agreement.
The data, which he noted ended in 2011, was presented as the key metric in establishing why NAFTA in his mind was bad for the U.S. automotive industry. The only problem with the argument was that the figures were wrong.
Canadian-based manufacturers know that a tremendous amount of content in the goods we produce originates in the United States. Mr. Ross quoted a figure of 15 per cent U.S. content in Canadian-manufactured automotive goods, down from 21 per cent at the signing of NAFTA. However, a recent Scotiabank Economics report put that figure at almost 60 per cent. Furthermore, since the restructuring of the industry after the global crisis in 2010, auto makers operating in North America have increasingly centralized their purchasing functions in the United States. The result is that, since 2011, Canadian suppliers have faced increasing pressure to supply their customers from their U.S. footprints or face additional scrutiny to demonstrate the competitiveness of their Canadian-based manufacturing facilities.
The pressure to supply from the United States has undoubtedly resulted in an increase in U.S. content in Canadian goods since 2011. The picture is equally accretive to the U.S.-content level in goods sourced from Mexico. According to Michigan’s Center for Automotive Research, U.S.-content in Mexican manufactured automotive goods has risen from 5 per cent before NAFTA to 40 per cent in 2014. In both cases, the U.S.-based automotive sector has increased its share of the pie, and that pie is bigger than the way the U.S. Commerce Department reports it.
In 1999, the peak year for automotive production in Canada, our industry manufactured 3.05 million vehicles while the United States produced 13 million. Ensuing years have witnessed an incredible globalization of automotive origin, design and manufacturing that has featured the dramatic rise of China, South Korea and Eastern Europe. Canada has sought to hold its own, but by 2016, that annual production figure had declined by 29 per cent. Over that same period, the U.S. production number has stayed relatively stable with a decrease of less than 8 per cent. Far from taking business away from U.S. industry, the Canadian automotive industry has looked at the relative American success with envy.
The North American automotive sector has benefited from the rise of skills, infrastructure and commercial activity in Mexico. This has resulted in a third global automotive manufacturing power in the NAFTA region. The emergence of Mexico has allowed for U.S. and Canadian manufacturers to count on Mexico’s competitiveness as their lower-cost jurisdiction to help bolster their fortunes against the rise of other global threats that boast such a partner. With Canadian firms operating 120 factories with more than 43,000 employees in Mexico, the future of our automotive industry is increasingly as interwoven with that country’s as it is with the United States.
As we move through the coming rounds of NAFTA negotiations, it is very important that all parties seek accurate counsel and up-to-date research to best serve the interests of the people and industries they represent. Canada, the United States and Mexico make great cars together. The industry in all three countries have supported this argument by making investments that know no borders and have strengthened their common value proposition against common external threats. It serves no one in any of the three countries to ignore the facts as we chart the next generation of success and prosperity. We are stronger together.
DOUG SCHMIDT, WINDSOR STAR
Published September 28th, 2017
Despite few details being made public so far, domestic auto sector players and observers appear much more upbeat on the NAFTA renegotiation effort that wrapped up its third round of talks in Ottawa Wednesday.
“We’re not worried,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.
That was the message he and a handful of other automotive sector executives delivered at a meeting with Foreign Affairs Minister Chrystia Freeland and Innovation, Science and Economic Development Minister Navdeep Bains on the eve of the latest round of NAFTA talks.
Following a period of auto industry nervousness when freshly elected U.S. President Donald Trump vowed to tear up the trilateral free-trade agreement, Canada’s auto sector and its politicians appear to be satisfied now that the new U.S. government at least understands the importance of cross-border integration within North America’s most important manufacturing sector.
The Trump administration recognizes that “America First hurts American interests and American corporate investments,” said Volpe, adding the types of big investments made by the automotive sector in Canada, the U.S. and Mexico are both expensive and meant for the long term.
Shortly after Trump’s inauguration, Volpe said members of his association, an important part of which is centred in the Windsor area, were “nervous” about the sudden uncertainty within “the world’s most integrated supply chain.”
The feeling now? “We’re slightly positive,” said Volpe.
Bains said he’s been getting positive feedback from industry sources. Piggybacking off a meeting in Turin, Italy, this week with his counterparts among the G7 group of economically powerful nations, the minister said he met with automotive company executives, including Fiat Chrysler Automobiles CEO Sergio Marchionne.
With the new CETA trade deal between Canada and the European Union, as well as a more “inward-looking” political approach by Trump in the U.S., Bains said the Liberals are touting Canada’s openness and increased opportunities for global investment.
“While others are building walls, we’re opening doors,” said Bains. He said his message to the G7 and to industry leaders is that Canada’s promotion of diversity, its immigration strategy focused on newcomers with skills and its emphasis on “strategic innovation,” all present opportunities for global investors.
“There’s probably room for optimism,” said Tony Faria of the Office of Automotive and Vehicle Research at the University of Windsor’s Odette School of Business.
“In respect to auto investment, the conversations were very positive,” said Bains.
The close to $2.6 billion in new investment announced recently by the Detroit Three auto companies “speaks volumes to how important Canada is — that bodes well for the sector,” he added. Marchionne — who, like Bains, earned an MBA degree at the University of Windsor — “spoke very positively about Canada,” the minister said.
“That’s always been an advantage for Canada … qualified, skilled people have always been welcome here, but not always so in the United States, and especially under Trump,” said Faria.
Windsor West MP Brian Masse, the NDP critic in the innovation, science and technology portfolio, agreed the current political climate in the U.S. provides Canada with a competitive edge and presents “a great opportunity to seize upon our diversity.”
But Masse, who accompanied Bains to this week’s G7 conference, described as “ghastly frightening” the fact Canada has been unable in recent years to lure a new automotive assembly plant. As for the billions in new automotive assembly plant investments touted by Bains, Masse said much of that was the result of Unifor’s contract demands at the bargaining tables.
At a time of record vehicle sales in Canada, “it’s been a pretty lopsided score,” said Masse, comparing domestic auto investment to that in the other two NAFTA countries.
While “still a good place for the parts industry,” Faria said Canada is “not top-of-mind” for any auto company looking for a place to build a new assembly plant. The country remains strong in the multibillion-dollar auto parts sector, but he said the trend that saw nine of the last 10 North American automobile assembly plants going to Mexico — and the 10th to the U.S. — is unlikely to change.
“There’s not much clarity about what’s going on,” Matt Marchand, president and CEO of the Windsor-Essex Regional Chamber of Commerce, said of the NAFTA talks that resume in Washington in two weeks.
Even after several rounds of talks, Canada’s negotiators were still waiting this week for their American counterparts to present more detailed positions about what it is they’re after, for example on the rules-of-origin requirements for automobiles.
“We don’t know if that’s a tactic (of the Americans) or a strategy,” said Marchand.
When it comes to the parts sector, Volpe said Windsor and Essex County’s interests are “acutely tied to the fortunes of Detroit and Michigan,” and that’s still the centre of the North American automobile industry.
“There’s always a risk (in international trade talks) … but the last thing you want to do is hurt your own,” he said of the Trump team’s likely auto strategy in the current negotiations.
September 27th, 2017
Author: Francesco Veronesi
TORONTO – Il settore automobilistico canadese è in fibrillazione in attesa delle proposte americane nel negoziato sul Nafta. Ad animare le discussioni dietro le quinte tra gli addetti ai lavori è il tema del “local content”, la percentuale del materiale usato nella fase di produzione necessaria per far sì che un’auto sia considerata prodotta in Nord America e non debba quindi pagare i dazi doganali. Per ora rimane in vigore la regola del 62.5 per cento per le automobili e il 60 per cento per la componentistica auto, ma gli Stati Uniti – come avevano già fatto durante i negoziati della Trans Pacific Partnership, accordo commerciale poi accantonato dal presidente Donald Trump – sono in pressing per dare un giro di vite e far salire la percentuale. Ma non solo. Tra le ipotesi al vaglio c’è anche quella – caldeggiata dall’inquilino della Casa Bianca – di inserire una sorta di sotto clausola che fissi una quota minima di materiale prodotto non solo nei Paesi Nafta, ma addirittura negli Stati Uniti. E questo – è la tesi dell’amministrazione statunitense – per garantire posti di lavoro negli States ed evitare che la delocalizzazione della produzione porti le aziende a spostare i propri stabilimenti in Messico e in Canada. Per ora è solo un’ipotesi, che “non è stata ancora formalizzata” rivela al Corriere Canadese Flavio Volpe, presidente dell’Automotive Parts Manufacturers’ Association (APMA). Ma se gli Usa decidessero di percorrere quella strada, sarebbe un evidente passo indietro nel processo di integrazione delle economie dei Paesi Nafta. “Non possiamo più parlare di singolo interesse statale – aggiunge il presidente dell’AMPA – ma di interesse continentale”.
E lo dimostra la presenza di aziende che decidono di investire in stabilimenti e fabbriche negli altri Paesi Nafta. Il settore della componentistica auto canadese, ad esempio, dà lavoro a più di 42mila persone negli Stati Uniti e a oltre 43mila lavoratori in Messico. Anche la linea dei rifornimenti è prettamente nordamericano, con le grandi compagnie automobilistiche – Ford, General Motors e Chrysler – che fanno affidamento sulla rete della componentistica su scala continentale. Se si decidesse di inserire una clausola sul “content” americano, si andrebbe a sconvolgere completamente l’equilibrio raggiunto in questi anni in un comparto produttivo chiave per le economie dei tre Paesi che hanno dato vita al Nafta. Il governo canadese, dal canto suo, è pronto a dare battaglia su questo fronte: per adesso è in attesa che i negoziatori Usa presentino la proposta formale.
September 27th – Tom LaSorda, Former CEO of Chrysler and Flavio Volpe, President of the Automotive Parts Manufacturers Association (APMA) dig into NAFTA’s Rules of Origin and outlook for the auto part marketplace.
Click here for video.
The U.S. has stated one of its key objectives is to raise the amount of North American content in automotive vehicles made and sold within the North American free trade zone, but has yet to say what number it would like to see. It also wants changes in agriculture and “rules of origin.”
By TONDA MACCHARLES
Ottawa Bureau reporter
Sat., Sept. 23, 2017
OTTAWA—The head of Canada’s autoworkers union predicted NAFTA renegotiation talks would end in failure after U.S. negotiators arrived Saturday for Round 3 without setting out precise demands for how exactly the Trump administration wants to boost the made-in-America manufacturing sector.
“I’m convinced that the U.S. doesn’t want a deal, not before Christmas,” Unifor president Jerry Dias told the Star. “It is impossible … they’re too far apart” more than a month and a half after negotiators first sat down for in-depth discussions in Washington, he said.
Steve Verheul, the chief Canadian negotiator, said it was too early to say whether significant progress overall could be made in the Ottawa round, a comment echoed by Mexico’s chief negotiator, Kenneth Smith Ramos. “We’re just starting,” Ramos told reporters. “I have no comments on the actual meetings.”
Dias predicted the deal would come together in 2018, closer to the U.S. congressional mid-term elections in November. Meanwhile, he said, the Trump administration talks tough for show, to curry political popularity, but is unlikely to get Canada or, for that matter, Mexico to “capitulate.”
Canada didn’t put higher labour standards (which would also affect Mexico as well as so-called “right-to-work” states that curb collective bargaining rights in the U.S.) on the table “just to fill time,” Dias said. And Mexico is determined not to change its rock-bottom labour and environmental standards, which underpin its low-wage non-unionized work force, he said, “so we are heading on a philosophical collision course.”
Trade lawyer Lawrence Herman disagreed that the U.S. was deliberately stalling. “These are very complex issues,” he said, and the U.S. Trade Representatives office is obliged to consult with the U.S. Congress and its “complex constituencies” along the way.
“The Americans have to show that they put, from their perspective, a serious proposition on the table on every issue, they can’t play games … I would think it’s more a question of sorting out the details of what they want to ask and ensuring they’ve lined up all the various constituencies in Washington.”
Regardless, Herman, one of Canada’s top experts on international trade, also sounded a pessimistic note about the prospect for success, given the “egregious” comments by Donald Trump about NAFTA to date. “He’s basically saying we’re going to walk if you don’t agree to our position. The other two parties are saying, ‘OK, what’s your position?’”
“At some point,” Herman said, “the Americans will put some extremely tough demands responding to an America-First agenda and that’s going to cause significant difficulty in completing these negotiations.”
“I think these will become extremely nasty and difficult negotiations as things continue.
Besides the lack of exact demands about the manufacturing sector, the U.S. team has also not presented specific demands regarding Canada’s supply-managed agricultural sectors — dairy and poultry — despite those also being high on the U.S. hit list for a new NAFTA, said Gary Stordy, a spokesperson for the Canadian Pork Council. Agriculture is on the agenda for detailed talks Tuesday and Wednesday.
Canadian government officials downplayed the significance of the lack of clarification from the U.S. side. They said with four more days remaining, there was time left for the U.S. to provide more specifics.
Verheul told reporters Saturday he did not expect the American team to lay out specific text for new “rules of origin” for the auto sector during this round. And Verheul said he was “doubtful” the three-way negotiations will close or sign off on a final version for a chapter on the environment either, despite a U.S. official’s earlier suggestion that “significant progress” had been made and could be finalized in Ottawa.
Those are two of the contentious issues on the agenda at the Ottawa round. A copy of the schedule of negotiations, obtained by the Star, shows a range of Canada’s top priorities will be dealt with this week, including digital trade, environment, labour and gender.
But there is no negotiating table devoted to another Canadian objective: a chapter to recognize Indigenous rights within a new trade agreement.
And two of the big U.S. priorities are up for detailed discussion only later in this round. Negotiators will do a deep dive on “rules of origin” and “trade remedies and dispute settlement” only on Tuesday and Wednesday.
Rules of origin for the auto sector — NAFTA now requires 62.5 per cent of autos and auto parts to be made in North America for tariff-free status — “will be a subject for discussion, but we’re not expecting to see anything radically new at this point,” Verheul said.
U.S. Commerce Secretary Wilbur Ross wrote an opinion column Friday in the Washington Post saying the top priority was boosting American jobs in the auto sector.
“The declining U.S. share of content in imports from Canada and Mexico puts those jobs at risk. The United States accounts for an overwhelming share of the total NAFTA auto market today — 83 percent, in fact — yet American workers are not reaping the benefits of that purchasing power,” Ross wrote.
“If we don’t fix the rules of origin, negotiations on the rest of the agreement will fail to meaningfully shift the trade imbalance. Our nation’s ballooning trade deficit has gutted American manufacturing, killed jobs and sapped our wealth. That is going to change under President Trump, and rules of origin are just the beginning.”
Flavio Volpe, of the Canadian Auto Parts Manufacturers Association, disagreed with Dias’s assessment, saying, “The longer they take the better we feel about it.” He said the U.S. Trade Representative’s office is working hard with American industry to understand the dynamics of tougher U.S. content rules, and Volpe said it will realize its own workers would suffer from them.
Dias is not a fan of NAFTA and wouldn’t shed crocodile tears over its demise because he believes it has favoured Mexico to the detriment of Canadian and U.S. autoworkers. He suggests a Canada-U.S. free trade agreement would be the default backstop if NAFTA fails, and that would provide better protection for workers.
Nevertheless, Unifor is a key stakeholder and Dias is in close consultation with the Canadian government as talks proceed.
Dias said Canadians expected more as this round got underway.
“From what I understand they (the U.S.) were supposed to drop the entire text this time around,” Dias said. “They haven’t dropped one piece of paper yet.”
“They’ll want a deal, but not before Christmas, just leading up to the (congressional) elections, so they’re going to show they were tough, they cancelled NAFTA, they walked away, and that’s all completely loaded in the U.S.’s favour. So this thing is going nowhere and if I’m the Canadian government, I’d just relax, there’s no need bargaining with themselves.”
For now, the negotiating teams are racing through talks on an accelerated schedule. Usually weeks or months can pass between rounds of international trade negotiations.
In the case of NAFTA, there are just two or three weeks scheduled between meetings.
Mexico’s lead negotiator, Ramos, said he expects successive NAFTA negotiation rounds to go ahead as scheduled despite devastating earthquakes that have hit Mexico City.
“Unfortunately, it’s been a traumatic experience for the country, but we haven’t had any impact in terms of the negotiations,” Ramos said. “Fortunately all of the negotiating teams and their families are okay and we’re working on that basis.”
“We have our schedule from now till the end of the year and that will be maintained for now.”
Ramos was part of Mexico’s negotiating team on the original NAFTA agreement.
Emily Davis, a spokesperson for the U.S. Trade Representative’s office, said “significant progress” has already been made in the areas of the environment, small and medium-size enterprise and competition.
“How many chapters will actually close is to be determined but there are areas where significant progress has been made and so that’s part of the goal of this round,” Davis said.
Here are the topics at the negotiating table at Round 3 in Ottawa.
Saturday: Customs, sanitary and phytosanitary measures, cross border trade in services, government procurement, digital trade, anti-corruption, environment, gender, and small and medium size enterprise, financial services
Sunday: customs, textiles, sanitary and phytosanitary measures, cross border trade in services, government procurement, digital trade, environment, state-owned enterprises, financial services, good regulatory practices, legal and institutional issues
Monday: textiles, goods, competition, telecoms, state owned enterprise, temporary entry rules, environment, good regulatory practices, technical barriers to trade, legal and institutional issues
Tuesday: rules of origin, goods, agriculture, energy, investment, intellectual property, telecoms, temporary entry, labour, technical barriers to trade
Wednesday: rules of origin, agriculture, investment, intellectual property, trade remedies and dispute settlement, labour, sectoral annexes
By David Ljunggren & Adriana Barrera
September 23, 2017
OTTAWA (Reuters) – Talks to update the North American Free Trade Agreement intensified on Saturday although U.S. negotiators looked set to once again withhold proposals for one of the Trump administration’s most challenging issues.
