MONTREAL—Prime Minister Justin Trudeau defended his decision to sign a trans-Pacific trade deal that excludes the United States and says he is sure a new North American trade pact is within reach.
“I know that we are going to be able to get there,” Trudeau said, “because so many jobs in Canada, in the United States, in our three countries rely on the smooth flow of goods and services back and forth across our borders.”
He said Canada’s negotiating team is working “constructively” at the NAFTA table.
The Star has learned Canada has made a bold offer to accept a U.S. demand for radical changes to NAFTA’s binding investor-state dispute settlement process outlined in Chapter 11 of the current deal — a move that is aimed at breaking a big impasse at the NAFTA talks in Montreal. But there’s a catch.
At the outset of talks, Canadian officials say, the U.S. wanted to kill chapter 11 but has since suggested it become a voluntary system, one that the U.S. would opt out of, leaving disputes to be settled by domestic courts. Ottawa has instead proposed it would strike a side deal with Mexico alone that would retain the binding bi-national tribunals that now adjudicate complaints. (Chapter 11 was designed to give investors confidence when they do business in another country by providing an impartial tribunal to settle disputes with the government.)
But if the U.S. wants complaints against American companies to be resolved in domestic courts, Canada is saying to the Americans, it’s a two-way street. American corporate complaints against the other two countries would also be decided in their respective courts.
In effect, Canadian NAFTA negotiators are taking a gamble on whether the Americans can take “yes” for an answer when it comes to rewriting NAFTA rules.
It’s not clear if it’s enough to break the impasse.
A senior Canadian official said the proposal was introduced by negotiators on Wednesday and the other countries had not yet responded to it.
Much depends on what happens in Davos today, he said.
Foreign Affairs Minister Chrystia Freeland met with the U.S. Trade Ambassador Robert Lighthizer in Switzerland on the sidelines of the global economic summit there.
Earlier in the week, U.S. Commerce Secretary Wilbur Ross said in Davos that Trudeau had announced the TPP deal there to exert “pressure” on the United States as NAFTA talks got underway in Montreal.
Asked to respond to that Thursday, Trudeau dodged a direct answer, saying only that Canada has been working “diligently” and responsibly” to find ways to improve NAFTA.
“We know furthermore that is eminently possible,” he said.
He called the TPP deal between 11 Pacific Rim countries as “an excellent achievement” that will stimulate economic growth and benefits for Canada and for citizens “in all its partner countries.”
Trudeau said the trans-Pacific deal, which excludes China, is not an alternative to NAFTA or to China’s own attempts to forge stronger economic and infrastructure ties in the Asian region.
Canada’s signature on the TPP has been praised by beef and pork producers and one of Canada’s largest auto parts manufacturers, Linamar, but panned by the national association representing autoparts manufacturers, Canadian steelmakers, carmakers like Ford, and unions like Unifor and the Canadian Labour Congress, as well as Canada’s dairy, egg and poultry farmers.
Trudeau defended the agreement, claiming Canada won significant improvements to the TPP, and will work to improve the 24-year-old NAFTA trade deal.
Each trade deal “has to be looked at on its own merits and as significant, if incremental, steps towards better global trade that supports everyone,” he said.
“There is no one fix or one way to approach the shifting global economy that is going to be the answer. There are only opportunities to roll up our sleeves, work together, try and reduce barriers, and create opportunities as we move forward.”
Trudeau said there are more trade deals to come “as we look at next steps on how we engage with China how we continue to stand up for Canadian interests in NAFTA.”
Mexico’s chief negotiator Kenneth Smith Ramos told the Star Wednesday there had been no movement “as of yet” in the discussion on investor-state dispute settlement, or on other thorny issues at the talks.
“We’re still working on that,” the Mexican lead negotiator said. “We hope” movement is possible, he added.
“I mean, we’ve been very clear in the sense that we want to strengthen the dispute settlement mechanism both on chapter 11, 19 and 20 and we are not looking to dismantle any of the key elements of dispute settlement in the NAFTA. And there are ways to improve the procedures, so that’s what we are looking for…not kill them- strengthen them.”
Rules for how state-to-state disputes involving complaints about how an industry like softwood lumber or aerospace, come under chapters 19 and 20.
Canada is open to discussing a periodic review of NAFTA, but not a hard and fast “sunset” clause proposed by the U.S.
Canada has proposed a new requirement for “meaningful” public consultations that could identify areas for improvement, but that would not automatically require a formal re-approval, said a Canadian source with knowledge of the talks going on behind closed doors.
Canada has also made a new proposal about the auto “rules of origin.”
It is centered on exploring ideas for a modern tracing list that takes into account the new technology in today’s cars as a way to reach a higher North American regional content percentage for autos, according to a Canadian official with knowledge of the closed-door discussions, who spoke on background to the Star.
The “rules of origin” discussion is a high-stakes and complicated one, especially when it comes to the automotive industry.
The U.S. wants the current requirement of 62.5 per cent North American content in cars and trucks to be raised to 85 per cent, with a 50-per-cent-made-in-U.S.A. guarantee.
A country-specific requirement is not feasible for highly-integrated supply chains, and would damage the auto industry, in Ottawa’s view.
Flavio Volpe, of the Canadian Autoparts Manufacturers Association, says Canadian negotiators want a new trade pact to look at the kinds of auto jobs and manufacturing that should be protected with an eye not just on jobs in North American steel plants, but on the research, engineering and design of complicated software and sensor development that are inevitably going to be central to automobile manufacturing in the future.
Volpe said the idea of making a list of 29 car parts or components and tracing their origins may have made sense when NAFTA was first signed in 1994 and the technology that went into cars was different, but it no longer does.
He said a new NAFTA needs to recognize the real threat is Chinese car manufacturers, who he said are poised to supply much more cheaply but well-made cars to the North American market.
Canadian Labour Congress President Hassan Yussuf says the TPP concessions have undermined Canada’s pitch at the NAFTA table on autos and on its goal of enshrining new labour safeguards.
In an interview he said the TPP’s labour provisions contain no real enforceability mechanism, and have allowed Vietnam to escape compliance, however he added many other details haven’t yet been outlined to stakeholders here.
“I think we played right into the Americans’ hands in regards to what we are able to do” at the NAFTA table, he said. “They made even a stronger argument for both Mexico and the United States to stay steadfastly on their positions and not alter it…because what they’ve agreed to in the TPP is so weak and ineffective that this is not really going to help.”
Canada’s chief negotiator Steve Verheul said the Pacific trade deal is “entirely separate” from what’s on the table here in Montreal at the NAFTA talks.
With a file from Canadian Press