Lawrence Herman is a former Canadian diplomat who practices international trade law at Herman & Associates. He is also a senior fellow of the C.D. Howe Institute in Toronto.
Another confusing day in Washington, with U.S. President Donald Trump talking by phone to the Mexican President and then suggesting the two countries could conclude a bilateral agreement, now that some kind of understanding with Mexico on auto rules of origin has been reached.
Telling the Mexican President that the United States might want to pursue a separate trade deal with them seems to have taken the Mexicans aback, Mexico never contemplating having to go up alone against the United States. It’s clear by now that Mr. Trump and his team don’t like dealing with Canada. That’s reflected in Canada being sidelined for weeks while the other two governments held high-level meetings behind closed doors – a disgracefully bad-faith tactic on the part of the Americans. Regardless of claims that the auto issues in the North American free-trade agreement were exclusively a U.S.-Mexico concern, Canadian companies have invested heavily in Mexican operations, and Canada had every right to be at the table while the other two governments hammered things out.
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More troubling are reports that other key NAFTA provisions, such as the sunset clause, intellectual property, energy and dispute settlement, were being taken up by the U.S. and Mexican teams behind Canada’s back.
Together with keeping Canada isolated over the past number of weeks was the notable absence of any statement by the U.S. Trade Representative or the White House offering assurances that Canada, as a treaty partner, was very much engaged and informed of developments on an ongoing basis. It was left to the Canadian government and to Canada’s ambassador in Washington to offer these assurances.
These developments, including Mr. Trump’s comments Monday, underscore the regrettable deterioration in the bilateral relationship, having had a major setback with U.S. surcharges on Canadian steel and aluminum, declining further with Mr. Trump’s anti-Canadian tirades following the G7 meeting in Charlevoix, Que., last May.
As to the U.S.-Mexico understanding on autos, technical details are to be sorted out later, once the NAFTA negotiating teams resume their work. But even if short on details, an understanding with Mexico could give Mr. Trump a welcome political boost on the eve of the U.S. mid-term elections.
As to talk of a fully revised NAFTA being concluded in the next few weeks, there seems little possibility of that. At last count, 10 of the 30 chapters of this enormously complex agreement, containing some of the most contentious issues, remain unresolved.
Added to these timing difficulties is that U.S. law requires the President to give Congress 90 days advance notice of his intention to sign the agreement, meaning a final treaty, not just an understanding or statement of principles. And after being signed by the President, Congress has a further 90 sitting days to consider it. It can be approved or rejected during that period.
With U.S. mid-term elections in November, it’s impossible for the current Congress, even under the so-called lame-duck period before year-end, to be presented with a new NAFTA and to examine it within 90 sitting days as mandated by statute.
Even if a fully negotiated trilateral deal emerges from all this, Canada has the right to take its own time to review the total package and proceed according to Canadian constitutional requirements. Until that’s done, the U.S. and Mexico alone can’t change the existing NAFTA, which will remain as is, unchanged and in full force.
Mr. Trump can lambaste Canada and make all kinds of threats – such as applying tariff surcharges on Canadian vehicles and parts – but the fact is the NAFTA can only be revised if Canada agrees to implement the package after full review and parliamentary consideration.
As to the possibility of separate U.S.-Mexico bilateral trade talks as Mr. Trump has suggested, that seems unlikely. Mr. Trump only has authority from Congress to update the NAFTA as a three-way agreement. The statement of his administration’s negotiating objectives sent to Congress in July, 2017, makes that absolutely clear.
Even if that hurdle could be overcome, changing course and doing a bilateral deal with Mexico would require American withdrawal from the NAFTA and the repeal of a slew of U.S. statutes. Only Congress can do that.
As difficult and acrimonious as they may be, this means that three-way NAFTA negotiations will have to resume and the difficult remaining issues tackled, taking us beyond the U.S. mid-term elections in November. Whether these can be resolved sometime in 2019 remains to be seen.
While all this is happening, the Canada-US political relationship will continue under more stress, probably deteriorating further with threats by Mr. Trump to hammer Canadian auto exports and possibly other products with unilateral surcharges.
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So while this week’s breakthrough of an understanding with Mexico may possibly indicate a step forward in the NAFTA exercise, Canada needs to gird itself for tough days ahead with its erstwhile friend south of the border.