Teams from the United States, Mexico and Canada kicked off the third of seven planned rounds of discussions in Ottawa amid warnings from trade experts that time was quickly running out to seal a deal by the end of the year as planned.
One key issue is the U.S. desire to strengthen rules of origin for autos, which dictate how much of a vehicle’s components must originate from within North America to qualify for tax free status.
The American side did not mention a specific goal in the first two rounds and Canada’s chief NAFTA negotiator on Saturday said he did not think the United States would provide more details during the Ottawa round.
“We’re not expecting that, no,” Steve Verheul told reporters, predicting the pace of the talks would nonetheless quicken.
According to a schedule of the talks obtained by Reuters, rules of origin will be discussed on Tuesday and Wednesday.
U.S. President Donald Trump wants more U.S. content in autos, citing trade deficits of $64 billion with Mexico and $11 billion with Canada. Trump, who says NAFTA is weighted against his country, has threatened to walk away from the agreement.
Flavio Volpe, president of the Canadian Automotive Parts Manufacturers’ Association, said late on Friday he felt it was too early for detailed rule of origin proposals given that U.S. officials were still talking to the domestic industry.
“It’s fine for us if they take a little longer so we all understand what our interests are and we make the right deal. We don’t need an early deal,” he said.
U.S. chief negotiator John Melle said ahead of the talks that his team would introduce the difficult provisions in Ottawa talks that are due to last for five days.
Another tricky issue is labor, given complaints from U.S. and Canadian unions that Mexico’s low wages give it a manufacturing advantage.
The United States is also expected to present proposals on intellectual property and investment, sources with knowledge of discussions said. Other areas of disagreement include dispute settlement mechanisms.
Canadian and Mexican officials, as well as U.S. businesses, have already rejected a proposal by Washington to include a five-year sunset provision in the updated agreement, saying it added uncertainty to investment planning.
Additional reporting by Alastair Sharp in Toronto; Editing by Marguerita Choy and Franklin Paul.
Phil Levy , Forbes CONTRIBUTOR
On the eve of the third round of renegotiation talks for the North American Free Trade Agreement, Commerce Secretary Wilbur Ross upped his attacks on the deal. He still errs, but he does so in interesting ways. The data, and Ross’ arguments, highlight a core Trump administration confusion on trade: they are trying to comprehend a global trading landscape while blinkered by a focus on bilateralism.
First, the interesting new data. Sec. Ross, in the Washington Post, claims that a new report from his department vindicates NAFTA skeptics’ critiques. To Ross’ credit, the new data does present a more sophisticated look at trade flows between NAFTA countries (Canada, Mexico, and the United States) and the rest of the world. Rather than looking at the gross value of trade flows, the new report works with “value added” figures.
Depending on what argument one is trying to make, this can be a substantial improvement. To see why, imagine that the United States sends $4k of auto parts to Mexico, which then uses those parts to build a $10k vehicle that is exported back to the United States. In gross terms, the United States has imported $10k in this transaction; in value-added terms, only $6k.
Ross uses the new Commerce Department study to argue that there is less U.S. content in imports from NAFTA partners than we previously thought. Focusing on a single sector, he writes: “Hundreds of thousands of Americans go to work every day in the automobile manufacturing industry. The declining U.S. share of content in imports from Canada and Mexico puts those jobs at risk.” He takes the falling share of U.S. content in imports as an indictment of NAFTA’s provisions.
What can we actually glean from the data? The report covers the 1995-2011 time period and shows (Table 1) that the NAFTA share of value added in U.S. manufactured imports (not just autos) fell from 26.9% in 1995 to 22.1% in 2011. However, it is interesting to break that time period down. In the immediate aftermath of the 1994 NAFTA agreement, the NAFTA share rose; it climbed to 29.0% by 2000. The aforementioned drop came only after the turn of the century.
And here the plot thickens. That turning point was roughly when China joined the World Trade Organization – the start of a period that has become popularly known as the “China shock.” Could the declining NAFTA share be due to China grabbing market share? China goes from 4.2% in 2000 to 15.5% in 2011. That would more than explain the NAFTA share drop.
Here we get our first glimpse of the problems with a bilateral fixation in a multilateral world. China’s share did grow, but most of that net share increase appears to be China’s displacement of other Asian countries. From 2000 to 2011 East and Southeast Asia (including China) rose only from 32.4% to 34.7% as a share of U.S. manufactured imports.
The part of the world with the biggest net jump 2000-2011 was not East and Southeast Asia; not the European Union; not South and Central America. It was “Rest of World,” which climbed from 13.2% to 18.8%. To the extent we want to interpret this rise, the most likely explanation is that this reflects a world of ever greater integration and diversification – global supply chains.
Later breakdowns in the report seem to tell a similar story. The U.S. share of manufactured imports from Mexico falls from 1995-2011, but so does the Mexican share! The same is true for the U.S. and Canadian share of manufactured imports from Canada.
So we have interesting new data demonstrating what we already suspected – that manufacturers are distributing production globally to get the best quality they can for the lowest price.
As an aside, there is an intricate question here about “rules of origin” – how much North American content is required to secure NAFTA preferences. Note that the new data does not specify which goods came in under NAFTA preferences, so it is not especially informative in this regard.
Now, we come back to Sec. Ross’ policy arguments. He interprets the data as demonstrating NAFTA’s failure. As he puts it, “We cannot forget that the point of a free-trade agreement is to advantage those within the agreement — not to help outsiders.” There are two key errors here.
The first mistake is to assume that value added in manufacturing imports is a sufficient measure of the well-being of the United States, Mexico, and Canada. It is a slightly more sophisticated measure than bilateral trade balances, but still far from meaningful. There are careful studies about the overall effects of NAFTA; they generally find small positive effects. That’s unsurprising, since U.S. tariffs on Mexico and Canada pre-NAFTA averaged only 2.7 percent and these studies look at the effects of tariff changes.
The second mistake is the narrowness of the goal for NAFTA. In fact, two major U.S. objectives extended well beyond bilateral U.S.-Mexico trade flows (there was already a trade agreement between the U.S. and Canada). The United States wanted an economically-stable partner on its southern border, and it wanted the global propagation of rules that worked to its advantage. NAFTA achieved both.
In the wake of NAFTA, Mexico signed free trade agreements with Chile (1999), the European Union (2000), the European Free Trade Area (2001), Uruguay (2004), Japan (2005), Colombia (2011), Israel and Peru (separately, 2012), Central America (2013) and Panama (2015). Mexico was thus following a pattern set by the United States, which also pursued a series of trade deals over the same time span. This has turned Mexico into a viable manufacturing hub. It has helped achieve the U.S. goal of a stable southern partner. It also means, incidentally, that if the United States blocks imports, Mexico has options.
As to the propagation of favorable rules, the trade deals pursued by the United States and its partners did just that. This process was to culminate in the Trans-Pacific Partnership, until President Trump torpedoed U.S. participation. Mexico and the other 10 erstwhile TPP countries are proceeding without the United States.
Supporters of President Trump sometimes argue that he is playing 4-dimensional chess against more limited opponents. Sec. Ross’ latest arguments and data on trade show they are struggling to deal with even two dimensions. They are making bilateral policy in a multilateral world.
ROBERT FIFE , STEVEN CHASE , GREG KEENAN AND ADRIAN MORROW
September 22, 2017 – Globe and Mail
Commerce Secretary Wilbur Ross is warning that Washington will push for higher U.S. content in auto manufacturing as NAFTA renegotiations enter the third round in Ottawa.
Mr. Ross brandished a study on Friday that he commissioned, which said the share of U.S. manufacturing content in imports has dropped significantly since the North American free-trade agreement took effect in the 1990s. His contention goes to the heart of thorny trade talks surrounding what is known as rules of origin.
“If we don’t fix the rules of origin, negotiations on the rest of the agreement will fail to meaningfully shift the [U.S.] trade imbalance,” Mr. Ross wrote in a recent opinion piece in The Washington Post. “That is going to change under President [Donald] Trump, and rules of origin are just the beginning.”
The U.S. study was immediately refuted by Canadian auto-industry executives during a meeting with Foreign Affairs Minister Chrystia Freeland late Friday afternoon.
“The U.S. has fared better than Canada over the last 16 years,” Flavio Volpe, president of the Automotive Parts Manufacturers’ Association of Canada, told The Globe and Mail.
Canada-U.S. trade is effectively in balance with Canada posting a sizable deficit in auto parts and running a surplus in finished vehicles.
Auto-industry officials estimate that there is between 60 per cent and 70 per cent U.S. content in Canadian-assembled vehicles. U.S. content in Mexico-assembled vehicles is estimated at 40 per cent.
“Since 2011, the U.S. position vis-a-vis Canada has improved materially from numbers that are already wrong,” Mr. Volpe said.
Right now, NAFTA rules require that at least 62.5 per cent of a vehicle’s content must be made in North America to qualify for duty-free access between the United States, Canada and Mexico.
Jerry Dias, the powerful head of Unifor, which represents Canadian auto workers, and a member of Ms. Freeland’s NAFTA advisory council, said Mr. Ross has told him the demand for greater U.S. content is aimed more at Mexico than Canada.
“I met with [Ross] twice and each time we met we both agreed the problem was Mexico and he understands that,” Mr. Dias said, who noted that Mr. Ross is the owner of a U.S. auto-parts company. “He knows that the majority of the parts that go into a Canadian-built car, including steel, come from the United States.”
Mr. Ross’s study says U.S. content of manufactured goods imported from Canada dropped significantly – from 21 per cent to 15 per cent. U.S. content in goods imported from Mexico fell even more – from 26 per cent to 16 per cent.
His salvo was a key topic on Friday as the Foreign Affairs Minister sat down with her NAFTA advisory council of business and labour leaders, and with former prime minister Brian Mulroney and the team he assembled to negotiate the 1989 Canada-U.S. free-trade deal.
One senior Canadian official, who was not authorized to speak on the record, said Canada will take a “wait-and-see” attitude until U.S. negotiators actually put concrete proposals on the table with regard to rules of origin and other controversial topics, such as trade dispute-resolution mechanisms.
Canadian negotiators have been waiting since the first round of talks in August for the United States to submit the country’s negotiating demands. At the time, U.S. Trade Representative Robert Lighthizer, who will be in Ottawa on Wednesday for ministerial talks, said rules of origin, particularly on autos and auto parts, must require higher NAFTA content and substantial U.S. content.
There are reports that the Trump administration wants to raise the NAFTA content to more than 70 per cent and add a requirement that anywhere between 35 per cent and 50 per cent must be made specifically in the United States.
Canadian auto workers are supportive of higher North American content but they also want Ottawa to press for tougher labour laws in NAFTA to push up wages in Mexico.
“I told [Ross] I want it raised to 70. He said he wanted it raised higher,” Mr. Dias said. “I have no problem raising the rules of origin, but rules of origin in itself won’t fix the problem because if they relocate auto-parts plants from Europe and Asia, they will just go to Mexico because their minimum wage is 65 cents an hour. An average auto worker probably makes a little over $2 an hour. So rules of origin will just to go to Mexico unless we fix the Mexican problem.”
As negotiators sit down, a survey by the Angus Reid Institute shows that Canadians’ top priority in the talks is to ensure labour standards are equal across all three countries.
Mexican leaders have been defensive on tougher labour laws but the poll shows 69 per cent of Canadians believe they are necessary.
The poll also shows that 67 per cent of Canadians are strongly in favour of making sure that Chapter 19 in the NAFTA pact – that deals with anti-dumping and countervailing duties – is maintained. Prime Minister Justin Trudeau has made clear that Canada would walk away from the talks if the Americans insist on scrapping this provision.
“This data certainly gives the Canadian negotiators a road map in a sense of priority for the Canadian public,” Shachi Kurl, executive director of the Angus Reid Institute, told The Globe.
The Sept. 18 poll of 1,534 Canadians shows there is less concern about including gender-equality and Indigenous-rights issues in a renegotiated NAFTA. The poll is considered accurate within 2.5 percentage points 19 times out of 20.
The Trump administration believes erasing the U.S.’s trade deficit – the amount that imports exceed exports – should be the country’s top trade priority. Canada, Mexico and many economists argue trade deficits are not a problem and that overall economic growth is all that matters. The U.S. ran a $55.6-billion (U.S.) trade deficit with Mexico last year. Trade between the U.S. and Canada is balanced, with the U.S. having a surplus in services and a deficit in goods trade.
Dan DiMicco, a former steel executive and author who served as a trade adviser to Mr. Trump’s presidential campaign, said the United States will have to see major concessions from Canada and Mexico at the bargaining table or it will quit the deal. Mr. DiMicco is the former CEO of Nucor and author of American Made: Why Making Things Will Return Us to Greatness.
“One of two things is going to happen: A deal that is significantly better for the American worker and the American manufacturing sector and the American economy will be worked out, which means people will move significantly from their current positions – and I don’t mean the U.S. Or we will walk away from NAFTA and start all over.
“The President is committed to having free and fair trade with our trading partners … but we’re not going to be taken advantage of.”
By Joan Bryden, The Canadian Press
September 22, 2017
OTTAWA – The Canadian automotive industry is anxiously waiting to see if the next round of NAFTA negotiations will provide some clarity on American demands that vehicles must have “substantial” U.S. content to qualify for duty-free movement within North America.
Rules of origin – one of the most complicated and contentious issues on the table, particularly when it comes to the auto sector – is on the agenda for the third round which starts Saturday in Ottawa.
David MacNaughton, Canada’s ambassador to the U.S., acknowledged Friday that the clock is ticking on the talks overall – and that negotiators won’t be able to take a passive approach if they want the best deal possible.
“We do have an opportunity to be a real powerhouse in the world, and keep our citizens prosperous and happy, and we can’t do that simply by playing defence,” MacNaughton said following an event in Banff, Alta.
“We’ve got to really iron out some of the difficulties that have emerged, or some of the things that weren’t thought of in 1994, but also look forward 10 years and say, ‘Where we want to be there?’
“The one thing that I can absolutely assure you of: I am 100 per cent confident, in terms of these discussions, that there will be some drama before they’re over.”
But while Canadian officials had been hopeful the U.S. would finally put some flesh on the bones of its auto-sector position over the course of the five-day session, they say it’s now uncertain whether American negotiators are ready to show their hand.
Flavio Volpe, president of the Automobile Parts Manufacturers Association, said everyone in government and industry is ready to spring into action the moment the U.S. tables its position but, in the meantime, they’re all “circling the airport.” He suspects they’ll have to continue circling for some weeks yet.
As far as Canadian officials are concerned, automobiles – specifically, the exodus of auto industry jobs and investment to low-wage Mexico – are at the root of President Donald Trump’s threat to rip up the North American Free Trade Agreement. And resolving the problem will be the key to the success, or failure, of efforts to rewrite the trilateral trade pact.
Hence, the eagerness to find out precisely what is the American bottom line on rules of origin.
“We’re waiting with bated breath, I guess, like our Canadian negotiating team and probably the Mexican negotiating team, as to what the U.S. is actually going to propose,” says Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association.
U.S. Trade Representative Robert Lighthizer opened the first round of negotiations in Washington last month with the aggressive pronouncement that “rules of origin, particularly on autos and auto parts, must require higher NAFTA content and substantial U.S. content.” Moreover, he said there must be a way to verify that content.The U.S. has not gone into any further detail since then. But it’s bound to be controversial when they do.
“Trade negotiations are based on the concept of a balance of concessions and the United States explicitly wants an imbalanced result (that favours the U.S.),” says Ted Alden, senior fellow with the Council on Foreign Relations in Washington.
“That’s going to be a pretty hard thing for Canada and Mexico to swallow and I’ve never seen a trade negotiation conducted where that was the starting point.”
Under the current terms of NAFTA, at least 62.5 per cent of a vehicle’s content must be made in North America to qualify for duty-free access between the U.S., Canada and Mexico – which is already “the highest content requirement of any trade deal we’re aware of,” according to Nantais.
Reports in the U.S. suggest the Trump administration wants to raise that to more than 70 per cent and add a requirement that anywhere between 35 and 50 per cent must be made specifically in the United States.
Moreover, the U.S. reportedly wants to add steel and electronics, which aren’t currently included, to the list of components whose country of origin must be traced.
Automakers on both sides of the border contend the U.S. position would disrupt their fully integrated North American supply chain, add costly red tape and ultimately weaken the North American industry’s competitiveness.
And trade experts on both sides of the border are warning that it could backfire.
In a paper published Thursday, Scotiabank Economics argues that there is no need to tighten rules of origin for the auto sector; more than 75 per cent of vehicle parts are already made in North America.
That could drop, the paper acknowledges, with the rapidly increasing computerization of cars and trucks since the electronic components are primarily produced in China, Japan and Germany. But tightening the NAFTA content requirement wouldn’t necessarily result in those components being made in the U.S.
More likely, Scotiabank says automakers would move more production to Mexico or even opt to conduct trade outside NAFTA altogether, preferring to pay the 2.5 per cent tariff on auto imports to the U.S.
