Prime Minister Justin Trudeau said Tuesday a deal to modernize the North American free-trade agreement is “very close.”
Don’t try telling that to officials involved in the negotiations. Unless there is a wholesale change of attitude by the Americans over the next few days, they say the negotiations are headed for failure. The Canadian side is very frustrated. It suspects Washington has been purposely running out the clock on negotiations.
Given a failed outcome, it will then be up to the whims of U.S. President Donald Trump whether to scrap the trade agreement entirely or to have negotiations on a new accord continue following the election of a new Congress in November. He will also decide whether to hit Canada with threatened tariffs on steel and aluminum.
In other words, Canada’s position is vulnerable, defenceless, precarious. Choose your adjective and get ready for the fallout.
There’s a deadline of Thursday for negotiators to notify Congress of an agreement. An extension may be possible, but only for a very short period.
The sides have been negotiating since the past summer, but a whole range of issues, as commerce secretary Wilbur Ross said this week, have yet to be resolved. Asked if the Americans have been, to use hockey parlance, “ragging the puck,” a senior Canadian player in the negotiations said, “Very much so.”
Part of the problem is that there is no unified view on the U.S. side, he said, as to what a renegotiated NAFTA looks like. And there is also the problem that Washington isn’t overly concerned about getting a new deal in the first place. It’s not urgent. If they can get all their demands met, then fine. If not, they’re prepared, as Mr. Trump has threatened, to throw the agreement to the winds.
From the U.S. side, the complaint is that Prime Minister Justin Trudeau’s government is not offering enough concessions to move negotiations forward. “That’s certainly their storyline,” said the Canadian insider. For them, trade deficits are the main issue. “Most of their NAFTA deficit is with Mexico no matter what phony numbers they use and most of that is autos.”
What they have to do, he said, is solve that question. “If they have mostly agreed on that, we can move quickly to deal with other issues. Very quickly.” (Owing to the sensitivity of the NAFTA negotiations, The Globe and Mail allowed the sources quoted here to remain unnamed.)
Mr. Trump talked on the phone on Monday to Mr. Trudeau about the importance of getting a NAFTA deal. He reportedly told the Prime Minister he was ready to do a deal. With the mercurial Mr. Trump one can never tell. But it would centre on autos. If an agreement on auto-sector trade can be completed, a lot of the other boxes can be ticked off.
Jared Kushner, Mr. Trump’s son-in-law, who has taken part in the negotiations, obviously has the President’s ear. Canadians say he gives the impression of wanting a new deal, but only on U.S. terms.
Beyond auto trade, the two sides are apart on rules of origin, a dispute-settlement mechanism, dairy imports, a sunset clause and other issues. Even if all the Canada-U.S. disputes can be resolved over the next few days, there is still the question of Washington working out its differences with Mexico, which is no small matter.
Another source of frustration for Ottawa is that congressional Republicans are not exerting much pressure on the White House to resolve the NAFTA issues. Canadian ambassador David MacNaughton has received copies of letters sent by lawmakers to the White House on specific issues. But there is no NAFTA caucus in Congress with a high-profile leader taking charge of the file.
North Korea and China are much higher on Mr. Trump’s priority list than Canada. It’s still the case that Americans don’t yet understand that Canadians are their biggest customers. Canadian negotiators try to drive that point home, to warn that Canadians will not take kindly to being bullied on trade. But it’s hardly something Mr. Trump is worried about at this point. You’ve got to take out ads on Fox News, it was suggested to a Canadian official. “Maybe we will,” he said.
On NAFTA, Mexico is the major problem and Canada is caught up in the whirlwind. Our whole foreign policy has been affected to the degree that the Liberals have not spoken out strongly against some of Mr. Trump’s initiatives for fear of igniting his ire. It’s what you have to do when you’re the supplicant, when almost three-quarters of your trade is dependent.
We have to care a lot. They don’t.