Trudeau heads to U.S. as trade tensions mount

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Prime Minister Justin Trudeau flies to Washington this week to meet with Donald Trump at the White House and to address key members of the House of Representatives amid growing concern the U.S. President's protectionist trade demands could cause NAFTA talks to collapse.

The visit comes as Canada braces for tough American demands on dairy and a U.S. content requirement for autos in the North American free-trade agreement renegotiation, and on the heels of punishing tariffs imposed on Canadian plane maker Bombardier and softwood lumber producers.

Mr. Trudeau will meet with the President in the Oval Office on Wednesday, the same day he meets with Republican and Democrat members of the powerful House of Representatives Ways and Means committee on Capitol Hill. The committee has jurisdiction over all taxation and tariffs and is responsible for implementing any changes to NAFTA. Mr. Trudeau will hold a solo news conference at the Canadian embassy; one source said Mr. Trump did not have time in his schedule for a joint media appearance.

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The fourth round of NAFTA talks also starts on Wednesday in Arlington, Va., across the river from Washington. Mr. Trump's negotiating team has taken a hard line, demanding at the last round that Canadian companies receive fewer American government contracts and angling to put even more severe measures on the table.

Mr. Trudeau is expected to speak with Mr. Trump about the free-trade negotiations, the dispute over Bombardier's C Series jets – in which the Trump administration is imposing punitive duties that make it impossible to sell the planes in the United States – and the gridlocked talks over softwood lumber, sources with knowledge of the planned discussions said.

Officials, speaking on condition of anonymity, acknowledged that Canada is getting slammed with hard protectionist proposals at the bargaining table and needs to find some resolution with Mr. Trump.

Canada believes Mr. Trudeau's visit will help push negotiations in the right direction, the sources said. Ottawa insists it has to keep up the outreach program, both to the White House and outside it, that it has been conducting all year in order to remind the Americans how much their economy relies on that of Canada.

Mr. Trudeau will be accompanied to Washington by his wife, Sophie Grégoire Trudeau, as well as Foreign Affairs Minister Chrystia Freeland and parliamentary secretary Andrew Leslie.

On Thursday, Mr. Trudeau will travel to Mexico City to talk trade with outgoing President Enrique Pena Nieto, during the Prime Minister's first official visit to Mexico. Mr. Trudeau will also honour the victims of the country's recent earthquake, attend an official dinner and address the Mexican Senate on Friday. International Trade Minister François-Philippe Champagne will join Mr. Trudeau and Ms. Freeland in Mexico.

Mexico's ambassador to the United States, Geronimo Gutierrez, told The Globe that Mexico still hopes to improve NAFTA. But he said the country is prepared to walk away from talks if it can't get a good deal.

"Mexico's position will continue to be serious and constructive, but we have also been very clear about the fact that we rather leave the negotiating table than [accept] a harmful deal," he said.

U.S. Agriculture Secretary Sonny Perdue said last week that he expects the administration will throw down some specific demands for loosening Canada's supply management system for dairy, eggs and poultry, which fixes prices and keep foreign imports out.

Mr. Perdue said supply management is "very unfair" and he's not happy that so little progress has been made in NAFTA talks so far. "If you've ever watched a boxing match, they circle one another for a while, and I think we've been circling," he said.

The Trump administration is also quietly floating a proposal to include a 50-per-cent U.S. content requirement for autos, as well as increasing the North American content from 62.5 per cent to 85 per cent, a source said. Canadian officials said there have been no formal proposals on auto content so far.

Jerry Dias, president of Unifor, which represents Canadian auto workers, said the Trudeau government won't agree to 50-per-cent U.S. content, or a sign onto a deal that doesn't include improved labour standards in Mexico. He said strict content requirements won't have an impact without raising the 2.5-per-cent tariff on vehicles imported to the United States outside NAFTA, because auto makers could still move their operations to Mexico, where labour is much cheaper.

"Canada will never accept that the U.S. automatically gets 50 per cent of the industry based on rules of origin. Nobody will ever agree to that under any circumstances," he said.

"Justin [Trudeau] ought not to be afraid to say to Trump, that, listen, we are quite comfortable walking away from a lousy deal. This isn't you in control."

The top business lobby group in the United States has already issued an extraordinary public warning that Mr. Trump's tough stand in negotiations risks destroying NAFTA and swiftly throwing hundreds of thousands of Americans out of work.

"It would be an economic and political debacle," John Murphy, the U.S. Chamber of Commerce's senior vice-president for international policy, said at a roundtable last week.

"There's an old adage in negotiations: 'Never take a hostage you wouldn't shoot.' Withdrawal from NAFTA is an unacceptable proposition, so we're urging the administration to recalibrate its approach."

The Trudeau government is trying to play down concerns that Mr. Trump is prepared to pull the plug on NAFTA, with officials insisting Mr. Trudeau's second visit to the White House will be used to bolster the two leaders' relationship on a variety of fronts, including trade.

"The trip is an opportunity for the Prime Minister to strengthen and secure the very strong relationships that we have both with the United States and with Mexico, two key trading partners," said Cameron Ahmad, a spokesman for the Prime Minister's Office.

He insisted the trip is "not motivated by NAFTA," but that Mr. Trudeau was scheduled to speak at Fortune's Most Powerful Women Summit in Washington on Tuesday evening. The Prime Minister will also hold a roundtable on gender equality and education.

Maryscott Greenwood, chief executive officer of the Canadian-American Business Council, said the Trudeau government's so-called charm offensive in the United States is proving useful.

"It's having an effect in terms of increasing the understanding and awareness level in the United States among policy makers and thought leaders about how integrated our economy really is," she said.

"I have to give the Trudeau government a lot of credit. So far, they're pitch perfect, and that is not easy given their dance partner."