Dionisio Perez Jacome, Mexico’s ambassador to Canada, warned Friday of precisely such a scenario if the requirement for U.S. content is increased.
“We have to look at it very carefully, in order not to have it backfire,” he said. “Certain companies, if we increase it too much, might just opt to import cars directly and pay the 2.5 per cent tariff and we would lose that production. So that is an element that needs to be discussed.”
Unifor president Jerry Dias, whose union represents Canadian autoworkers, supports hiking the North American content requirement, but warns it can’t be done in isolation.
“Unless you fix the rest of the mess, it’s meaningless,” says Dias, who “absolutely” expects to see more detail on the American position during the next few days.
The rest of the mess includes, in his view, more stringent labour standards that would significantly hike wages for Mexican auto and auto parts workers and an increase in the low U.S. and Canadian tariffs on imported vehicles outside of NAFTA.
Without those two additional measures, he says more jobs and investment will simply wind up flowing to Mexico or outside North America altogether.
— With files from Armina Ligaya in Toronto and Ian Bickis in Banff, Alta.
September 10, 2017
9:40 AM EDT – Canadian Press via National Post
SAN JUAN DEL RIO, Mexico — Looming above a Canadian auto-parts plant, keeping watch over workers, is a painting of the Virgin Mary. This same plant plans a celebration of its latest expansion with a party featuring a mariachi band.
It’s far from Windsor. It’s close to Mexico City.
The story of the Exo-s factory is the story of NAFTA: manufacturing booming in Mexico, while surviving in the north; supply chains that are internationally interconnected and extra-efficient; and a Mexican workforce seeing the most modest gains and longing for more.
Canadian auto-parts companies have more than 120 plants and 43,000 employees in Mexico, and this Quebec-based plastics-maker is among them. It has grown a bit in Canada, but exploded here: when it opens a new warehouse on its property, its Mexican workforce will have nearly tripled to 300.
While workers hammer and weld together the new warehouse frame, the plant manager explains why Mexico was a must.
His company’s customers — GM, Cadillac, Fiat Chrysler — are here and need plastic products. They opened plants here because of Mexico’s low costs, government incentives, and free-trade agreements with 47 countries allowing tariff-free shipment throughout Latin America.
“For us it was a no-brainer,” Francois Ouellet said.
“When (our customers) open a new plant they want us to be close to them. If not we would have put at risk our actual business we have in Canada and the United States… We would have a problem to keep our business (without Mexico).”
The company’s U.S. and Canadian branches are still adding jobs, albeit more modestly. Canada has about 127,000 auto jobs today, the same the year before NAFTA was signed in 1993.
But something dramatic then happened. Canada’s long-term trendline looks like a steep mountain: employment climbed toward a peak in 2000, dropped, then plunged catastrophically after the 2008 recession and is now slowly inching back to early 1990s levels.
The Great Recession was a near-death experience for many companies, including the precursor to Exo-s. It relied upon GM for three-quarters of its revenues — and that giant’s near-collapse almost pulled down an entire ecosystem of suppliers.
Exo-s responded by diversifying. It not only spread operations to Mexico; it spread beyond the auto sector, beyond its core business of under-the-hood plastics like engine covers and coolant tanks.
On the same Mexican plant floor that produces car parts, an overhead machine spits down black, plastic trash bins. Someone strips away excess plastic, then hands the bins to Nataly Jacobo.
She grabs one bin to insert a wheel, then another, then another. She repeats this over an eight-hour shift, six days a week. The 23-year-old usually works on car parts, producing more than 3,000 pieces a week.
Her weekly salary is about Cdn $61.
This represents a raise for her. She arrived here three months ago from a job that paid $51. She also gained benefits here: the company subsidizes half her meals, offers free transport, and built a shower with hot water which many households here lack.
Ask her whether she deserves more, and she squirms. But she answers a broadly phrased followup: What if NAFTA were adjusted, so people in your country earned more?
“Mexicans make very little,” Jacobo replied.
“(Salaries) could be a bit higher… It would be good if they kept us in mind (at the negotiating table) — the Mexicans.”
Salaries have indeed increased in this manufacturing area. Ouellet estimates that his average worker makes about $6-$7 an hour with benefits, and it’s going up because of an acute labour shortage here.
“Go around everywhere. You’re going to see signs that they need employees. All companies — hotels, restaurants,” Ouellet said. “It’s really hard to find employees. So there’s (salary) increases.”
That’s in this manufacturing area.
But the overall story of NAFTA, in Mexico, is one of flat wages. In fact, they’ve declined overall because traditional corn-farming communities have been hard-hit by U.S. competition since 1993.
The Canadian government is pushing for higher labour standards in a new agreement. It has consulted closely with union leader Jerry Dias, who has done multiple interviews in Mexico spreading the message that Mexicans deserve a pay raise.
Dias said workers across the continent would benefit if Mexicans got more independent unions, freer collective bargaining, and pay hikes. The Unifor boss repeatedly told media assembled at last week’s NAFTA talks: “Mexican workers deserve to be able to buy the products that they make.”
It’s more complicated than that, according to industry and some analysts.
For starters, it’s unclear how an international agreement would enforce local labour laws. Dias favours an international panel. But the U.S. wants to end the international panels that already exist for intra-industry disputes.
There’s also the question of unintended economic consequences.
Industry insists profit margins are tight, and big salary hikes would just steer jobs like Jacobo’s toward Asia — or to machines. Canada’s auto-parts association says these jobs simply won’t ever return to Canada.
But the association’s Flavio Volpe said Canada does benefit from being part of supply chains that include Mexico.
That includes a certain plastics maker from Richmond, Que. It is planning a party in its other home — about a 43-hour drive south, off a road lined with taco eateries and women selling colourful, hand-woven indigenous clothing.
By TONDA MACCHARLES Ottawa Bureau reporter
Wed., Sept. 6, 2017
OTTAWA—Canada, the U.S. and Mexico put a positive spin Tuesday on what sources say was a tough five-day round of negotiations to rewrite North American free trade rules.
Canada’s Foreign Affairs Minister Chrystia Freeland, U.S. Trade Representative Robert Lighthizer and Mexican Secretary of the Economy Ildefonso Guajardo presented a united front on a stage as talks wrapped up in Mexico City.
Each in turn praised the “hard work” negotiators did at the table. Lighthizer said their efforts consolidated into two dozen chapters that will form the basis for the next round of talks to be held in Ottawa Sept. 23-27.
A joint statement issued by the three after their appearance emphasized that “important progress was achieved in many disciplines” and said more is expected in the coming weeks as negotiators take a break to consult with their respective industry associations and political decision-makers.
The communiqué said all three countries “reaffirmed their commitment to an accelerated and comprehensive negotiation, with the shared goal of concluding the process towards the end of this year.”
However speaking to reporters in Mexico City, Freeland acknowledged there are disagreements even as she insisted “North American relations are fundamentally solid.”
From left, Canadian Foreign Affairs Minister Chrystia Freeland, Mexican Secretary of Economy Ildefonso Guajardo Villarreal and U.S. Trade Representative Robert Lighthizer take part in a press conference on the second round of NAFTA renegotiations in Mexico City on Tuesday.
From left, Canadian Foreign Affairs Minister Chrystia Freeland, Mexican Secretary of Economy Ildefonso Guajardo Villarreal and U.S. Trade Representative Robert Lighthizer take part in a press conference on the second round of NAFTA renegotiations in Mexico City on Tuesday. (MARCO UGARTE / THE ASSOCIATED PRESS)
“Of course this doesn’t mean we’re going to agree on all points. But our deep friendship will permit us to resolve disagreements which arise at times” she said, as negotiators focus on the “difficult task of modernizing NAFTA.”
She said all “wholeheartedly share the goal of reaching a mutually beneficial agreement.” She rhymed off data to say the North American Free Trade Agreement has benefited the U.S. to the tune of an extra $127 billion in economic activity each year since it was signed.
And in contrast to U.S. President Donald Trump’s threat to ditch the talks and kick-start the legislative process to kill NAFTA, Trump’s chief trade envoy Lighthizer agreed there was “mutual agreement on many important issues.”
But Lighthizer also stressed a new NAFTA that benefits U.S. workers and industry is a “very important priority” for Trump.
“That’s why American delegation focused on expanding opportunities for American agriculture services and innovative industry, but …we also must address the needs of those harmed by the current NAFTA, especially our manufacturing workers.”
“We must have a trade agreement that benefits all Americans and not just some at the expense of others,” Lighthizer said. “I am hopeful that we can arrive at an agreement that helps Americans workers, farmers and ranchers while also raising the living standards of workers in Mexico and Canada.”
Guajardo struck a conciliatory note after last week, saying Mexico had to work on a “plan B” and anticipate a failure of the talks. He said Tuesday that Mexico was committed to a process that accommodates “each country’s interests.”
“In the process, I recognize we have responsibility to translate our negotiations into a final result that will imply more jobs in North America, jobs that are well-paid jobs, and to strengthen basic principles in this continent,” he said.
It was a diplomatic dance that belied many of the difficulties behind the scenes. Sticking points include the U.S. insistence on gaining greater access to Canada’s dairy and poultry sectors, its demand to end independent dispute resolution processes, and its demand that “Buy American” provisions — whether for auto parts or for government procurement projects — be protected.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said in an interview that one of the difficulties is that although the U.S. insists it wants to increase American content in the automotive sector by drafting tougher “rules of origin” or stiffer tracing of the origin of auto parts, it still has not put any substantive numbers on the table. Right now, vehicles and auto parts are required to have 62.5-per-cent North American content to travel tariff-free across continental borders.
Volpe suggested the failure of the U.S. trade representative (USTR) office to put a hard number on the table may in fact be a good thing. He said the USTR may be documenting for the Trump White House data that negotiators, senators and congressional leaders, especially those with auto plants in their districts, already know, having recently gone through trade negotiations for the Trans-Pacific Partnership that also dealt with “rules of origin” debates.
“The fact that we haven’t seen a number and we haven’t seen proposals confirms for me that the USTR is doing the hard work of inventorying where the American assets are, and they’re going to get to the same conclusion that we did: the American assets and interests are all over the map in North America. It’s going to be very difficult to cleave them off.”
David Lawder, Dave Graham, Reuters
Sep 04, 2017
MEXICO CITY—NAFTA negotiators discussed rules of origin on Monday as the Trump administration’s expected demand for U.S.-specific automotive content requirements was emerging as a major obstacle to a deal, auto industry lobbyists said.
U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland arrived in Mexico City to close out the second round of talks to modernize the North American Free trade agreement on Tuesday along with Mexican Economy Minister Ildefonso Guajardo.
U.S. President Donald Trump has repeatedly threatened to abandon the 23-year-old pact unless it can be rewritten to reduce U.S. goods trade deficits of about $64 billion with Mexico and $11 billion with Canada.
“Addressing the U.S. trade deficit is a top priority in renegotiating #NAFTA,” the U.S. Trade Representative’s office said in a tweet on Monday, breaking its silence since the talks began last Friday.
Auto industry lobbyists and government officials said they did not expect the USTR negotiators to reveal specific targets on Lighthizer’s demand that a minimum percentage of North American vehicles be produced in the United States.
One lobbyist, speaking on condition of anonymity because the proposal is still under discussion, said he believed that U.S.-sourced proposal would have to be at least 35% to satisfy Trump, who railed against automakers for moving jobs to Mexico throughout his election campaign last year.
“Anything less would not be a political victory” for Trump, the lobbyist said.
The demand may prove a bigger problem than potentially increasing the overall North American automotive value content from the current level of 62.5% for tariff-free shipments of vehicles within the region, which officials say Trump’s administration also wants to raise.
Autos are expected to be one of the most contentious parts of the talks because the sector accounts for the lion’s share of the U.S. trade deficit with Mexico.
Juan Pablo Castanon, head of Mexico’s powerful CCE business lobby, which is representing the private sector, told reporters the automotive and labor issues were among the areas least advanced in the negotiations so far.
A U.S.-specific content requirement would cause major headaches for both Detroit and international automakers producing cars and trucks in North America.
It could also slow progress in the talks much more than some of the other issues, said Flavio Volpe, president of Canada’s Auto Parts Manufacturers Association.
“That could prove problematic, because it won’t deliver the benefits to the American interests that politically they might hope for,” he added.
Volpe acknowledged that Canada and Mexico will likely have to make some concessions on autos rules of origin to meet U.S. political demands, but these could be creatively structured.
For example, content requirements could be tailored to capture billions of dollars in research and development investments primarily made in the United States, protecting high-paying engineering jobs from moving offshore, he said.
Tabling Some Texts
The talks so far have largely focused on the three countries proposing their preferred language for less controversial areas, such as digital and cross-border services trade, according to government officials and industry representatives briefed.
But negotiators have not started consolidating the language, and wording for more controversial subjects, including rules of origin and dispute resolution mechanisms, is not expected to be revealed until the next round later this month in Canada.
“The horse trading on all of this has yet to begin. That’s for future rounds,” said a government official familiar with the negotiating process. Talks were proceeding in a “workmanlike and constructive manner,” the official added.
Guajardo, Lighthizer and Freeland are scheduled to hold a joint news conference on Tuesday afternoon after talks conclude.
With additional reporting by Ana Isabel Martinez and Anthony Esposito; editing by James Dalgleish.
Minister of Foreign Affairs Chrystia Freeland arrives to where the second round of NAFTA talks involving the United States, Mexico and Canada is taking place in Mexico City on Monday.
ADRIAN MORROW – Globe and Mail
SEPTEMBER 4, 2017
American negotiators are insisting Canada and Mexico will have to make all the concessions in the overhaul of the North American free-trade agreement while the United States will not give anything up, The Globe and Mail has learned.
A source familiar with the closed-door talks at the Hyatt Regency hotel in Mexico City, where the second round of the NAFTA renegotiation is unfolding, said the Trump administration has taken a hard line at the bargaining table.
The U.S. decision to dig in at such an early stage of discussions means there will be little fast progress, despite a packed agenda and compressed time frame: Negotiators are working on 25 different parts of the agreement, and the United States is pushing to have a deal done before the end of the year.
The United States ratcheted up the tension even further on Saturday by demanding that Canada loosen its system of supply management for dairy, eggs and poultry, said the source, who spoke on condition of anonymity in order to reveal confidential details of the discussions.
This round of discussions, which began Friday, wrap up Tuesday. According to a schedule obtained by The Globe, the final day of talks will include a second day of talks on the rules of origin.
The rules of origin govern how much content in manufactured goods must be produced within the NAFTA zone to be exported between the three countries without paying tariffs. Negotiators will also discuss environment and government procurement, a subject that could include controversial Buy American provisions.
Foreign Minister Chrystia Freeland arrived in Mexico City Monday and had dinner with her counterparts – U.S. Trade Representative Robert Lighthizer and Mexican Economy Minister Ildefonso Guajardo – before a series of meetings they will hold Tuesday. Two senior advisers from each country also attended the dinner.
The next round of talks will start later this month in Ottawa; future rounds will continue rotating between the three countries.
Despite the United States’ hard stand, the country did not give its negotiating partners many specifics on what it wants, government and industry sources said.
Washington has not, for instance, said exactly what it wants Canada to do with supply management, whether to loosen the rules or allocate a larger quota for U.S. farmers.
It was a similar story on the rules of origin. The United States signalled in the opening round of talks last month that it would demand more NAFTA-zone content in autos – as well as a quota of specifically U.S.-made content – but has not yet given Canada and Mexico the details on what that would be, the sources said.
One industry source said the United States’ prime imperative on rules of origin appears to be helping the domestic steel industry. But the American government is still trying to figure out how exactly to rejig the rules of origin to make that happen.
Canada’s apparent strategy has been to make large demands – including that climate change be written into the deal and that the Unites States bans states from adopting so-called “right-to-work” laws accused of gutting unions – knowing they will likely be dialled back as part of the give-and-take. Mexico, meanwhile, is tabling few detailed demands, two sources said, waiting for the United States to reveal its positions before responding.
Armando Ortega, a former Mexican trade negotiator, said the United States’ intransigence is unusual at the early stage of talks: Normal negotiations usually begin with all sides putting their best foot forward and trying to reach common objectives. The tough American stand, he said, might be politically motivated posturing. President Donald Trump won last year’s election largely by attacking Mexico on trade and border security.
“If you are Lighthizer, you need to play to the audience. Your boss being who it is, you certainly would like to be very tough, especially if you’re in the country that has been your pinata,” he said in an interview.
Mr. Ortega, president of the Canadian Chamber of Commerce in Mexico, said it is ironic that the United States – which demanded the negotiations and wants them done by the end of the year – hasn’t laid out all the details of its demands.
“They’re the demandeur, they should be putting things on the table,” he said.
Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association, said rules of origin will be the key issue for the United States in talks because they will give it something straightforward to take back to its supporters.
He said he believed the United States is still trying to sort out how much North American content the domestic industry could realistically produce to figure out what it can ask for without inadvertently driving production outside of the NAFTA zone.
“That number is the most easily analyzed success or failure point for the U.S. administration. So I think we won’t see a solid number until much later in the process,” Mr. Volpe told The Globe in the lobby of the Hyatt.
Mr. Volpe said the United States’ hard line at the opening of the talks was likely an “on the moment tactic,” and doesn’t mean the negotiations are doomed.
“The waters are going to boil some times more than others,” he said. “But it’s just language.”
