Foreign Affairs Minister Chrystia Freeland and the Trump administration’s trade chief have agreed to resume “intensive” NAFTA talks this summer as Canada looks for a way out of its burgeoning trade war with the United States.
And sources with knowledge of the confidential discussions say the three countries have discussed compromise proposals to break logjams on automotive content rules and a sunset clause – two key U.S. demands that are major sticking points in the talks to renegotiate the North American free-trade agreement.
Ms. Freeland met with U.S. Trade Representative Robert Lighthizer at his office near the White House for an hour on Thursday morning.
“We spoke about a plan and a path forward for continuing our negotiations,” Ms. Freeland said later. “We decided to continue our work in an intensive way over the summer.”
They have not yet set specific meeting dates.
The Trump administration has insisted it will not lift tariffs on steel and aluminium it imposed at the start of this month until Canada and Mexico agree to a deal on NAFTA. Canada has announced it will retaliate with equivalent tariffs on $16.6-billion worth of U.S. goods starting July 1.
The U.S. President has also threatened to impose a 25-per-cent levy on imported autos.
Sources with knowledge of the confidential talks said the United States has held out the possibility of dropping the tariffs once Canada and Mexico agree to the Trump administration’s NAFTA auto content demands, with the rest of the pact to be negotiated afterward.
Among other things, the United States wants provisions that would force car and truck-makers to use at least 70 per cent North American steel and aluminum and source 40 per cent of their car parts from factories paying at least US$16 an hour. The latter measure is intended to make it more difficult for Mexico to attract manufacturing jobs by allowing automakers to pay wages averaging the equivalent of US$4 an hour.
Compromise discussions have focused on reducing the percentage of content subject to the wage and steel standards. Mexico has also proposed allowing automakers to choose which standards they meet, fulfilling a requirement on steel, for instance, but not on wages.
Negotiators have also discussed how to make a NAFTA sunset clause that the United States is demanding more acceptable to Canada and Mexico, one source said. The original proposal – rejected by Prime Minister Justin Trudeau – would terminate NAFTA in five years unless all three sides agreed to extend it.
Compromise ideas include making the time period longer and adding a provision for regular negotiations to address issues years before the expiry date, the source said.
Dan Ujczo, an Ohio trade lawyer who represents auto-parts makers, said he believes U.S. negotiators will try to cut a deal with Mexico right after that country’s presidential election on July 1 and use this to press Canada into an agreement.
Leftist candidate Andres Manuel Lopez Obrador is leading in the polls and is expected to be more amenable to U.S. auto demands – particularly on wage standards – because he is not as close to multinational automakers as the current government of Enrique Pena Nieto.
Mr. Ujczo said he believes the United States will keep negotiating and does not plan to imminently trigger the six-month process of withdrawing from NAFTA, which Mr. Trump has repeatedly threatened to do.
“If the goal is to torture Canada, he’s going to have it on the rack and stretch it out with tariffs, NAFTA, uncertainty,” he said. “You don’t cut the rope by withdrawal and ease the pain – that would be mercy, almost.”
Ottawa is pressing ahead with its campaign to get U.S. governors, members of Congress and the business community to urge the White House to ease off on its tough NAFTA demands.
Ontario premier-designate Doug Ford vowed to join the fight on Thursday after a briefing at the Whitney Block near the Ontario Legislature from Ms. Freeland and David MacNaughton, Canada’s ambassador to the United States.
“It’s going to be a full-court press. I’m going to be travelling to every single state, because nothing is better than meeting someone eye-to-eye,” Mr. Ford said.
Canada’s steel industry is calling on companies that use steel in Canada and have operations in the United States — such as auto makers -- to lobby the U.S. administration to lift the tariffs on Canada.
The federal government has released a list of U.S. products it proposes to target, including steel, aluminium, boats, maple syrup and orange juice. The federal government gave Canadians until Friday to comment on the plan.
“Only by presenting a unified ‘Team Canada’ approach to free and open trade can we hope to convince the U.S. to exempt Canada from tariffs in steel and aluminum and to discourage the U.S. moving forward with … tariffs on imports of autos and automotive parts from Canada,” Canadian Steel Producers Association president Joseph Galimberti said in the comment he submitted, which was released on Thursday.
Ms. Freeland had the tête-à-tête with Mr. Lighthizer the morning after she gave a tough speech to Washington’s foreign policy establishment linking Mr. Trump’s tariffs to the mounting populist authoritarianism threatening liberal democracy around the world.
That speech, at an event during which she received Foreign Policy magazine’s diplomat of the year award, described the tariffs as “absurd” and “hurtful” and a “naked example of the United States putting its thumb on the scale, in violation of the very rules it helped to write.”
Ms. Freeland said she gave Mr. Lighthizer a copy of the speech at their meeting. She said he was “very gracious” and congratulated her on the award.
“I believe very strongly that it is important for those of us who believe in liberal democracy – and I think that includes the overwhelming majority of Canadians – for us to strike back,” Ms. Freeland said on Thursday, warning that democracies must fight against “demagogues who scapegoat immigrants at home, or foreign trading partners.”