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Politics Blackstone CEO says he advised Trudeau to make dairy concession to reach USMCA deal

Blackstone Group CEO Stephen Schwarzman, seen here on Jan. 22, 2019, arranged a meeting with U.S. CEOs and then met privately with Justin Trudeau to lay out concessions for Canada to make in order to get a deal from the Trump administration.

Markus Schreiber/The Associated Press

The CEO and founder of one of the world’s biggest buyout companies says he persuaded Justin Trudeau to agree to the new continental free-trade deal on Donald Trump’s terms or risk a recession that could cost the Liberals the Canadian election.

Blackstone Group chief executive Stephen Schwarzman writes in a new book that he brokered a deal between Mr. Trudeau and the U.S. President that saw Canada make significant concessions, including opening up the country’s protected dairy market to U.S. products.

The American private-equity executive served as an adviser to Mr. Trudeau and the President during the free-trade talks and was invited to brief the Liberal cabinet at a retreat in Calgary in January, 2017, on the eve of talks to renegotiate the North American free-trade deal. At the time, Mr. Schwarzman headed a blue-chip presidential advisory group that was eventually disbanded.

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In a memoir − What It Takes: Lessons in the Pursuit of Excellence − to be published next week, Mr. Schwarzman writes about how free-trade talks were at risk of collapsing in late September of 2018 as the Oct. 1 deadline approached for reaching an agreement.

“Trade talks had once again stalled. The prime minister said Canada could not offer any more concessions and wanted to close out the talks,” Mr. Schwarzman writes. “But the president refused a private meeting with the prime minister at the [United Nations] General Assembly.”

At Mr. Trudeau’s request, Mr. Schwarzman said he arranged a meeting with U.S. CEOs at Blackstone’s corporate offices. Then, he had a private sit down with Mr. Trudeau where he laid out concessions Canada had to make to get a deal from the Trump administration.

“I told him I did deals for a living and the moment had come to stop agonizing. If he refused to meet the U.S. demands of a deal, Canada would almost certainly go into a recession, and no politician wins reelection in a recession. If he did a deal, at least he’d have a chance of political survival,” Mr. Schwarzman writes.

Mr. Schwarzman said he told Mr. Trudeau to write down an outline of the terms for a deal that would be acceptable to Mr. Trump.

“Empty your pockets on dairy. Make any last concessions you can and draw the line on Chapter 19 [a dispute-resolution mechanism] and the cultural exemption, the law protecting Canadian media from foreign ownership, if you have to. Move the lingering secondary issues to the bottom of the page and state simply what you are or are not prepared to do about them. Send the documents to the administration and walk away,” he writes of the meeting.

Mr. Schwarzman said he told the Prime Minister that he was seeing Mr. Trump that evening and a deal needed to be signed by midnight on Sunday.

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“The prime minister looked at me from the couch. He said it would be tough, but he would do it. When I met the president that evening, he reaffirmed that in my discussions with the Canadians, I had accurately reflected terms that the United States would accept. I called the Canadians and let them know,” Mr. Schwarzman writes. “It took another 48 hours of waiting and pleading from all sides before finally, at 10 am on Friday (Sept. 28), the Americans received the Canadians’ written offer.”

Over that weekend, the details were worked out between the two countries and that Monday, Oct. 1, the President announced a revised NAFTA, renamed as the Unites States-Mexico-Canada Agreement (USMCA).

Liberal Party campaign officials had Foreign Affairs Minister Chrystia Freeland and former Canadian ambassador to Washington David MacNaughton respond to the passages from the book.

Ms. Freeland said she was not in the meeting with Mr. Schwarzman and Mr. Trudeau but maintained that the Prime Minister would not put electoral politics ahead of the national interest.

“One thing I want to be very clear about … We did not look at [NAFTA negotiations] through a particularly partisan or electoral focus. It was always formal in our minds that this is one of those moments when you speak for Canada,” she said. “Some very important Canadian red lines were maintained.”

Mr. MacNaughton said Mr. Schwarzman was considered by the Canadians as a “Trump whisperer” but he wasn’t as crucial to the talks as he maintains in the book.

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“He was helpful. There is no question about that, but I always found when things are very successful, there are a lot of people who want to make it their idea," he said.

Mr. MacNaughton also disputed the suggestion that Mr. Trudeau made major concessions to the Americans, particularly on dairy.

“At the end of day, what did we give up on dairy, 3.5 per cent of the market? Ninety per cent of Canadian dairy is still supply management by Canadian dairy farmers," he said.

As part of the final deal, Ottawa traded U.S. access to Canada’s protected dairy market for the preservation of a key dispute-resolution system and exemption from threatened auto tariffs.

Canada also agreed to increase protections for pharmaceutical patents to 10 years, a significant victory for the United States in an area it has long pushed Canada on. Ottawa has long resisted increasing protections for pharma in order to keep drug prices low and help its own generic drug industry.

Canada preserved the Chapter 19 dispute-settlement provision, satisfying Mr. Trudeau’s long-standing red line in the negotiations. The deal also kept in place protections for Canadian cultural industries.

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Ms. Freeland said Canada deliberately pushed the talks with the United States to the edge to get the best deal for Canada.

“Canada and Mexico who are the only countries who have binding dispute mechanism with the United States, which is a huge thing. … Likewise the cultural exemption, which was tremendously important for Canadians. That was a clear red line for us and we kept that red line,” Ms. Freeland said.

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