04/09/2017 4:01 PM CDT |
Juan Tolentino Morales
En la extrema derecha, Enrique Solana, residente de la Confederación de Cámaras Nacionales de Comercio, Servicio y Turismo (Concanaco).
En la cuarta jornada de la negociación del Tratado de Libre Comercio de América del Norte (TLCAN), que se realiza en la Ciudad de México, las pláticas continúan a puerta cerrada, y a decir de los partícipes, lo único en lo que se coincide es que la amenaza de Estados Unidos de abandonar el acuerdo es sólo parte de su estrategia de negociación.
Según Flavio Volpe, presidente de la Automotive Parts Manufacturers’ Association (APMA) de la delegación de negociación canadiense, uno de los principales problemas es que no se conoce cuáles son los objetivos de los negociadores estadounidenses.
Flavio Volpe, presidente de la Automotive Parts Manufacturers’ Association (APMA) de la delegación de negociación canadiense
“No sé qué es lo que quieren. Creo que debemos controlar nuestras expectativas; esta es la segunda ronda, y este tipo de negociaciones comerciales usualmente toman años y estamos tratando de acelerarlo a meses, por lo que debemos primero establecer el proceso y las propuestas”, dijo a medios el representante del sector automotriz.
Aunque a principios de agosto se firmó un acuerdo de confidencialidad entre los tres países sobre las pláticas del Tratado, incluyendo a los empresarios y otros sectores, entre los negociadores resulta imprescindible conocer las necesidades de los tres países para llegar a un acuerdo, dijo.
En cuanto a la amenaza de Estados Unidos de abandonar el acuerdo, Flavio Volpe consideró que, por el momento, sólo se trata de una retórica que tiene por objetivo que los estadounidenses lideren el proceso de negociación.
Al respecto, Enrique Solana Senties, presidente de la Confederación de Cámaras Nacionales de Comercio, Servicios y Turismo (Concanaco Servytur), coincidió en que Estados Unidos no va a dejar el TLCAN debido a la mutua importancia que hay entre los tres países en materia comercial.
“Es parte de una estrategia de negociación, pero no se va a levantar (Estados Unidos de la mesa del TLCAN); somos demasiado importantes los unos para los otros”, dijo a medios.
Por otra parte, Enrique Solana previó que sea luego de mañana, la última jornada de negociaciones en México, que pueda comenzar a hablarse sobre los primeros borradores.
“Va a ser vital la reunión de mañana (…) Se están moviendo varios temas pero todavía a nivel muy incipiente de propuestas, está muy frío”, dijo.
En tanto, Flavio Volpe consideró que las reglas de origen es de los primeros temas que podrían tomar forma, a pesar de su controversia.
Lunes, 4 de septiembre de 2017
Actores de las industrias de autopartes y automotriz de Canadá se pronunciaron a favor de modernizar el tema de reglas de origen e incrementar el contenido regional de las mercancías que intercambian los países del Tratado de Libre Comercio de América del Norte (TLCAN).
“No suena descabellado pensar en revisar las reglas de origen para modernizarlas”, dijo Flavio Volpe, jefe de la Asociación de Manufactura de Autopartes Canadiense, entrevistado en el hotel Hyatt de la colonia Polanco, donde se lleva a cabo la segunda ronda de negociaciones para modernizar el TLCAN.
Explicó que entre los actores de la industria de los tres países se analiza cómo pueden quedar las reglas para satisfacer a los socios americanos.
“Estamos en el mismo negocio, en el mismo curso del consumo americano. Es una buena expectativa que al terminar este proceso podamos modernizar las reglas de origen”, dijo Flavio Volpe.
Una de las propuestas de Estados Unidos en la modernización del TLCAN ha sido endurecer las reglas de origen exigiendo que los productos elaborados en la región tengan más insumos de los tres países.
Volpe detalló que dentro de la industria automotriz, los contratos se modernizan cada cuatro a siete años, por lo que se requieren reglas más modernas que las de hace 23 años, cuando entró en vigor el acuerdo trilateral.
“Hoy un automóvil se mira distinto al uno del 94, las condiciones en el mercado han cambiado”, dijo Volpe a medios durante el penúltimo día de la segunda ronda de negociaciones para modernizar el Tratado..
Apenas ayer, Jerry Dias, presidente del sindicato de Unifor, uno de los más grandes de la industria automotriz en Canadá, refirió que el porcentaje de contenido regional en esta industria puede subir a 70%, en la actualidad es de 62%.
Especialistas en comercio exterior consultados por Expansión han referido que en el corto plazo subir el contenido significaría menos competitividad para las exportaciones de México, pues al no cumplir con este porcentaje se les cobrarían aranceles.
Pero en el largo y mediano plazos representa una oportunidad para el desarrollo de proveedores nacionales y generar incentivos para la inversión extranjera en territorio mexicano.
VAN POR COMERCIO ELECTRÓNICO
A la Confederación de Cámaras de Comercio Servicios y Turismo (Concanaco) de México le interesa que el tema de comercio electrónico se aborde en las negociaciones del TLCAN, y ya estudia los cambios que pueden venir.
“Estamos interesados en el tema de comercio electrónico que es un tema nuevo, vemos que el comercio avanza a ser más intenso, más fuerte, de mayor intercambio”, dijo a medios al salir del hotel Hyatt Regency.
Explicó que el sector de comercio y servicios aún no llega a presentar propuestas concretas, pero las preparan tomando experiencias en otros países como Argentina.
04/09/2017 18:49 | Ivette Saldaña y Miguel Pallares
Los mexicanos y canadienses entienden que es necesario ceder “un poco” para satisfacer la demanda de Estados Unidos de pedir un incremento del porcentaje del contenido regional de automóviles superior al 62.5%, dijo Flavio Volpe, presidente de la Asociación de Fabricantes de Partes Automotrices de (APMA) de Canadá.
“Los canadienses y los mexicanos entendemos, que tenemos que ceder un poco para satisfacer a nuestros socios americanos. Ahora les corresponde a los socios estadounidenses describir sustancial y puntualmente qué es lo que ellos quisieran”, comentó el representante del sector automotriz canadiense.
Durante el cuarto día de la segunda ronda de negociaciones del Tratado de Libre Comercio de América del Norte (TLCAN), el titular de la APMA explicó que las recientes crisis automotrices y las elecciones en Estados Unidos trajeron el tema a la actual discusión, por lo que ya están familiarizados con una perspectiva a grandes rasgos de la intención de Estados Unidos.
Para el empresario canadiense las propuestas de aumentar las reglas de origen son parte del discurso de “retórica”, que en ocasiones se presenta como una agenda agresiva que usan las partes, pero no necesariamente será el resultado de las negociaciones.
By Josh Wingrove and Eric Martin
September 4th, 2017.
The latest Nafta talks are nearing conclusion without a major breakthrough or agreements on even the least-contentious topics, officials familiar with the negotiations say, fueling doubts among observers that a deal can be reached this year.
U.S. Trade Representative Robert Lighthizer is scheduled to speak publicly alongside Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland Tuesday to conclude the second round of talks toward a new North American Free Trade Agreement. Their appearance will cap a five-day session in Mexico City.
While negotiators have made some progress, they have yet to agree on any major contentious issue and are far from a deal on individual Nafta chapters, the officials said, asking not to be identified discussing private matters. On some topics, discussion has been verbal with no specific text proposals submitted, they said.
The talks came after U.S. President Donald Trump threatened outright withdrawal from the agreement. While slow progress is normal in most trade negotiations, the nations have been seeking an unusually quick timeline for Nafta, and officials expressed doubt a deal could be reached by the target date of December. That sentiment is shared by many observers and stakeholders who say the U.S. has been slow in detailing its actual demands.
“They can’t possibly finish. The Americans haven’t started negotiating yet,” said Peter Clark, a trade strategist and former Canadian official. Jerry Dias, a Canadian labor leader, said he’d “be shocked if it gets done before Christmas.”
Clark said the earliest possible date for a deal is February or March, and even then it would likely be an agreement-in-principle that wouldn’t be finalized until after Mexican and U.S. elections. “It’s not really a negotiation. What you have is a president who says he’s been robbed for years,” Clark said. “He wants to break a contract without any penalty.”
Juan Pablo Castanon, the leader of the Mexican business chamber known as CCE, told reporters on Monday there had been progress on topics including small and medium businesses, trade facilitation and telecommunications, while others — including autos and labor — were less advanced. The next talks, expected for Ottawa later this month, will be key to knowing if a deal can be reached this year, Castanon said.
“It’s what we all want,” Castanon said. “If we begin to close chapters and advance very fast, then we’ll be able to say there’s a possibility to find solutions by the end of the year.”
Over the first four days in Mexico City, government officials had said progress was being made on subjects such as the digital economy, a topic on which the three countries largely already agree. Controversial subjects like rules-of-origin and dispute settlement were discussed Monday by negotiators, according to a schedule obtained by Bloomberg.
“There’s a will of the three countries” to get a deal, Bosco de la Vega, the head of Mexico’s agriculture chamber, told reporters. In the original Nafta negotiations in the early 1990s, when de la Vega represented the interests of potato farmers, “we met every four or six months,” he said. “Now we’re meeting every two or three weeks.”
David Wiens, a farmer and vice president of the Dairy Farmers of Canada, said he’s been surprised by the lack of written and firm policy proposals put forward by the U.S. government. That makes him believe it’s “a bit unrealistic” to get a deal by December.
“What we’re hearing on the ground here is the Americans have still not posted all the texts for the different chapters,” Wiens said in an interview in Mexico City. “If there’s a strategy behind all of that, I’m certainly not recognizing it.”
One key issue without a firm policy proposal is what threshold the U.S. is seeking for the so-called rules of origin on the auto sector — the share of a vehicle that must be sourced within Nafta countries to receive the pact’s benefits. The current level is 62.5 percent and Dias said U.S. Secretary of Commerce Wilbur Ross wants a “significantly” higher figure.
The auto threshold is “the heart of the American objective,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association in Canada. “Negotiators will be very careful before pegging a rate that would drive assessments of success or failure.
The outlook isn’t entirely gloomy. One official described a two-track process — a political one dominated by Trump’s threats, and a more constructive and technocratic track with negotiators plodding forward in search of agreement.
The fast pace for Nafta is spurred by a Mexican presidential election in July 2018 and American midterm congressional elections in November. Canadian officials are said to also favor a quick deal to put an end to economic uncertainty created by the talks, officials said.
Click here for original text.
Alexander Panetta, The Associated Press – CTV News
Published Saturday, September 2, 2017 10:01AM EDT
MEXICO CITY — Everyone talks about a new NAFTA that will help the working class: Donald Trump was elected on it, the Canadian government calls it a priority and the Mexican government says it’s open to improving labour conditions.
Labour leaders want to hold them to their word.
Hundreds of people gathered in a street rally organized by unions in Mexico City, while across town negotiators from the three countries huddled in a hotel Friday and began the second round of negotiations for a new North American Free Trade Agreement.
A Canadian auto-workers leader addressed the crowd as people cheered and chanted slogans amid a sea of banners and street-food vendors peddling Mexican delicacies. Jerry Dias of Unifor derided the original NAFTA as a corporate scam, where companies shifted jobs to Mexico, then kept wages low there.
He shouted out a series of suggested improvements: Easier unionization rules for Mexico; the end of a Mexican practice where auto companies insist upon a long-term contract guaranteeing low wages before building a plant; a higher minimum wage in Mexico; an end to right-to-work laws in the U.S.; and an international mechanism to enforce new NAFTA labour standards.
“It’s our time to fix the wrongs of the past,” Dias said.
“The promise of NAFTA — that it would improve the standard of living for workers in all three countries — that was a lie….. The Mexican workers that work in your auto plants can’t afford to buy the cars that you build. And that is an absolute disgrace.”
He asked the crowd through a Spanish-language interpreter whether people agreed that if workers in Canada and the United States earn $35 an hour, perhaps a Mexican worker might make the equivalent 525 pesos an hour.
Many in the crowd burst out laughing when they heard the latter number. A salary that high is inconceivable for the average Mexican factory worker. Speakers at the event shared stories about intimidation of labour and even the murder of Mexican workers.
Several heaped scorn on their own national government, deriding it as corrupt and indifferent to working people.
“It’s the end of a six-year term marked in blood, in political pressure, in reforms that hurt the Mexican people,” said Gonzalo Martinez of the national education workers’ union, referring to national elections next year, as a new left-wing populist party leads the polls.
A woman in the crowd said most Mexicans didn’t feel NAFTA’s benefits. Indeed, while wages have generally gone up in Canada and the U.S. since 1993, they have stagnated and even declined in Mexico.
“We don’t see it,” said Patricia Perez of the Institute of Social Investigations, which researches working conditions at Mexico’s National Autonomous University.
“Things are worse in the fields. Agriculture workers feel abandoned.”
She said many earn the minimum of about $6 per day. Auto workers are better off, she conceded.
And that’s an important distinction. Supporters of NAFTA point to it all the time. While Dias is correct that Mexican salaries haven’t grown overall, stats also show that the workers seeing the biggest gains are in parts of the economy exposed to trade.
That includes the auto sector.
One industry representative rejected the idea of a silver-bullet solution. A sudden, dramatic growth in labour costs would simply risk moving production to Asia, leaving all of North America worse off, said Flavio Volpe of Canada’s auto-parts manufacturers’ association.
He said Canada and the U.S. have maintained their overall auto work force, and what’s moved to Mexico are low-skilled tasks — like stitching seat belts and making windows: “You can quote me on this one: nobody in southern Ontario is going to be making seat belts and windows,” Volpe said.
The fact these jobs are in Mexico — and not Asia — is good for Canada, he said: it creates spinoff effects up north, as vehicle parts criss-cross the border.
As for using a trade deal to increase wages, one Mexico analyst says that’s hard to do. That’s because any salary increase, or new labour rules, would have to be enforced by the national government — and Mexico’s has a poor track record.
Duncan Wood says there’s a simpler solution: demographics.
He pointed out that Mexico’s population growth has plummeted in recent decades, and is now barely one-third its pace of the 1970s. Young workers will soon find themselves in higher demand, he said.
“The first thing is to recognize that Mexico’s demographics are changing,” said Wood, of Washington’s Wilson Center.
“This question of having a lot of cheap labour is going to solve itself, in the medium term.”
By William Mauldin and Paul Vieira
Updated Aug. 16, 2017 5:54 p.m. ET
WASHINGTON—The Trump administration launched the renegotiation of the North American Free Trade Agreement Wednesday by laying out a starkly different vision from that of its two continental trading partners of how the pact has worked and how radically it should be rewritten.
The wide gap between the administration’s opening rhetoric and the positions of Mexico and Canada suggests a difficult road ahead in redoing the 23-year-old accord, even discounting for the posturing at the opening of any negotiation.
“We believe that Nafta has fundamentally failed many Americans and needs major improvements,” U.S. trade representative Robert Lighthizer said at the opening of talks in Washington. “We need to assure that the huge trade deficits do not continue.”
Mr. Lighthizer said Mr. Trump, who vilified Nafta in the 2016 presidential campaign, isn’t interested in just modernizing the pact and “tweaking” commercial rules, but rather wants new features to reduce the U.S. trade deficit with its two neighbors.
The disparate approaches have worried some business leaders, who see a risk that political leaders could dig in on opposing positions and hurt the ability of negotiators on the ground to strike a deal. Mr. Trump has repeatedly warned he could pull the U.S. out of Nafta.
“Canada doesn’t view trade surpluses or deficits as a primary measure of whether a trading relationship works,” Canadian Foreign Minister Chrystia Freeland said, noting that the U.S. has a surplus in trade of goods and services with Canada. Ms. Freeland touted the “deep friendship our countries share.”
Mexico’s Economy Minister Ildefonso Guajardo said his country considers Nafta “a strong success for all parties” and suggested that achieving a consensus on changing it won’t be easy. “For a deal to be successful, it has to work for all parties involved,” he said. “Otherwise it is not a deal.”
U.S. trade representative Robert Lighthizer said the Trump administration isn’t interested in merely ‘tweaking’ Nafta, but instead wants changes to reduce the trade deficit. PHOTO: POOL/GETTY IMAGES
Mr. Lighthizer pointed to Nafta’s success for many U.S. farmers, but he said it has hurt many others. The U.S. wants to boost rules to protect intellectual property, guard against currency manipulation and make changes to dispute-resolution mechanisms in Nafta to “protect our national sovereignty,” he said.
Given Mr. Trump’s fiery rhetoric on trade, Mr. Lighthizer’s tone “isn’t going to shock anyone, but is the kind of posturing you expected to happen privately,” said Mark Warner, a trade lawyer who practices in New York and Toronto.
The benchmarks for success Mr. Lighthizer laid out suggest a tough path ahead. The rising U.S. trade deficit with Mexico and the sharp drop in American manufacturing jobs are particularly difficult issues to address in trade agreements. Economists and former officials point to broader macroeconomic forces as playing far larger roles than trade does in creating deficits and jobs.
Mr. Lighthizer has yet to define exactly how the U.S. intends to negotiate a new pact that reduces trade imbalances among Nafta partners. Advisers to the Trump administration have discussed injecting some specific deficit-reduction benchmarks into the pact or demanding new provisions that officials believe could have that effect.
