The Liberal cabinet is portraying Canada's decision to launch a sweeping challenge of U.S. trade practices as a show of strength, even as it prepares Canadians for the possibility that the government may lose its battle to keep NAFTA talks alive.
This week's announcement that Ottawa has filed a wide-ranging complaint with the World Trade Organization against the United States came as the government now openly concedes the prospect that U.S. President Donald Trump may soon withdraw from ongoing negotiations to renew the North American free-trade agreement.
Foreign Affairs Minister Chrystia Freeland said Thursday that Canada is hoping for the best when NAFTA talks resume later this month in Montreal, but is also preparing for the worst. While she said Wednesday's news of Canada's WTO challenge is a separate issue from NAFTA that is primarily focused on the ongoing softwood-lumber dispute, Trade Minister François-Philippe Champagne said the challenge was aimed at sending a broad message to the U.S.
"When people see that you're firm, you get respect," he said. "And I think that the message that has been sent [Wednesday] is one of firmness."
The ministers spoke with reporters in London, Ont., where Justin Trudeau and his cabinet are holding a retreat. The Prime Minister held a town hall Thursday evening at Western University.
As the cabinet huddled to prepare for potential bad news from the U.S., Mr. Trump threw his NAFTA partners another curveball. In an interview with the Wall Street Journal, he said the talks were "moving along nicely" and suggested he was open to delaying a conclusion on NAFTA until after Mexico's July 1 election.
"I'm leaving it a little bit flexible because they have an election coming up," he said, though he also repeated his threat to walk away from the agreement. "If we don't make the right deal, I will terminate NAFTA, OK."
Former Conservative foreign affairs minister Peter MacKay, who monitors the NAFTA talks as a partner with Toronto's Baker McKenzie law firm, said it sounds like the negotiations are quickly falling apart and he questions whether the timing of Canada's sudden change in tone could backfire.
"Things are sounding increasingly ominous," he said. "The Canadian government seems to be preparing the ground to maybe insulate folks from the shock, but they've gone from very much the carrot approach of playing nice with the Trump administration to now quite openly and publicly using the stick, including this WTO challenge."
In her comments to reporters, Ms. Freeland said the Americans have always made it clear that one option would be for the U.S. to invoke Article 2205 of NAFTA, which allows any of the three member countries to provide a six-month notice of withdrawal from the deal. Providing formal notice does not oblige the country to actually withdraw from the deal, and there is significant debate about whether Mr. Trump could pull the U.S. from the pact without support from Congress, where members are generally supportive of NAFTA.
Mexico has threatened to withdraw from the negotiations if the U.S. invokes the provision.
"Our approach from the start has been to hope for the best, but prepare for the worst. So Canada is prepared for every eventuality and that is a whole-of-government preparation," she said.
The three countries are close to concluding chapters on "bread-and-butter" issues, the minister said, but disagreements remain over what she described as "unconventional" and "extreme" positions from the American side. The minister did not list those issues.
Canada has previously indicated that it is at odds with the U.S. over procedures to settle trade disputes and a U.S. proposal to insert a five-year "sunset clause," meaning the deal would expire unless it is renewed every five years.
Ms. Freeland said Canada intends to put forward new proposals at the Montreal talks, but did not provide specifics.
NDP trade critic Tracey Ramsey called on Ms. Freeland to clearly outline what the government means by a "whole-of-government" preparation for the potential termination of NAFTA.