Foreign Affairs Minister Chrystia Freeland pressed pause on NAFTA negotiations with the United States after one day in Washington this week, saying she needed to leave the talks to speak in person with Prime Minister Justin Trudeau about the state of discussions.
Ms. Freeland is heading to Saskatoon where the governing Liberal caucus is holding a retreat, saying negotiations are at a juncture where she, chief negotiator Steve Verheul and David MacNaughton, Canada’s ambassador to the United States, need to consult on the North American free-trade agreement talks with Mr. Trudeau.
“This is really a moment when speaking and meeting face to face with the Prime Minister is really essential,” Ms. Freeland said.
She gave no details on her planned discussions with Mr. Trudeau, saying once again that Canada would not negotiate in public, but said this was not a conversation she wanted to have over the phone.
“It is very important for the Prime Minister to speak directly with me, with Steve Verheul and Ambassador MacNaughton. We need to brief him in person. Telephone lines are just not the same. We need to be able to talk to him directly and answer his questions," she said.
The Canadian team had planned to return to Washington later this week, but inclement weather may frustrate such a schedule.
Ms. Freeland left Washington on Tuesday evening ahead of Hurricane Florence which was expected to bring heavy rains, flooding and power outages to the capital district by Thursday. It’s not clear yet when talks will resume, even as a Sept. 30 deadline looms for Canada to be included in the prepared text of a trade deal in principle already struck between the United States and Mexico.
Ms. Freeland described the single day’s talks as cordial and productive but offered no evidence of what she called the “intensive phase” of negotiation had generated in terms of results.
Trade watchers suggested Ms. Freeland would have stayed if talks were making good progress and nearing completion.
“If we were close to a deal, I think both the Canadian delegation would be staying for the week and the Mexican delegation would be on their way to Washington,” said Dan Ujczo, an Ohio-based international trade lawyer who has worked for the Canadian and U.S. governments and is monitoring the NAFTA talks closely.
Canada and the United States have been negotiating since late August, when Washington unveiled a proposed North American free-trade deal with Mexico and pressed Canada to sign on or be left out. The United States is seeking to water down or eliminate Chapter 19, which provides for binding arbitration decisions to settle disputes. It also wants significant new access to Canada’s sheltered dairy industry and seeks the relaxing of foreign ownership restrictions on Canadian media companies by removing a cultural exemption clause in NAFTA. So far, Canada has been unable to obtain a guarantee from the United States that Canadians would not be hit with punitive American auto tariffs if Ottawa agrees to a new NAFTA deal with Washington.
Former Progressive Conservative prime minister Brian Mulroney, an architect of the original NAFTA deal, said on Tuesday Canada must grant the United States additional access to its heavily protected dairy market in order to clinch a new trade agreement.
“You are not going to get a deal of any kind without a compromise that allows [U.S. President Donald] Trump a victory,” Mr. Mulroney said during a visit to Ottawa.
Mr. Trudeau has already publicly signalled Canada is willing to grant the United States better access to its dairy market. In early June, he told reporters Washington wants more access on “certain products like dairy” in Canada and a better deal on autos from Mexico and “we’re moving toward ... flexibility in those areas that I thought was very, very promising.”
Mr. Trudeau, in Winnipeg on Tuesday, said “there are things that we’re looking to be flexible” on, but said he won’t be steered by Mr. Trump into signing a bad NAFTA deal.
He acknowledged Mr. Trump’s threat to impose 25-per-cent tariffs on Canadian-made automobiles would seriously hurt Canada, but insisted it would harm the United States just as much because the two economies are so integrated.
“We know that if the President were to move forward with his punitive tariffs on cars that he’s threatened, it would be devastating, obviously, to the Canadian auto industry, but it would also be devastating to the American auto industry. It would cause a massive disruption and I think lots of layoffs in the United States,” Mr. Trudeau told a Winnipeg radio station.
He reiterated that Canada wants to preserve the binding Chapter 19 dispute settlement mechanism in NAFTA and fend off U.S. demands to eliminate the massive tariff walls that shelter Canada’s dairy, egg and poultry from significant foreign competition.
One source familiar with the NAFTA talks said he’s heard Canada and the United States are not making progress on Washington’s demand for Canada to raise the threshold at which duties are applied on imported goods. Internet vendors want this threshold raised and Mexico agreed to raise it to $100. Canadian retailers do not welcome this request because it would mean more competition from U.S. rivals.
In a research note, Bank of America predicted Canada is likely to make concessions on dairy “given the relatively small size of the industry,” and would join the trade deal by the end of September.
The Egg Farmers of Canada and the Chicken Farmers of Canada declined to comment.
With reports from Laura Stone, Robert Fife and Eric Atkins