One of the main ways Trump officials are looking to move the needle on deficits is by tightening the “rules of origin,” the requirements governing what portion of a product has to come from within the trading bloc to qualify for tariff-free treatment. In his opening remarks, Mr. Lighthizer seemed to suggest the U.S. could set a standard not only for North American content, as Nafta currently does, but also for U.S.-specific content.
The trading partners are resistant such a demand for a specific level of U.S. content in Nafta-traded cars and auto parts. The opening comments were “kind of a signal from Ambassador Lighthizer that he has in mind some type of a national content,” Mr. Guajardo said. “That’s not part of trade agreements anywhere in the world.”
“Canada is not in favor of specific national content,” Ms. Freeland said late Wednesday.
Auto-parts makers from all three countries have warned officials about the risks to the industry’s integrated supply chain if changes to Nafta make it harder to ship parts across the continent’s borders. Still, said Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, a Canadian lobby group, “you are going to have to give a little bit, otherwise there’s no victory for the American administration side.”
“The good part of this is that we initiated the dialogue,” Mr. Guajardo said. “Eventually we’ll start closing some of the differences that we have.”
The Trump administration is still working with U.S. lawmakers and business groups in many key areas and isn’t expected to propose new Nafta text this week on automotive rules of origin, currency manipulation or a controversial form of arbitration known as investor-state dispute settlement, according to people familiar with the U.S. negotiating position.
The three countries opened the talks in a Washington hotel ballroom with flags from each nation lined up behind the ministers and chief negotiators.
Mexico, whose economy has been transformed the most by Nafta, was represented by a large delegation including formal and informal advisers and members of the Mexican Senate who flew in for the event.
Ms. Freeland, the senior Canadian official, made a point of giving some of her remarks in Spanish, in an apparent show of solidarity with the Mexicans also facing U.S. demands.
The ballroom was also filled with industry lobbyists—officially designated “stakeholders”—with interests in the talks, from farm groups to retailers, as well as groups representing consumers and labor.
Officials hope to hold several rounds of talks this fall and complete negotiations as soon as early next year, before the political season heats up in Mexico and the U.S. Following the current first round, officials are expected to meet in coming weeks in Mexico City for the next round.
—Jacob M. Schlesinger contributed to this article.
THU AUG 17, 2017 / 5:39 PM EDT
David Lawder and Anthony Esposito
(Reuters) – Auto industry groups from Canada, Mexico and the United States are pushing back against the Trump administration’s demand for higher U.S. automotive content in a modernized North American Free Trade Agreement.
At talks underway this week in Washington, automaker and parts groups from all three countries were urging negotiators against tighter rules of origin, said Eduardo Solis, president of the Mexican Automotive Industry Association.
But U.S. Trade Representative Robert Lighthizer confirmed the industry’s fears that the administration of President Donald Trump was seeking major changes to these rules to try to reduce the U.S. trade deficit with Mexico.
“Rules of origin, particularly on autos and auto parts, must require higher NAFTA content and substantial U.S. content. Country of origin should be verified, not ‘deemed,’” Lighthizer said on Wednesday in opening remarks.
Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland both said they were not in favor of specific national rules of origin within NAFTA – a position that the industry agrees with.
“We certainly think a U.S.-specific requirement would greatly complicate the ability of companies, particularly small- and medium-size enterprises, to take advantage of the benefits of NAFTA,” said Matt Blunt, president of the American Automotive Policy Council. The trade group represents Detroit automakers General Motors Co (GM.N) Ford Motor Co (F.N) and Fiat Chrysler Automobiles (FCHA.MI).
His comments were echoed by Flavio Volpe, president of Canada’s Automotive Parts Manufacturers Association.
“Anytime you say this list or a part of this list has to come from one specific country you’re going to hurt all three countries,” he said.
The United States had an autos and auto parts trade deficits of $74 billion with Mexico and $5.6 billion with Canada, both major components of overall U.S. goods trade deficits with its North American neighbors — deficits that Lighthizer said could no longer continue.
Lighthizer’s mention of tightening verification requirements is a reference to expanding the parts tracing list, which is used to determine whether companies meet the 62.5 percent North American content requirement for autos and 60 percent for components.
Devised in the early 1990s, the tracing list covers almost none of the sophisticated electronics found in today’s cars and trucks, most of which come from Asia. Putting these on the tracing list could force suppliers to source these components from North America or pay tariffs on them.
Volpe said any changes to this must also capture the North American system design work and software content for these components that is not currently included.
“A car today probably has 25 to 30 percent advanced electronics, software content in it. In 1994, it had zero or 1 percent,” Volpe said. “Could you address the tracing to help you get to NAFTA compliance level by capturing some of the work that’s being done in Silicon Valley or Waterloo, Canada? Yes.”
John Bozzella CEO of the Association of Global Automakers, which represents international-brand carmakers, said NAFTA has allowed a major expansion of auto exports, with more than 1 million more vehicles built annually in the United States than in 1993.
“Negotiators should be mindful of this success as they work to modernize the agreement,” Bozzella said, whose organization represents international brand carmakers with U.S. plants, including Toyota Motor Corp (7203.T), Honda Motor Co Ltd (7267.T) and BMW (BMWG.DE).
(Reporting by David Lawder; Editing by Lisa Shumaker)
ADRIAN MORROW AND GREG KEENAN
The Globe and Mail
Published Wednesday, Aug. 16, 2017 10:57AM EDT
The Trump administration will demand steep concessions from Canada and Mexico in NAFTA talks, including a US-content requirement for cars and trucks made in the free-trade zone.
Robert Lighthizer, President Donald Trump’s trade czar, delivered this stark message on the opening day of NAFTA talks in Washington.
“We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement,” Mr. Lighthizer told a hotel ballroom full of trade negotiators from the three countries, adding that the trade pact has caused 700,000 Americans to lose their jobs.
Mr. Trump, he said, “is not interested in a mere tweaking of a few provisions and a couple of updated chapters.”
Mr. Lighthizer’s tough opening speech served notice that the U.S. will not accept the Canadian and Mexican strategy of turning the NAFTA talks into an exercise in simply updating the deal to cover the digital economy.
Instead, Mr. Trump intends to make good on his campaign pledge last year to bring in protectionist measures in a new era of economic nationalism. The President was elected in part on a promise to tear up or renegotiate free-trade deals in a bid to bring factory jobs back to the US rustbelt. The NAFTA talks are the first serious test of that promise.
“We cannot ignore the huge trade deficits, the lost manufacturing jobs, the businesses that have closed or moved because of incentives — intended or not — in the current agreement,” Mr. Lighthizer said.
He laid out a series of demands, including slashing the U.S.’s trade deficit – the country imports more from Mexico than it exports; writing tougher labour standards into the deal; fighting currency manipulation, which the Trump administration blames for making foreign imports cheaper; revamping dispute-settlement provisions; and getting more market access for US agricultural products.
Mr. Lighthizer’s toughest specific demand was a toughening of the rules of origin, which dictate how much content in manufactured goods must be produced within the NAFTA zone to be sold within the zone without paying tariffs. The rules are particularly important for the auto sector, which currently must have 62.5 per cent of its content made in the NAFTA zone.
Mr. Lighthizer said he wants that per centage jacked up – and a US content requirement added on top of it.
“Rules of origin, particularly on autos and auto parts, must require higher NAFTA content and substantial U.S. content,” he said.
Such a move would severely disrupt the integrated network of the auto industry, which operates the way it does because of the rules set up when NAFTA came into force almost a quarter century ago. Vehicles and parts are made in all three countries and shipped among them duty-free.
The components that make up the 62.5 per cent can come from any combination of the three countries or a single one of them.
“If it was U.S. content [rules] then Canada and Mexico would be arguing that they would want specific content as well,” said David Worts, executive director of the Japan Automobile Manufacturers Association of Canada, which urges maintaining the rules of origin at 62.5 per cent and having no country-specific level of content.
“It goes against the way the deal has been operating for 23 years where there has been uniform regulations across the three countries,” Mr. Worts said. “That has supported the development of supply chains and the nature of the industry.”
NAFTA has led to a system where parts that are labour-intensive, such as wiring harnesses and fabrics for seats, are made in Mexico and shipped to assembly plants or seating plants in the United States and Canada.
“It would start to unravel a pretty complicated but pretty well understood way the industry works,” said Mr. Worts, whose organization includes Honda of Canada Manufacturing and Toyota Motor Manufacturing Canada Inc.
“There’s a whole lot of U.S. content in Canadian-made vehicles because everybody relies on imports from the U.S.”
Both auto makers and their parts suppliers have urged the Canadian government to insist that the 62.5 per cent threshold remain in place.
Flavio Volpe, President of the Automotive Parts Manufacturers’ Association, expressed hope that Mr. Lighthizer’s demand was only an opening gambit and would be bargained down over the course of talks.
“I understand that’s the objective – to raise some of the US activity in the supply sector – so I wasn’t surprised to hear it,” said Mr. Volpe on the sidelines of the speech. “I think, maybe, at the final draft we’ll see other ways to get there.”
Mr. Volpe said it makes sense to update the list of auto components subject to the NAFTA content requirement to include such things as software, an industry that is already strong in Canada and the U.S. But he said it would do nothing to add such things as hard electronic components which are not currently made in the US; even if the rules were tightened on those products, he said, it would not lead to factories moving to North America. Instead, it could simply lead to higher prices for consumers.
“If you add components to the tracing list that aren’t actually made in the US, you’re not going to inspire a sector to show up,” he said.
The first round of talks lasts until Sunday, and is expected to pack in discussions on at least 27 different elements of NAFTA. These include such controversial subjects as Chapter 19, the dispute resolution system that has helped Canada in the long-running softwood lumber dispute to the anger of the U.S.
The largest single blocks of time have been set aside for discussing investment, which includes Canada’s desire to roll back a NAFTA chapter that allows businesses to sue governments for unfavourable policy decisions; and the digital economy, including a U.S. push for Canada to raise its $20 “de minimis” amount – what consumers can buy online across borders without paying duty – to the $800 US level that American consumers enjoy.
Canada and Mexico struck a completely different tone from the US at the opening session.
Foreign Minister Chrystia Freeland opened by showing photographs of American and Mexican firefighters heading to battle wildfires in British Columbia and spoke of the “deep relationship” the three countries have.
She said trade is “not a zero-sum game” and Canada does not believe the trade deficit – Mr. Trump’s personal economic fixation – is important in evaluating if trade is working.
Ms. Freeland described trade between Canada and the U.S. as “balanced and mutually beneficial” and pointed out that Canada buys more U.S. goods than China, the United Kingdom and Japan put together.
“We pursue trade, free and fair, knowing it’s not a zero-sum game,” she said. “Canada does not view trade surpluses or deficits as a primary measure of whether a trading relationship works.”
Mexican Economy Secretary Ildofenso Guajardo, for his part, said any changes to the deal have to ensure more trade and not less.
The talks, he said, must not be “about going back to the past.”
“Mexico believes NAFTA has been a strong success for all parties,” he said.
The primary goal for both Canada and Mexico at the talks will be resisting any attempt by the US to claw back the current open market, while also seeking opportunities to broaden the agreement. Ms. Freeland has said she wants to pursue stronger environmental protections, for instance, while Mexico is focused on such things as expanding digital trade.
The Canadian Press via National Post
August 16, 2017
4:47 PM EDT
WASHINGTON — Early indications are pointing to a potential No. 1 issue for the U.S. in a renegotiated NAFTA: automobiles. What’s not clear yet is whether it will go from being important to being an irritant.
The issue came close to prompting an immediate public debate between the countries on the first day of the talks, after remarks from the lead U.S. official were interpreted by some as floating the idea of a Made in America quota.
Both Canada and Mexico pushed back against the idea of an American-made quota in auto manufacturing — the lead ministers for both countries warned of damaging unintended consequences to the industry.
Auto production was the issue mentioned first, at greatest length, and in most detail by Donald Trump’s trade czar as talks got underway Wednesday.
Robert Lighthizer pointed to the carnage in the manufacturing sector as the reason so many Americans view NAFTA as a failed agreement.
“Thousands of American factory workers have lost their jobs because of these provisions,” Lighthizer said in his opening remarks.
He cited priorities for the sector, designed to boost production of parts in North America, and in the United States. Industry members are warning Lighthizer to handle the matter with care as the details are complicated, and any wrong moves could either drive up vehicle prices.
There’s also a risk that changes could make North American producers less competitive, or even force them to just ignore the new rules and simply pay a tariff that would be passed along to consumers.
Lighthizer listed four priorities for the sector:
— A “higher” North American content requirement to avoid a tariff. The current rule of origin calls for 62.5 per cent of a car’s parts to be made in North America.
— “Substantial” U.S. content in cars. It was unclear whether he was advocating a new, specific requirement for U.S. content — a move that would surely be controversial — or whether he was simply stating that the desired changes should positively affect the region, with more cars being made in the U.S.
— Stricter monitoring to make sure companies comply with the rules of origin. Lighthizer said country of origin “should be verified, not deemed.” Labour provisions should be included in the agreement and be as strong as possible.
— Tougher labour standards. Some insiders in Canada and the U.S. suggest better worker conditions in Mexico, and more pay, would not only be good for Mexicans but also for making non-Mexican production more cost-effective and preserving vehicle production in Canada and the U.S.
A Canadian auto-industry representative at the talks said he’s not worried by what he heard: “There’s no anxiety about it with us,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association.
For example, Volpe interpreted Lighthizer’s words to mean that he’s hoping for more production in the U.S. as a spinoff effect of a stronger North American industry, not as a demand that plants move there from other countries.
But he urged negotiators to be very careful when touching the current rules. He warned of ample possibilities for unintended consequences.
“It’s not simple,” Volpe said. “If you make it too onerous, does a company or supplier say, ‘Forget about compliance. I’ll just pay the tariff.”‘
That means production would actually shift abroad: companies would simply pay the tariffs, ranging from 2.5 to 6.1 per cent, as a cheaper alternative to following complicated new rules.
It’s also risky to try requiring companies to produce certain products at home, Volpe added: some industries that produce certain types of electronics for automobiles simply don’t exist in North America.
Finally, damaging Mexican competitiveness can boomerang on companies from the other countries.
He said Canadian auto-parts companies have 43,000 employees in Mexico.
Foreign Affairs Minister Chrystia Freeland pushed back when asked about the idea of a U.S. content requirement.
“Canada is not in favour of specific national content in rules of origin,” she told a news conference later Wednesday.
“We’re also very aware of the extreme complexity of rules of origin. It’s going to be very important… to take very great care in any changes that are made to ensure they don’t disrupt supply chains.”
Mexico’s economy minister, Ildelfonso Guajardo, said: “It’s not good for American companies, it’s not good for Mexican companies. So I think we should find other policy tools… It would be highly complicated.”
The Globe and Mail
Published Wednesday, Aug. 16, 2017 8:18PM EDT
Not tweaking. Not a minimalist modernization. U.S. officials opened NAFTA talks with a declaration that it is out for major changes to the deal that shifts the balance of trade.
U.S. Trade Representative Robert Lighthizer, in his opening statement before negotiations began, insisted this isn’t going to be cosmetic. After years of politicians promising Americans they would renegotiate the North American free-trade agreement, President Donald Trump is finally going to do it, he said.
The big question that follows is more about politics than trade: How can Mr. Trump claim victory at the end?
It’s a tough question, because there’s no way that a rewriting of NAFTA can do all the things the U.S. President has promised, such as eliminating trade deficits, bringing back lost manufacturing jobs and restoring lost national sovereignty.
But it’s a key question for Canadian officials and business leaders. They want Mr. Trump to feel he can declare victory in a way that doesn’t destroy NAFTA or disrupt North American trade.
One way that some suggest is to deflect Mr. Trump’s target elsewhere, to non-NAFTA countries such as China – another key target of his trade rhetoric – and to use NAFTA as a tool aimed at those other countries.
The three NAFTA countries, for example, could work together to investigate unfair trade practices such as “dumping” of product by Chinese manufacturers – selling the product in North America at artificially low prices to win market share – and taking action against it.
“That would be of interest to all three countries,” said Dennis Darby, president of Canadian Manufacturers & Exporters.
You could imagine how it might be of interest to Mr. Trump, if he could tell American workers that he had turned NAFTA – a term many Americans see as a synonym for unfair trade – into a tool to fight unfair competition from Chinese makers of steel or plastics or machinery. That may play well in Ohio.
But it’s not easy. It would be hard to find a way to have all three countries retaliate together against dumping or subsidies using measures like countervailing duties. All three countries would have to show they have suffered the same injury because of the unfair trading practices, and that’s hard to do when all three have different duties and regulations, Toronto trade lawyer Larry Herman said. It would be extraordinarily complex to arrange a joint NAFTA retaliation process unless all three countries formed a common customs union, Mr. Herman said – and that’s not a real possibility.
However, Mr. Herman argued there are some less-muscular NAFTA tools that could be used. The original NAFTA created a little-used North American free-trade commission that could be mandated to monitor third-country imports, and unfair practices, and co-ordinate trade-remedy action – even if they can’t apply a common retaliatory measure. That might have some political value for Mr. Trump.
Others suggest Mr. Trump could claim a win in the auto sector with a rewriting of the rules of origin – the complex rules that dictate what percentage of a car is considered North American.
Under NAFTA, a car must contain 62.5 per cent North American content in order to be exported duty free within North America. Because of the way the rules are written, it might really be 55 per cent in practice. The United States wants to make the rules more stringent.
Auto makers warn that reducing their ability to use parts from non-NAFTA countries such as India and China would make their vehicles less competitive.
