MONTREAL--Trade talk dominates the Canadian political agenda today with reports a deal without the U.S. is within reach on the 11-country Trans-Pacific trade partnership, the Canadian prime minister is making a pitch to international investors in Switzerland, and NAFTA talks are resuming in earnest in Montreal.
In an attempt to push back against recent U.S. spin that Canada is blocking progress at the NAFTA table, federal officials say Canada is open to compromise on several U.S. “poison pill” proposals pushed by American negotiators when the sixth round of talks formally gets underway.
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The message is an effort to project what Foreign Affairs Minister Chrystia Freeland Monday has said is Canada’s constructive and creative approach to this round after the last one ended in bitter recriminations.
With five so-called “poison pills” blocking progress, two sources told the Star that Canadian negotiators are willing to make “substantive” progress on three areas, but that all depends on the Americans’ willingness to move as well.
“What will really determine the round is if the U.S. is willing to move a little bit because if they come in and they still hold the position that we want other countries to make concessions to us and we will give nothing up in return, then we’re probably not going to make much progress. That has been their position all along on those five key areas,” said the official.
Two Canadian officials say Ottawa is open to U.S. demands for a periodic review of the deal—but not a five-year kill or “sunset” clause; changes to the dispute resolution process to settle corporate trade challenges under the so-called chapter 11 of the current deal; and to higher demands for North American content in autos and auto parts.
But Ottawa still views the U.S. demand that 50 per cent of all automotive manufacturing be made-in-America as a non-starter, and one that could drastically harm the industry overall.
One Canadian official said Ottawa is heeding auto sector warnings that automakers will simply disregard the new rules, reduce their manufacturing in North America, seek to source cheaper materials outside the NAFTA zone, and pay the 2.5 per cent tariff now applied to imports of more cheaply-made autos brought into North America for retail sale. Unifor President Jerry Dias, which represents auto-workers, has predicted this scenario for months and suggested the NAFTA deal will die a welcome death, but auto workers won’t be helped by it.
NAFTA now requires 62.5 per cent of autos and auto parts to be made in North America for tariff-free status, but does not specify how much must be made in any of the three NAFTA partner countries.
A Canadian official, speaking on background, said that there has never been country-specific rules of origin requirement in any free trade agreement. “It’s not about ideology or politics,” said the official.
But Ottawa remains staunchly opposed to U.S. demands on agriculture that one official described as aimed at dismantling Canada’s supply-management system for products like dairy, poultry and eggs. On agriculture, Canada has an ally in Mexico which is also resisting several U.S. proposals, and which has strong leverage as it is the biggest market for U.S. corn producers, for example.
Mexico is likewise an ally for Canada at the trade table when it comes to opposing U.S. demands to open up national and sub-national government procurement business American companies while the U.S. would shut out foreign bidders from its state and municipal contracts.
And Mexico and Canada appear aligned in opposition to continuing U.S. demands to end the current state-to-state dispute resolution mechanisms contained in chapters 19 and 20 in the NAFTA. Those provide for bi-national panels to settle challenges over broad claims that a country isn’t respecting free trade rules, such as in the ongoing softwood lumber battle between Canada and the U.S.
But when it comes to the mechanism in chapter 11—which allows investors to sue when they feel they’ve been unfairly treated by a foreign government regulation or policy action – Ottawa says it is open to improving the chapter, to establishing standalone, professionally trained panels of trade judges to assess claims. However the Canadian sources said while Canada wants to strengthen the system, the U.S. demand that it be an “opt-in” system, which would give domestic courts the power to rule if a country did not opt in, would weaken it.
“They’d expect the U.S. would opt out but Canada and Mexico would opt in,” said one official.
Canada will once again get high-profile help from former PC prime minister Brian Mulroney, who has been talking up NAFTA to Trump privately as well as to other American officials.
The powerful Senate committee on foreign relations, chaired by Republican Sen. Bob Corker, has invited Mulroney to address the committee on Jan. 30, a Canadian official confirmed today, adding the Canadian embassy in Washington is prepared to support Mulroney “in any way.”
Despite U.S. President Donald Trump’s contention last week in a tweet that “NAFTA is a bad joke,” his White House press secretary Sarah Huckabee Sanders told reporters Monday that “we actually feel like things are moving forward” at the NAFTA re-negotiation.
“We’re going to continue in those negotiations.”
But she re-iterated that the president “is going to make sure he gets the best deal for America and American workers. That’s still the focus.”
Chief negotiators will be in Montreal today after two days of preliminary talks began Sunday.
Canada’s proposal to include a chapter on Indigenous people’s rights in the trade deal will be discussed at a formal table Tuesday for the first time in these talks. Until now, Canada’s proposal had been discussed at the chief negotiators’ level only.
International Trade Minister François-Philippe Champagne said Monday that Canada is insistent that a new deal include environmental and labour protections and more opportunity for young people, women and Indigenous people.
According to a copy of the schedule obtained by the Star, Tuesday’s talks include negotiations focused on the environment, financial services, temporary entry rules, investment, digital trade, customs and trade facilitation, good regulatory practices (transparency), technical barriers to trade, state-owned enterprises and sanitary and phytosanitary measures.