Trump blasts Canada's dairy, energy and lumber sectors

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U.S. President Donald Trump is vowing to target Canada's energy, lumber and dairy sectors in a renegotiation of the North American free-trade agreement – and promising to unveil a plan to tackle the deal within the next two weeks.

The President indicated Thursday that, after barely mentioning Canada during last year's campaign, the country is squarely in his sights, drawing his second verbal broadside in a week.

"Canada, what they've done to our dairy farm workers is a disgrace," he said in the Oval Office, at the signing of an executive order to clamp down on the dumping of cheap steel into the U.S. market.

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"We can't let Canada or anybody else take advantage and do what they did to our workers and to our farmers … included in there is lumber, timber and energy. So we're going to have to get to the negotiating table with Canada very, very quickly."

The President's rhetoric will soon be put to the test. He said he would start negotiations shortly, likely by giving Congress a letter outlining U.S. demands and kicking off a 90-day countdown to the start of talks.

"The fact is, NAFTA – whether it's Mexico or Canada – is a disaster for our country. It's a disaster. It's a trading disaster," he said. "And we'll be reporting back some time over the next two weeks as to NAFTA and what we're going to do about it."

Mr. Trump had spared Canada from his trade-related attacks – training most of his fire on China and Mexico – until Tuesday, when he took aim at Canada's protectionist dairy rules in a speech in Wisconsin. The President also signed an executive order earlier this week mandating tougher enforcement of Buy American provisions, a move that could hurt Canadian companies bidding on government contracts.

But his hard line will run up against economic and legal realities, as well as opposition from business. The U.S., for instance, is heavily dependent on Canadian oil and gas imports and does not have the capacity to replace them with domestic production. The same goes for lumber.

A Buy American clampdown, meanwhile, could break international trade rules, provoke retaliation from other countries and frustrate U.S. attempts to get better access to public procurement in Canada and Mexico.

Mr. Trump's complaint on energy is a mystery. The President has promised to reduce the U.S.'s trade deficit and oil and gas is one area in which America has a hefty deficit with Canada.

On Thursday, Prime Minister Justin Trudeau said he was "not going to overreact" to Mr. Trump's provocations, but warned that taking a hard line on NAFTA would hurt Americans as much as Canadians.

"The issue facing President Trump is that he made a promise to do things that were good for the middle class and that he was going to help people who felt like they weren't part of the economic success of their country. And killing jobs because of thickening borders between Canada and the U.S. isn't something that Mr. Trump is particularly interested in," Mr. Trudeau said at a Bloomberg News event in Toronto.

He fired back over Mr. Trump's dairy salvo, pointing out that the U.S. has a $400-million trade surplus on dairy with Canada and accusing the U.S. of being equally protectionist by using subsidies to prop up its industry.

"It's not Canada that's the challenge here," he said. "Let's not pretend we're in a global free market when it comes to agriculture. Every country protects, for good reason, its agricultural industries."

Foreign Affairs Minister Chrystia Freeland dismissed Mr. Trump's bluster as mere politicking aimed at a domestic audience. She said Ottawa had built a good relationship with his administration, with regular discussions between herself and Commerce Secretary Wilbur Ross, who will be steering NAFTA talks.

"Notwithstanding some of the rhetoric that we occasionally hear, I do really feel we've developed very good lines of communication. And I'm confident. So far so good," she said at the Global Growth Summit II in Toronto. "I understand that Wisconsin dairy farmers are unhappy … It is the job of politicians to respond to the unhappiness of some of their constituents."

In a statement, she pointed out that Canada is the largest importer of U.S. goods and argued that fighting Canada over softwood lumber or energy imports would hurt Americans.

Whether Mr. Trump's harder line is simply posturing or represents a realistic negotiating position is an open question.

One congressional trade source said the President's moves and rhetoric in recent days do not change the realities of the coming negotiation. For instance, the source said, the White House has previously signalled it will seek more access for U.S. firms to bid on Canadian and Mexican government contracts – an impossible feat if Mr. Trump also beefs up Buy American.

The U.S. Chamber of Commerce also warned Mr. Trump of this reality. "We don't just want Americans to buy [goods and services]; we want to sell them to the 95 per cent of the world's consumers who live outside the United States, too. However, expanding current Buy American rules in U.S. law would make it more difficult to spur growth and jobs here at home," chief policy officer Neil Bradley said in a statement.

Dunniela Kaufman, a Washington-based trade lawyer who specializes in Canada-U.S. business, said the President is, at least, giving Ottawa some idea what areas the talks will focus on. He has also torpedoed any hope Canada had that it would emerge unscathed by avoiding his attention.

"He's turning his mind to Canada, as opposed to Canada just being a sideshow. Staying under the radar was [Canada's] best bet," she said. "Once he gets a bee in his bonnet, it's there. These are the issues he'll direct peoples' attention to."

Ms. Kaufman said she had not encountered any energy-related trade friction between Canada and the U.S. "Domestic energy production is not anywhere near what they consume. Do you want to be dependent on OPEC countries, or your friendly neighbour to the North?"

Matthew Gold, a former deputy assistant U.S. trade representative, said earlier this week that Mr. Trump appears to be navigating the gap between his campaign-trail rhetoric on NAFTA and the realities of dealing with it in office.

"Donald Trump … campaigned validating peoples' beliefs that NAFTA is why their dog died, NAFTA is why their spouse left them, and, while NAFTA was causing floods, it was simultaneously causing droughts," he said at a Georgetown University forum on trade. "We all know we lost manufacturing jobs after we entered into NAFTA, but most of those were lost to automation … there is nothing you can do to NAFTA that will bring those jobs back."