Flavio Volpe, president of the Automotive Parts Manufacturers Association, said if rules are too stringent, it will raise costs and hurt jobs. But he said it may be possible to tighten and update the rules somewhat in a way that won’t have a big effect on Canadian companies. It might have a little more impact on Mexican ones. If the tighter rules are phased in over a period of years, that would minimize the disruption, he said.
That might be a political winner for Mr. Trump. He could argue that he stopped Mexico from serving as a back door for Chinese steel or parts – an allegation he has levelled.
But is it enough? Is tinkering with the complex rules of origin, or mandating a commission to keep a watch on Asian imports, big enough to match Mr. Trump’s NAFTA rhetoric? The hard question in these talks is what it will take for Mr. Trump to claim a win.
By: Alicja Siekierska, Financial Post
July 18, 2017
CLICK HERE FOR MORE
The Trump administration is using “careful language” when it comes to its desire to strengthen the rules of origin in the North American Free Trade Agreement, industry experts say, something that could bode well for any potential impact on the automotive supply chain.
In the document released Monday outlining the United States’ objectives when it comes to NAFTA renegotiations, the U.S. trade representative said it wants to “update and strengthen the rules of origin, as necessary, to ensure that the benefits of NAFTA go to products genuinely made in the United States and North America.”
The U.S. also wants to ensure rules of origin “incentivize the sourcing of goods and materials from the United States and North America” and establish procedures that streamline rules of origin certification and promote strong enforcement.
NAFTA’s rules of origin currently stipulate that vehicle must have at least 62.5-per-cent North American content in order to gain duty-free access to all three member countries.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said the list of objectives did not contain any surprises to the auto parts industry.
“We’re seeing careful language around rules of origin as the administration and the industry south of the border has substantive conversations about how regulatory change would affect the industry,” he said.
“I think they have a very good understanding of how intertwined the three countries interests are in this sector and, very specifically, how deeply the American interest flows across both borders.”
While the objectives do not point to any specific changes that could potentially be made to rules of origin, U.S. Commerce Secretary Wilbur Ross has previously said the rules were “far too lenient.”
“Rules of origin are a loophole that allows material from outside to come in and yet be counted as though it was NAFTA-produced,” Ross said in a CNBC interview in March.
“One of the many problems with the rules of origin in NAFTA as presently drafted is that in the case of say autos, it went specifically part by part…. Many of those parts are no longer even used in cars…. It’s an obsolete provision, and it’s essentially a back door way for a non-NAFTA good to take advantage of NAFTA.”
Potential changes to the rules of origin could mean raising the North American content level past the 62.5 per cent threshold, said international trade lawyer Mark Warner.
“The sense of it is that Trump probably wants to raise it higher than the 62.5 per cent, and that could mean raising it substantially to 80 per cent or playing around with the way it’s calculated so that, in effect, it’s closer to the 62.5 per cent,” Warner said.
“Another question is, based on the wording (in the document), whether you could have a second rule of origin that is U.S.-specific and would exist alongside that North American rule. It’s not clear that’s something they would want, but clearly it’s an indication that they want to move the content number up.”
Eric Miller, the president of Rideau Potomac Strategy Group who was an advisor during the 2009 auto bailout, said while he doesn’t anticipate specific country-by-country rules of origin to be implemented, changes to content levels and enforcement policy could disrupt the auto manufacturing industry.
“When you scramble those rules by either raising the overall North American content level, or tightening some of the accounting requirements that are out there, that will inevitably create impacts on the supply chain which, in my view, would likely mean potentially greater economic activity in North America but potentially higher cost for vehicles,” he said.
Volpe, however, said he is less concerned about renegotiations affecting the auto industry’s supply chain.
“Americans do well to have Mexican and Canadian supply when we compete against other major jurisdictions around the world,” he said.
“I’m not that concerned that anybody is going to shoot themselves in the foot when it comes to the automotive industry.”
THE GLOBE AND MAIL
LAST UPDATED: SATURDAY, JUL. 08, 2017 9:39AM EDT
The engine blocks creeping along the line at the Linamar Corp. plant in Arden, N.C., provide a cast-iron example of how the North American free-trade agreement has created an integrated economic ecosystem.
Blocks weighing 317 kilograms arrive by truck from Mexico at the factory in southwestern North Carolina, where the thump and hum of 13 machining and drilling processes prepare them for shipment to Hagerstown, Md., for installation in heavy-duty trucks made by Sweden-based AB Volvo.
“We get the blocks from Mexico because of NAFTA,” plant manager Thomas Grein says.
Engine block LNC 1300694, which bears the signature of former U.S. president Barack Obama, did not make the final leg of the journey along the continental assembly line.
Instead, it sits on the floor of the Canadian-owned factory – a memento of Mr. Obama’s visit to Linamar North Carolina in 2013 and a symbol of an outward-looking United States that was seeking to expand global trade.
That signed engine block is also a potent reminder that current U.S. President Donald Trump rejects the idea of expanding global trade. Mr. Trump has turned the country inward by pulling the United States out of the Trans-Pacific Partnership and has promised on several occasions to retrench even further by tearing up NAFTA.
Those threats have energized the federal government and provincial premiers, leading to a flood of Canadian politicians to Washington and state capitals.
But there’s a secret weapon – Canada Inc., the country’s manufacturing and resources giants and other companies that are significant employers in a multitude of U.S. congressional districts in more than one-third of the 50 states. Many of them are the largest private-sector employers in their districts or dominate a local economy.
Their investments give these members of corporate Canada the influence and opportunity to echo the argument federal and provincial politicians are making in Washington and state capitals – that significant changes to NAFTA could affect U.S. jobs in cities and towns from Georgia to Michigan to Alaska.
If those arguments can convince enough state politicians that their own interests will be harmed, Canada could emerge from the NAFTA renegotiations relatively unscathed.
The politics and the economics of NAFTA converge in this corner of the Carolinas, which is dominated by the Great Smoky Mountains and is the site of a Canadian manufacturing insurgency whose health depends on a smoothly functioning trade system.
In the 11th congressional district of North Carolina, Linamar and two other Canadian multinationals are large employers and, in the case of Linamar, growing. Across the state line, bordering on the North Carolina 11th, the third district of South Carolina is home to a Magna International Inc. plant with 1,200 employees.
The future of NAFTA will be meted out at the negotiating table beginning late this summer now that Mr. Trump has officially notified Canada and Mexico that he wants a new deal. He has publicly excoriated companies for shifting jobs to Mexico and appears to believe that renegotiating the trade deal and imposing a border tax will repatriate those jobs.
But Canadian companies such as Linamar in the suburbs of Asheville; recreational vehicle maker BRP Inc. in the mountain town of Spruce Pine; and textiles giant Gildan Activewear Inc. along the Interstate 40 corridor; are located in the United States largely because of NAFTA. That presence gives the companies the clout to urge Representative Mark Meadows and North Carolina’s senators to vote against substantial changes to the agreement.
“The government of Canada has been leaning on industries to do more,” says Laura Dawson, director of the Canada Institute of the Woodrow Wilson International Center for Scholars in Washington.
“We really need to see Canadian businesses in particular going into Gary, Ind., into Buffalo, to Seattle, all the border communities, and reminding folks in their home districts that Canadian trade is important – the Canadian economic relationship is vital to your livelihood,” Ms. Dawson told a NAFTA discussion panel presented by The Globe and Mail last month.
Some of the companies are lobbying local members of the House of Representatives and the Senate to make sure changes to NAFTA don’t disrupt their operations or supply chains, or indeed, the U.S. economy on a scale similar to the turmoil blamed on the original 1993 agreement.
Linda Hasenfratz, chief executive officer of Guelph, Ont.-based Linamar, has started at the top, making the pro-NAFTA case directly to Mr. Trump at a meeting at the White House in February. Ms. Hasenfratz sat across the table from the President as Canada and the United States established a joint council for the advancement of female entrepreneurs and business leaders.
The question of NAFTA’s future arose during the discussion, she says, including how Canadian innovation is benefiting consumers in all three countries and why it’s vital to preserve seamless collaboration in the continent’s auto sector. One of her fears is that a renegotiation of NAFTA will lead to added cost that will make North America uncompetitive against Europe and Asia.
Increased costs on a North American vehicle “will follow the consumer and the consumer stops buying and we make less cars and that’s a hell of a lot less jobs across the board,” she says. “That doesn’t help anybody.”
The North Carolina 11th occupies a picturesque, waterfall-sprinkled corner of the Tar Heel State, with Tennessee on its western and northern borders and Georgia and South Carolina to the south.
It’s bisected by the Blue Ridge Parkway, which bills itself as “America’s Favorite Drive” and lives up to that reputation with stunning mountain vistas before the Depression-era make-work project terminates near Great Smoky Mountains National Park in the northwest corner of the district.
Linamar’s Mr. Grein finds the southern climate and lifestyle much more appealing than in New York, where he spent his student days at New York State University in Oswego, N.Y., which was pounded with snow every winter while he was earning his industrial science degree.
“If I were to be interviewing someone to move from Detroit to here, I could probably do that a lot easier than flipping it,” he says.
Thomas Grein, plant manager at the Linamar factory in Arden, N.C.
The largely rural district delivered an overwhelming plurality to Mr. Trump in the 2016 election. He won every county except Buncombe, which includes many of the suburbs of the traditional Democratic bastion of Asheville, the heart of which was gerrymandered out of the district, making it one of the safest Republican congressional seats in the country.
In rural Graham County, perched in the mountains up against the Tennessee border, Mr. Trump captured 80 per cent of the vote. In the extreme southwest corner of the district, he won 77 per cent of the vote in Cherokee County. The margins of victory in all the counties he won far exceeded his 3.8-per-cent statewide defeat of Hillary Clinton.
Some of that support came as a result of Mr. Trump’s stated position that NAFTA is one of the worst trade deals ever made and that it bears the blame for declines in the textile and furniture industries that dominated the economy of this part of North Carolina – and elsewhere in the state – for generations.
“You have a community that can point and say, ‘Here’s a big negative cost that we’re bearing. Okay, why?’” says Sean Mulholland, an economics professor at Western Carolina University, located in the 11th district.
“They scan the place and say, ‘There’s a big shock that happened, NAFTA,’” Professor Mulholland says over lunch on the university campus in Cullowhee, a winding, leafy, one-hour drive west of Asheville that takes travellers past Old Grouch’s Real Military Surplus and billboards extolling the virtues of Hazelwood Gun & Tactical.
But there were also huge productivity gains in manufacturing that coincided with the first few years of NAFTA, adds Edward Lopez, another Western Carolina economics professor.
That makes it hard to determine to what degree the trade deal can be blamed for local job losses.
It’s also important to note, Prof. Lopez adds, that trade was vital to the creation of the local manufacturing sector in the first place.
“We wouldn’t be the economy we are without international trade – moving from agricultural to manufacturing – and the same is true as we transition from manufacturing to more service and knowledge-based jobs,” he said.
Data from Mexico’s Economic Secretariat underline that statement. North Carolina’s largest and second-largest export markets in 2016 were Canada and Mexico, which soaked up 31.2 per cent of the state’s total exports.
Compared with other congressional districts across the country, the North Carolina 11th fared relatively well in terms of job losses caused by the U.S. trade deficit with Mexico, according to a study by the Economic Policy Institute, a Washington-based think tank that examines the impact of economic trends on working Americans.
The district ranked 256th out of 437 in jobs displaced, the study showed. Ten Michigan congressional districts were in the top 20 in terms of numbers of jobs lost. Four of those Michigan districts voted for Mr. Trump, making a strong contribution to his pivotal win in that traditionally Democratic stronghold.
But plant closings are amplified in the small towns that dominate the North Carolina 11th. Many of those were typically home to a single large manufacturer.
Whether the closings were caused by NAFTA, increased productivity, automation, the rise of China or the other global forces that transformed the U.S. economy in the 1990s and 2000s, the trade agreement gets the blame.
In Andrews, population 1,762 in 2014, the shutdown of the VF Jeanswear plant in 2002 – caused by a shift in jobs to Mexico – vaporized about 500 jobs at the biggest employer in the town and in Cherokee County.
“It was terrible,” recalls Joe Gibson, who started work at the maker of Lee and GWG jeans in 1979 and was plant manager when it closed.
“We drew people from three counties. It took a toll on all the small towns,” Mr. Gibson said.
He recalls his father-in-law telling a story about how the plant that became VF Jeanswear was lured to Andrews in the first place in the 1950s. Employed people throughout the area donated 25 cents (U.S.) from every paycheque to help the town buy 50 acres of land that were offered to a company that built a hosiery factory.
There is still manufacturing in some of the small towns of the 11th district, including Spruce Pine, where BRP, maker of Ski-Doos, Sea-Doos, all-terrain vehicles and motorcyles, operates a foundry that employs 150 people making parts that go in Evinrude boat engines.
Any trade moves that reduce jobs “would be a negative, that’s for sure,” says Darla Harding, mayor of the town, which has a population of 2,123.
“We’re a rural area with a population of about 2,000, so the job aspect of that [plant] is very important to this area,” Ms. Harding said.
If any Canadian manufacturer has an interest in making sure that the status quo remains in place it’s BRP, the company now manufacturing a product invented by Quebec entrepreneur Joseph-Armand Bombardier and still controlled by his descendants.
BRP, which is based in Valcourt, Que., operates two assembly plants in Chihuahua, Mexico and an engine and transmission facility in Queretaro.
“The big dark cloud above our heads is everything related to NAFTA,” chief financial officer Sebastien Martel said on the company’s third-quarter financial results conference call in December, shortly after Mr. Trump was elected.
On the same call, however, Mr. Martel noted that the financial impact of slapping tariffs on products built in Mexico would be slight – between $20-million (Canadian) and $25-million on $1-billion worth of transactions. Making plants more efficient, passing on costs to suppliers and increasing prices would be ways of addressing those added costs, he said.
On the company’s fiscal year-end results call in March, CEO Jose Boisjoli said the company is optimistic that economic measures Mr. Trump is considering are designed to create economic growth, which would help BRP.
On June 1, BRP underlined its confidence that NAFTA will not be dismembered by saying it will invest $25-million in its Mexican operations to reduce bottlenecks.
The company did not respond to requests for comment on what lobbying efforts it is undertaking in regard to NAFTA.
In Hildebran, on the eastern edge of the 11th district, 205 people owe their jobs at Peds Legwear to Montreal-based Richelieu Group, which bought assets from a struggling textile company and won a contract to sell socks to Wal-Mart. It’s now part of the Gildan global manufacturing footprint, after Montreal-based Gildan took over Peds Legwear in 2016.
Senior executives of Gildan say they think the company’s presence in several low-cost countries and trade agreements between Canada and those countries will insulate the Montreal-based company from any major changes that might happen to NAFTA.
“One day they’re renegotiating, one day they’re tweaking,” CEO Glenn Charmandy said of the Trump administration’s public broadsides about NAFTA. “At the end of the day, it’s a little bit out of our control.”
Gildan is not hiring lobbyists in Washington because it’s not worried about the outcome of the negotiations, Mr. Charmandy added.
Gears at the Linamar factory in Arden, N.C.
Linamar’s Ms. Hasenfratz says her position as chair of the Business Council of Canada gives her access to members of Mr. Trump’s cabinet, while auto industry organizations such as the Motor and Equipment Manufacturers Association lobby members of the House and Senate.
She and other members of the Council met with U.S. Commerce Secretary Wilbur Ross earlier this month in Washington.
While Linamar lobbies, it’s also doubling down in the 11th district. The engine-block plant and an adjoining factory that makes gears and other engine and transmission parts employ 215 people and are hiring more.
The company is also building a new plant just southwest of Asheville in Mills River. The Canadian company and joint venture partner Georg Fischer AG of Switzerland are spending $200-million (U.S.) to build an aluminum casting plant that will eventually employ 350 people.
Aurora, Ont.-based Magna, which is Canada’s largest auto parts maker, operates in 11 states and also has 30 plants and 28,000 employees in Mexico. The company is working hard to make sure U.S. governors and state representatives are well aware of its sprawling presence.
Misti Rice, Magna’s director of government affairs, says her No. 1 priority is to educate politicians in those states about the company’s activities.
Ms. Rice has met with all but two of the 11 governors – all of whom are Republican – and has invited 51 members of the House and Senate to tour Magna facilities located in their districts and states. She has visited South Carolina, where Governor Henry McMaster was one of the first U.S. politicians to endorse Mr. Trump’s candidacy for the presidency, five times in four months.
“There’s a very tight relationship there and South Carolina is very important to us,” Ms. Rice says.
Magna has three factories in South Carolina and is constructing a fourth in the state to supply BMW of North America Inc., whose Spartanburg, S.C., assembly plant is less than an hour’s drive from the southern edge of the North Carolina 11th.
A plant operated by Magna’s Cosma metal forming division is located in Piedmont, which is in South Carolina’s 3rd congressional district, represented in the House of Representatives by Republican Jeff Duncan, whom Ms. Rice met with in May.
When she has finished what she calls the education phase of her meetings with politicians, she will turn to an advocacy campaign.
At some U.S. plants, she notes, Magna has added several hundred jobs because of NAFTA.
“Any kind of radical changes [to NAFTA] are inevitably going to change how we do business, which could negatively impact how we operate,” she says.
“We’re a very nimble company and adjust to any changes, but there could be a cost to that.”
North Carolina was not on the list of states being visited by federal cabinet ministers as part of Canada’s lobbying blitz, even though annual two-way trade between the state and Canada totals more than $10-billion (Canadian).
But given the investment by Canadian companies in the 11th district and elsewhere in the state – and local politics – it would be a good place to make the case for NAFTA, says Chris Cooper, who heads the faculty of political science and public affairs at Western Carolina University.
Prof. Cooper points to Mr. Meadows, who has represented the 11th since first being elected in November, 2012, and is now the head of the Republican Party’s Freedom Caucus in the House.
“From a Canadian lobbying perspective, I think it is a smart move,” Prof. Cooper says.
“In a way, he is the perfect person to make this argument to. If he’s in a competitive district where people are anti-NAFTA, he doesn’t have any room to move, but he’s in an overwhelmingly Republican district where if something catastrophic doesn’t happen, he’ll be re-elected.”
Mr. Meadows has already engaged in a public battle with Mr. Trump over health care and Prof. Cooper notes that he has much better access to the President than a third-term congressman from a mainly rural district in North Carolina would normally be expected to have.
The Congressman told The Globe that he has not heard from the Canadian companies with big operations in his district.
“But I’ve talked to the Canadian ambassador at length, had a great conversation with the Canadian ambassador about our mutual interests and I believe that we’ll find some common ground.”
Back at the Linamar plant, Jeff Brower takes a moment from working on a gear assembly line to recall Mr. Obama’s visit and the opportunity he had to speak with the former president on the importance of education.
Nonetheless, Mr. Brower cast his vote for Mr. Trump last November in Leicester, just northwest of Asheville.
He’s well aware of the trade links that are vital to the future of the Linamar facility, but believes that Mr. Trump’s most extreme comments on the deal don’t represent the path U.S. negotiators will take.
“It’s kind of hard to stomp on all that,” he says, adding a thought that seems to be driving much of the thinking on the issue in corporate Canada: “I know he’s made a lot of promises he’s not going to uphold.”
With files from Nicolas Van Praet in Montreal, Adrian Morrow in Washington and Josh O’Kane in Toronto.
By MAX FISHER JUNE 22, 2017
New York Times
TORONTO — As President Trump disrupts alliances across the map, nearly every level of government in Canada has taken on new duties in a quietly audacious campaign to cajole, contain and if necessary coerce the Americans.
Prime Minister Justin Trudeau’s strategy for managing Mr. Trump is unlike anything tried by another ally. And he has largely succeeded where even experienced leaders like Angela Merkel of Germany have fallen short.
More than perhaps any other country, Canada relies on the United States, which accounts for 70 percent of its trade. Its sizable manufacturing industry is tightly integrated with American production, meaning even a slight hardening of the border or prolonged trade negotiations could put its economy at risk.
Laid in the first days after Mr. Trump’s election win, the plan even enlists Brian Mulroney, a former Conservative prime minister and political nemesis of Mr. Trudeau’s father, who had also been prime minister. Mr. Mulroney knows Mr. Trump and his commerce secretary, Wilbur Ross, from social circuits in southern Florida, where all three keep vacation homes.
Mr. Mulroney’s former chief of staff and ambassador to Washington, Derek Burney, said they urged Mr. Trudeau’s government to “cultivate access, but not just within the White House. To work the American system as never before.”
By organizing a grass-roots network of American officials, lawmakers and businesses, Canada is hoping to contain Mr. Trump’s protectionist and nationalist impulses. Though emphasizing the benefits of harmony, the Canadians are not above flexing muscle, with a provincial government at one point quietly threatening trade restrictions against New York State.
“We don’t have the luxury that the Germans have of an ocean between us,” Mr. Burney said. “And we don’t have a Plan B.”
The War Room
In the weeks before Mr. Trump’s inauguration, Mr. Trudeau reorganized his government to focus on his now uncertain ally.
His new foreign minister, Chrystia Freeland, a former journalist with long experience in the United States and an unapologetic champion of the global liberal order, is seen as able to coax the Americans when possible and defy them when necessary.
Ms. Freeland’s team of America-whisperers includes Andrew Leslie, a former lieutenant general and Afghanistan veteran who knows many of the American generals filling out Mr. Trump’s administration.
Mr. Trudeau established a “war room” dedicated to the United States, headed by Brian Clow, an operative with the governing party who had worked on some of its most important election victories.
The new office sought to cultivate the people around Mr. Trump. During a February visit to the White House, Mr. Trudeau and Mr. Trump’s daughter Ivanka led a panel on women in business. The two later attended “Come From Away,” a Broadway play about Canada sheltering travelers whose flights were diverted after the Sept. 11 terrorist attacks.
The efforts initially paid off. Mr. Trump’s February address to Congress mentioned only one foreign leader: Mr. Trudeau, whom he praised for his panel with Ms. Trump.
A few days later, the White House exempted the Keystone XL pipeline, overseen by the Canadian firm TransCanada, from Mr. Trump’s executive order requiring pipelines in the United States to be built with American steel.
But the honeymoon did not last. Mr. Trump accused Canada of unfair trade practices and threatened to exit the North American Free Trade Agreement, which would devastate Canada’s economy. Though he agreed to renegotiate instead, officials here fear the uncertainty could scare off investors or prompt factories to relocate.
Other foreign leaders found their administration allies similarly unable to temper Mr. Trump. Many shifted from absorbing his attacks to returning them. The Canadians felt they could not afford such a downturn.
Catherine McKenna, Canada’s environment minister. The Canadian federal government is working directly with American states and cities on climate change. CreditMax Rossi/Reuters
The Doughnut Strategy
So Canada turned to courting every other level of government, forming something like a doughnut around a White House-shaped hole.
Canadian officials have fanned out across the United States, meeting with mayors, governors, members of Congress and business leaders on matters from trade to the environment.
Ministers’ schedules resemble those of rock bands on summer tours. They travel armed with data on the precise dollar amount and number of jobs supported by Canadian firms and trade in that area.
“They’re going to great lengths, going into parts of America that few cabinet ministers from Canada have gone to,” Mr. Burney said.
Hints of this network emerged when Mr. Trump announced that the United States would leave the Paris climate agreement. Canadian officials said they would instead seek climate deals with American states, many of which were already in progress.
“Something snapped in the last few weeks,” said Roland Paris, a former foreign policy adviser to Mr. Trudeau. With trade threats looming, Mr. Trump’s break on climate convinced Canadian leaders of the need for drastic steps.
Since then, Mr. Paris said, “the approach has been to maintain cordial relations with the White House while going to extraordinary lengths to activate American decision makers at all levels of the political system.”
Mr. Trudeau hinted at the shift in a tweet, writing, “We are deeply disappointed that the United States federal government has decided to withdraw from the Paris Agreement.”
The phrase “federal government” was intended to signal Mr. Trudeau’s plan to cut his losses with Mr. Trump and focus instead on state and local governments, according to a Canadian official close to policy decisions toward the United States, who asked to remain anonymous because of the sensitivity of relations between the two countries.
The official said Canadian leaders plan to individually contact every lawmaker in Congress.
An early test came in New York, where Gov. Andrew M. Cuomo introduced a “buy American” budget provision on all state contracts worth over $100,000.
Officials here, sensitive to Mr. Trump’s influence on politics, feared the measure could inspire more protectionist policies. But they also saw an opportunity to demonstrate Canada’s growing muscle.
Provincial governments in Ontario and Quebec, which border New York, sent high-level delegations to Albany, where they hired the lobbying firm Bolton-St. Johns. New York-based business leaders were urged to intervene.
Premier Kathleen Wynne of Ontario, the province’s equivalent of governor, said she led with positives, like the benefits of cross-border manufacturing, under which plants from both countries collaborate on a single product.
But as Mr. Cuomo pressed forward, Ms. Wynne issued a quiet warning: If the measure passed, Ontario would reciprocate, imposing similar restrictions on trade with New York.
It was a powerful threat. New York’s annual exports to Ontario are worth $10 billion. Plants in Buffalo, near the border, are already struggling. New York firms would probably have been shut out of Ontario’s planned infrastructure investments, budgeted at $160 billion.
“If this was going to go ahead, we had to be prepared to protect our industry,” Ms. Wynne said in an interview. “Nobody wants a trade war, but we also have to be clear on what we will and won’t stand.”
The gambit paid off, with state lawmakers stripping the provision hours before passing the budget. Mr. Cuomo’s spokesman acknowledged Canadian lobbying had played a major role. Mr. Cuomo this week persuaded lawmakers to adopt a far more limited “buy American” measure. It is largely symbolic, underscoring how far Ms. Wynne was able to push the third-richest American state so as to protect Canadian interests.
Ms. Wynne is working against another “buy American” measure, in Texas, and proactively building ties. Last week, she spoke with Gov. Roy Cooper of North Carolina, the 13th governor she has been in touch with since the inauguration. She will meet the rest in July, when she attends the National Governors Association meeting in Rhode Island.
Other provincial governments are doing the same, as is the federal government, chiefly to recruit allies for the big one: Nafta renegotiations.
Should Mr. Trump seek to withdraw from or significantly weaken the trade deal, American governors, mayors and members of Congress can expect a call or in-person visit from their Canadian counterparts, asking them to pressure Mr. Trump to keep the deal in place.
Canada’s secret weapons appear to be proximity and language.
Allies of the United States typically work with the White House and federal agencies. Those have proved less reliable under Mr. Trump, leaving many adrift. Only the Canadians enjoy such easy access to mayors and governors.
American news and entertainment are ubiquitous in Canada, giving officials a nuanced understanding of political and cultural issues.
Whereas flights from Europe or Asia take a full day, forcing allies to visit selectively, Canadian leaders can be in Washington for breakfast and home by lunch.
Domestic politics have also helped. Mr. Trump polls poorly in nearly every allied country. Leaders, particularly those up for re-election, feel pressure to respond to slights. Mr. Trudeau, who is popular at home and faces little organized opposition, is freer to politely ignore Mr. Trump’s outbursts.
Still, Ms. Wynne acknowledged that little could solve for Mr. Trump’s unpredictability.
“I’m anxious about how all this could change if there’s a decision that puts up an insurmountable barrier,” she said, adding, “There’s a lot of uncertainty, and I will say quite candidly, our businesses here in Ontario are very nervous.”
Sarah Sacheli, Windsor Star
Published on: May 19, 2017 | Last Updated: May 19, 2017 7:57 PM EDT
READ MORE HERE
Premier Kathleen Wynne says a renegotiation of the North American Free Trade Agreement is an opportunity to improve trade relations for Ontario, and players in the province’s auto industry agree.
The United States officially served notice Thursday of its intention to renegotiate the agreement, triggering a 90-day consultation window before starting talks late this summer with Canada and Mexico.
Unifor president Jerry Dias said Friday he has already met with Wilbur Ross, U.S. Secretary of Commerce. “There’s a real recognition that Canada is not the problem in the trade agreement,” Dias said of his discussions with Ross. Rather there’s a need to change labour standards in Mexico to even the playing field.
The average wage in a Mexican assembly plant is $6 a hour, Dias said. In parts plants, it’s $3 an hour.
“They can’t even afford the cars they are making,” he said, calling NAFTA, in its current form, “a colossal disaster.”
The president of the Automotive Parts Manufacturers’ Association of Canada, said NAFTA works for the auto industry, but there is room for improvement.
“NAFTA works for us right now,” Flavio Volpe said. But when the agreement was negotiated 25 years ago, it couldn’t contemplate technological advances in the industry.
NAFTA’s “rules of origin” don’t include may of the components that exist in automobiles today — GPS and advanced driver-assistance systems such as lane sensors, Volpe said. Not including those components skews the percentage of components coming from a particular country.
Renegotiating NAFTA could also improve mobility for specialists working for a particular company. This is Canada’s chance to reopen categories of specialists who can get special H1 visas to work in the United States without needing a green card.
“We see this as a great opportunity,” Volpe said.
Wynne noted that Ontario is the main customer of 20 U.S. states and the second largest of eight more.
She said nearly nine million U.S. jobs depend on trade and investment with Canada.
The premier said the government is working in Washington and in state capitals across the U.S. to address issues that could affect Ontario-U.S. trade and ensure the province’s interests are represented.
Wynne also said the province has retained legal experts and trade advisers to support ongoing efforts to improve trade with the U.S.
“We are not satisfied to take a wait-and-see approach when it comes to any renegotiation of NAFTA,” Wynne said Thursday in a statement. “We see this decision as an opportunity to look at how NAFTA could potentially be improved to make the agreement even more effective for the people of Ontario, our workers and businesses.”
Wynne said she will continue to travel to the U.S. to meet with governors, legislators and businesses in states that have strong trading partnerships with Ontario.
— With files from The Canadian Press
May 18, 2017
APMA President Flavio Volpe talks to CBC about the upcoming NAFTA talks.
ADRIAN MORROW, STEVEN CHASE AND GREG KEENAN
WASHINGTON, OTTAWA and TORONTO — The Globe and Mail
Published Apr. 27, 2017
Donald Trump says he was ready to “terminate” the North American free-trade agreement by the end of this week until Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto talked him out of it in a pair of emergency telephone calls.
Now, the U.S. President is ready to “give renegotiation a good, strong shot” and is confident of reaching agreement. But he warned he would still shred the agreement if he cannot get a “fair deal.”
The President said on Thursday that he had been prepared to take a hard line the previous day, when White House officials had anonymously told U.S. media that Mr. Trump was considering an executive order to start the process of U.S. withdrawal from NAFTA.
Explainer: NAFTA, dairy and softwood: What’s going on with Trump? A guide to the trade file
“Well, I was going to terminate NAFTA as of two or three days from now. The President of Mexico, who I have a very, very good relationship, called me, and also the Prime Minister of Canada, who I have a very good relationship with, and I like both of these gentlemen very much, and they said: ‘Rather than terminating NAFTA, could you please renegotiate,’” the President said during an unrelated Oval Office photo opportunity. “I said: ‘I will hold on the termination. Let’s see if we can make it a fair deal.’”
He acknowledged that pulling out of NAFTA unilaterally would be “a shock to the system,” but said the option is still on the table if negotiations fail.
Mr. Trump’s new-found collegiality was the latest development in a week of NAFTA whiplash, in which the President suddenly launched a barrage of attacks on Canada’s trade practices, considered unilaterally pulling out of the deal, then abruptly backed down and declared himself ready to start talks.
It remained unclear whether the world’s most powerful leader really reversed himself on a major file based purely on persuasive conversations with two other leaders or if the entire thing had been a high-stakes bluff all along.
It also showcased the power of an emerging alignment between Canada and Mexico, which both want to preserve as much of NAFTA’s open market as possible.
Canadian government sources said Ottawa viewed Mr. Trump’s prospective executive order as pure posturing. They also understood the move to be a way to put pressure on the U.S. Congress, which has held up the confirmation of Mr. Trump’s trade czar, Robert Lighthizer, delaying the start of NAFTA talks. Still, Canada took the threat seriously enough to have Mr. Trudeau call the President.
Mr. Trudeau said on Thursday that Mr. Trump told him he “was seriously considering withdrawing from” NAFTA. But Mr. Trudeau said he warned Mr. Trump that pulling out would cause “a great deal of suffering” on both sides of the Canada-U.S. border.
Pulling out of the trade deal would result in tariffs on goods entering Canada and Mexico from the United States, leading to a drop in U.S. exports and increasing production costs for manufacturers and other companies with supply chains that cross international borders, such as the automotive industry.
“For now, we’re trying to keep this on a positive and co-operative level, and in fact the President himself said that he wanted the same thing, in our discussion,” Mr. Trudeau told reporters during a visit to Saskatchewan.
Mr. Trudeau said he sought common ground with Mr. Trump during the conversation, noting that “he, like me, got elected on a platform of helping people, helping the middle class, growing the economy in ways that bring along people who don’t always feel like they’ve had a fair shake.”
Foreign Affairs Minister Chrystia Freeland also spoke with her Mexican counterpart, Luis Videgaray, to compare notes after the reports of Mr. Trump’s NAFTA withdrawal surfaced on Wednesday, Mr. Videgaray told Radio Formula.
And Mr. Trudeau spoke with Mr. Pena Nieto on Thursday. A summary of their call released by the Prime Minister’s office said the pair “welcomed” Mr. Trump’s decision the previous day to renegotiate NAFTA and “reiterated their respective readiness to do likewise.”
Both Canada and Mexico adopted similar play-it-cool strategies, opting not to escalate the dispute by hitting back publicly at Mr. Trump.
Now, attention will turn to the negotiations themselves. Senate Republicans and Democrats reached a deal earlier this week that will likely mean Mr. Lighthizer can be confirmed within the next two weeks. After that, the White House will formally notify Congress of NAFTA talks, triggering a 90-day countdown to negotiations.
Robert Holleyman, the number two U.S. trade official under president Barack Obama, said the United States cannot realistically pull out of NAFTA because it would be so economically damaging. This means the countries will have to reach an agreement all three can live with.
“Withdrawal is not a viable option,” he said. “Walking away from a deal only works if you don’t need the deal or if you have a different viable option. Neither of these exist with NAFTA. When you have an integrated economy, withdrawing would be painful. The United States does not have another option to make up for the loss of NAFTA.”
Canadian industry leaders and analysts gave high marks to Mr. Trudeau’s strategy for handling Mr. Trump before negotiations. They said the country should ignore the day-to-day rhetorical flourishes coming from the White House while continuing the vigorous lobbying campaign to impress upon U.S. politicians how important NAFTA is to their economy.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association of Canada, likened Canada to a hockey goalie in a shootout. “The shooter’s coming at you. He may have 100 moves, he may have one move. At one point that puck leaves his stick. You’ve got to keep your eye on the puck.”
Patrick Leblond, a professor in the graduate school of public affairs at the University of Ottawa who specializes in trade, said senior Canadian business leaders should join the government’s back-door diplomatic efforts.
“There are a lot of North American companies, American companies, Canadian companies that are big on either side of the border and those companies need to bring that message to Washington and explain that the world has changed,” Prof. Leblond said.
Follow us on Twitter: Steven Chase @stevenchase, Adrian Morrow @adrianmorrow, Greg Keenan @gregkeenanglobe
March 23, 2017
TORONTO — Ontario Premier Kathleen Wynne met with Canadian automotive executives and labour leaders in Toronto on Friday to strategize about how best to approach a potential renegotiation of the North American Free Trade Agreement.
The group, which also included Minister of Economic Development and Growth Brad Duguid, discussed the importance of emphasizing the interconnectedness of the North American automotive industry. The approach has emerged as a key tactic in countering trade pressures from the United States government.
While the possibility that the United States may attempt to negotiate separate trade deals with Canada and Mexico has been raised, Volpe said that Canadian stakeholders see the tripartite arrangement of NAFTA as being an important one for the industry at large.
“I think everybody is committed to trilateralism unless the Earth moves, and then we’ll deal with it differently if the need arises,” he said. “But we’re all looking at this as all three countries help to manufacture cost-competitive vehicles in competition with the other major regions in the world. Ideally, we maintain that balance.”
March 21, 2017
Canada’s auto parts suppliers want U.S. lawmakers to realize how integrated the North American automotive industry is, so it’s currently taking stock of all Canadian companies that have operations in the United States.
The Automotive Parts Manufacturers Association is conducting a survey it calls Measure of Canadian Companies Having a U.S. Manufacturing Footprint.” Its goal is to determine how many facilities Canadian companies operate in the United States, the number of Americans they employ, and in which U.S. electoral districts those plants are located.
“Not only will your submission assist our efforts, but it will also assist your company as we take the aggregate State statistical information to Washington and remind individual congressional representatives that while companies in their jurisdictions may be Canadian owned, the jobs created are American (voters),” the APMA says on its note to members.
The information will help ensure that healthy trade relations between Canada and the United States stay strong.
“As a country, we’re a pretty big international investor,” APMA President Flavio Volpe said. “Canadian parts suppliers are one of the biggest employers, employing Americans and Mexicans. It’s important for us — ‘us’ being the industry at large and the provincial and federal governments, who advocate on our behalf — to understand what Canadian investment across NAFTA looks like.”
As appeared on BNN, February 27, 2017
Automotive Parts Manufacturers’ Association (APMA) hosted a roundtable discussion with Prime Minister Justin Trudeau on Monday. APMA president Flavio Volpe is impressed with Trudeau’s approach to the auto industry, and how much Foreign Affairs Minister Chrystia Freeland brings to the sector.
CP24 Coverage, February 27, 2017
February 28, 2017
Prime Minister Justin Trudeau met with representatives from automotive parts manufacturers on Monday afternoon in Toronto for a roundtable discussion on their industry.
The meeting, held at the Automotive Parts Manufacturers’ Association head office in Toronto, included representatives from companies such as Magna International, Martinrea International, ABC Group and The Woodbridge Group.
Part of the discussions were over President Donald Trump’s campaign pledges to tear up or renegotiate the North American Free Trade Agreement. However, representatives at the meeting say their concerns are lessening.
“I think that the Prime Minister and the President [Trump] had a good first date,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association. “We’re not really worried.”
February 27, 2017
A meeting Feb. 27 between Prime Minister Justin Trudeau and key players in the auto supply industry suggested possible federal-industry collaboration in efforts to shield Canada’s auto industry from disruptions threatened in the United States.
The roundtable discussion with high-ranking officials from the auto parts sector included Automotive Parts Manufacturers Association (APMA) President Flavio Volpe, Martinrea International Executive Chair Rob Wildeboer, Magna International CEO Don Walker and others. Trudeau brought with him Chrystia Freeland, Canada’s point person on NAFTA.
“It was a good listening session from both sides,” Volpe told Automotive News Canada immediately after the one-hour meeting. “The prime minister has a very good understanding of the dynamics that affect the industry, from trade to the consumer to currency.”
Published Monday, Feb. 27, 2017 5:47PM EST; Last updated Monday, Feb. 27, 2017 5:47PM EST
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GREG KEENAN – AUTO INDUSTRY REPORTER
TORONTO — The Globe and Mail
The federal government is doing the right things so far as it gears up for negotiations with the United States and Mexico on a new North American free-trade agreement, senior executives of Canada’s automotive-parts makers say.
The government – and major players in the industry – are in the midst of gathering facts about the impact a new NAFTA deal, border taxes or tariffs on vehicles would have on the auto sector and that should continue, executives said after a roundtable discussion in Toronto on Monday with Prime Minister Justin Trudeau and Foreign Affairs Minister Chrystia Freeland.
Discussions on the auto industry will be a critical part of any NAFTA renegotiation – in part because three-way free trade in vehicles and parts underpins the entire industry in North America. Vehicles are assembled in each of the countries and shipped duty-free across borders while U.S., Canadian and Mexican components that go into those vehicles also enter each of the countries without tariff.
The sector also appears to be at the top of U.S. President Donald Trump’s hit list after his tweets earlier this year, and during the election campaign last year, that castigated various auto makers for building assembly plants in Mexico and then planning to ship the vehicles into the U.S. market.
But the relationship between Mr. Trudeau and Mr. Trump seems to have started well with “a good first date,” earlier this month when they met in Washington, said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association of Canada (APMA), who played host to the meeting.
The federal government has moved early to make sure Canada’s views are known and “I think the language you hear out of Washington about Canada reflects the fruits of that,” Mr. Volpe said.
Mr. Trudeau told the industry leaders in a brief comment before the one-hour, closed-door meeting began that, because NAFTA matters to the auto industry, it matters to all Canadians.
“The high level of integration between our economies, particularly in the auto sector, needs to be continued and protected and recognized as a tremendous driver of jobs and opportunity on both sides of the border,” he said. He refused to answer questions from the media.
Don Walker, chief executive officer of Magna International Inc., said NAFTA as a region needs to remain competitive when compared with Europe and Asia.
“If you look at NAFTA, Europe and China and the rest of Asia, we shouldn’t be doing anything to damage the competitiveness of NAFTA,” Mr. Walker said.
Both Magna and Martinrea have made significant investments in Mexico – and the United States – reflecting how the industry has grown since NAFTA took effect.
Global auto makers have invested billions of dollars in assembly plants in Mexico in recent years. Mexico’s vehicle production has doubled to about four million units a year since 1994 and is projected to top five million by 2020.
With a possible renegotiation of the North American Free Trade Agreement looming, Prime Minister Justin Trudeau sat down to reassure representatives from the auto industry on Monday.
Trudeau and foreign affairs minister Chrystia Freeland visited the Automotive Parts Manufacturers Association’s Toronto office for a closed-door meeting with business leaders. Earlier this month, the Prime Minister met with U.S. President Donald Trump, who has promised to renegotiate NAFTA on terms more favourable to the U.S.
APMA president Flavio Volpe said he was feeling optimistic following Trudeau’s trip to the White House. During the visit, Trump acknowledged he was more concerned about trade with Mexico than with Canada and called it a “wonderful meeting” on Twitter.
“The more we hear from the president’s nominees, the less anxious anybody is,” Volpe said. “They understand the dynamic and I think they understand Canada is a full partner. We’re not really worried.”
Feb 14, 2017
The sigh from the C-Suite was one of relief as Canadian business leaders took comfort Monday in the positive tone on trade struck by Prime Minister Justin Trudeau and President Donald Trump.
From the forestry industry to the automotive sector to the oilpatch, Corporate Canada kept a close eye on the first one-on-one meeting between the two leaders, parsing every word they uttered for clues on the future of trade between the two countries.
Trump, who won the U.S. election campaigning on a promise to renegotiate the North American Free Trade Agreement, beamed about America’s “very outstanding trade relationship with Canada.”
The president of the Automotive Parts Manufacturers’ Association, which represents companies that are acutely integrated across North America, said Trump’s comments were a welcome affirmation of what he’s been quietly hearing from U.S. officials over the last couple of months.
“We were pleasantly surprised that the president would have used as many superlatives when discussing his view on Canada as a trading partner,” Flavio Volpe said.
Volpe said that going forward, he’ll be emphasizing how much America — and American consumers — have benefited from one of the most integrated industries in the world.
“We’re happy to share any and all data and give them a sense of how American interests have been well-served in all three countries.”
FEBRUARY 13, 2017
WASHINGTON — Despite sharp differences on immigration, refugees, trade and climate change, President Trump and Prime Minister Justin Trudeau of Canada struck a cordial tone on Monday in their first meeting, alternating between attempting to bridge those gaps and steering clear of them ….
Flavio Volpe, the president of the Auto Parts Manufacturers’ Association, a trade group, said that it was important for his members to hear Mr. Trump’s message that he is not planning to dramatically remake the United States’ trade relationship to Canada ….
Thu., Feb. 9, 2017
Prime Minister Justin Trudeau heads to the White House Monday for his first face-to-face meeting with U.S. President Donald Trump, a high-stakes session that will set the tone for relations between the two nations for years to come.
Personal relationships between leaders matter, says David Wilkins, former U.S. ambassador to Canada.
The upcoming meeting is “immensely important” for the two leaders “to meet and develop a good working relationship,” said Wilkins, past envoy for Republican president George W. Bush in Ottawa. “I think the key is to find middle ground, and there’s plenty of middle ground to find.”…..
Flavio Volpe, head of the Automotive Parts Manufacturers’ Association, one of many stakeholders the Trudeau government has consulted, said in an interview, “You can’t make a car, you can’t do a final assembly in any of the three countries without sourcing parts from the other two.”
“Part of the discussion is to make sure everyone understands that in our business there are no borders. And the American interest exists in all three countries, as well as the Mexican and Canadian interest.”
“You will harm American interests if you thicken the border between Michigan and Ontario”
January 11, 2017
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JD: It’s becoming kind of a familiar pattern: Donald Trump tweets, and the stock market reacts. Today, the President-elect’s call for General Motors to bring Mexican jobs over to the U.S. wobbled the automaker’s share price. In a tweet he threatened the company with a quote, “big border tax for any cars that are made in Mexico and shipped to U.S.” Ford, meanwhile, has dropped its plan for a plant in Mexico. And, of course, Mr. Trump has pledged to renegotiate the North American Free Trade Agreement (NAFTA). In an effort to prevent American jobs from leaving the country and all of this has Canadian auto manufacturers worried. Flavio Volpe is the president of the Canadian Automotive Parts Manufacturers’ Association. We reached him in Toronto.
HM: Mr. Volpe, what are your thoughts today about Donald Trump’s tweets and the reaction we’re seeing from the auto industry?
FLAVIO VOLPE: It’s tactics, certainly the President-elect has made clear what he expects from American automotive manufacturers. And it’s just a tactic that we’re not used to seeing.
Read the full transcript here (Begins after shaded transcript)
January 20, 2017: BNN speaks with Flavio Volpe, president at Automotive Parts Manufacturers’ Association.
Canada need not worry as long as American interest is addressed.
Volpe says the Trump administration understands the importance of the U.S.-Canada trade relationship and that the latest protectionist rhetoric targeting the auto sector is simply Trump trying to ensure American interests are met.
November 24, 2016: BNN speaks with Flavio Volpe, president at Automotive Parts Manufacturers’ Association.
As Canadian businesses brace for the policies that U.S. President-elect Donald Trump brings in on NAFTA and climate change, BNN speaks with APMA President, Flavio Volpe about how this will affect investment in Canada.
November 17, 2016
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But Canada’s auto sector, which is heavily integrated with both the U.S. and Mexican industries, said only a trilateral deal would work for Canadian automakers and parts suppliers.
“It (the North American auto industry) really only works if there are no borders,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, which represents Canadian independent parts makers.
“A revision of NAFTA for the auto sector – there’s likely zero support for it.”
November 16, 2016
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“There isn’t a binary decision that he can make that can solve that problem [of lost jobs],” said Flavio Volpe, president of Canada’s Automotive Parts Manufacturers’ Association.
Many of North America’s biggest manufacturers have supply chains stretching across all three countries, with products crossing borders multiple times before they are ready for sale. Changes to the NAFTA that complicate that flow could cost jobs in the U.S., as well as in Canada and Mexico, said Mr. Volpe.
“You’re going to hurt American interests, at some point, with any move you make. And those auto workers that voted for him, maybe, they work for those companies,” he said. …
The Canadian and U.S. auto industries are “almost completely aligned” on the NAFTA and free trade, said Mr. Volpe. That’s unsurprising, given that the same large automakers operate in both countries.
Mr. Volpe and the companies he represents will be delivering their message to existing allies in Congress, and relying on Canada’s embassy in Washington for introductions to new Representatives and Senators, said Mr. Volpe.
November 9, 2016
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Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said suppliers and tool makers with assets in the U.S. and/or Mexico have spent the last few months trying to determine the impact of a Trump presidency.
“It’s too early to express practical concerns, but we will have to be vigilant in telling the auto industry integration story in Washington,” said Volpe. “The challenge for Ontario and Canada’s auto industry is to make sure the new administration understands that any protectionist measures against imports equally affect the profitability of American companies. We’re so integrated, you can’t supply operations on either side of the border efficiently if that border gets thicker.”
Flavio Volpe, President of the Automotive Parts Manufacturers’ Association, is also concerned about NAFTA being repealed, and what that would mean for a business that routinely ships parts across the border.”You can’t make a car in Michigan without parts from Ontario and you can’t make a car in Ontario without parts from Michigan, everyone knows that,” Volpe said.
For now, his organization will keep an eye on Trump. If the president-elect does move to repeal NAFTA, Volpe said his group will work with governments on both sides of the border to make sure Ontario’s industry isn’t damaged.
Flavio Volpe, head of the Canadian Automotive Parts Manufacturers’ Association, told Automotive News Canada the elimination of NAFTA, or at least a revised version of the deal, could be good for Ontario. However, the province would need help from Rust Belt states like Michigan, Ohio, Indiana and Pennsylvania, all of which voted for Trump.
“If the Great Lakes states and the Midwest States can explain to Washington that Ontario is essentially a part of that region, then it’s good for Ontario,” Volpe said. “But it will come down to state-to-state, province-to-state co-support and the articulation of how integrated we are.”
For example, 30 per cent of the parts used at the more than 10 auto assembly plants in Michigan come from Ontario, Volpe estimates.
As the vote grew closer, the auto industry started planning, APMA President Flavio Volpe said.
“People were starting to model what it would look like if a Trump victory meant a new look at NAFTA,” Volpe told Automotive News Canada, Nov. 9. “I think everyone was prudently saying, ‘If he wins, what does it mean for us?’
“I heard that in Washington, D.C. when we went there [in September] and we met with Congressional leaders and manufacturing leaders. I heard that in Detroit.
“And I certainly heard it up and down Highway 401 on this side of the border.”
That could bode well for Ontario if its partnerships with states like Michigan remain strong, Volpe said.
An estimated 30 per cent of the parts used in Michigan assembly plants alone are Canadian made, Volpe previously told Automotive News Canada.
“You can’t take for granted who may or may not advise the president,” Volpe said, “but certainly Michigan’s Congress representatives and Senate representatives will be able to very quickly state how important it is that the border stays fluid and those [Canadian] relationships don’t get disrupted.
“If we’re successful in doing that, I think Ontario and Canada is in a relatively better position than any number of Mexican states.”
Volpe said “a deep dive and debate on what NAFTA 2.0 looks like” is likely now that Trump won the presidency.
“I imagine there will be some compromises before they crystallize their position on NAFTA,” he said. “If the Republican Congress thinks pulling out of NAFTA is a bad thing, and assuming that’s where he wants to go, they have the ability within their jurisdiction, to put a fence around him.”
September 18, 2016
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association of Canada, says the auto parts business operates on slim margins: “A 35 percent tariff would be a reckless instrument that would put an immediate chill on anybody’s investment in any of the three countries.”
Industry officials such as Volpe credit NAFTA with allowing North America to be competitive in an increasingly global industry. “The rise of Mexico as a free trading zone in my opinion is one of the catalysts that allow automakers to profitably go to a global product platform,” Volpe says.
Volpe, of the Automotive Parts Manufacturers’ Association of Canada, says Canada and other countries look to the U.S. to set an example. Recklessness on the part of the U.S. would encourage other countries to disregard world trade rules, he says. “Some of the rest of the world does cheat on those obligations,” Volpe says. “But the solution isn’t for the global trading leader to drop its standards in response.
“It’s a tough spot to be in. But you’re there for a reason. It’s like Superman getting into a bar fight. Why?”
August 8, 2016
Automotive-related companies, including in Windsor, have adjusted to NAFTA and created “the world’s most integrated supply chain,” said Flavio Volpe, president of the Automotive Parts Manufacturers’ Association. Severing those links, he said, would be “problematic” and could harm the very manufacturing businesses Trump promises his plan would help.
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