Prime Minister Justin Trudeau is now heavily involved in last-ditch efforts to conclude a NAFTA deal, with sources saying the Trump administration is ready to concede to Canada’s wish to keep Chapter 19′s dispute-settlement mechanism in place in exchange for greater access for U.S. dairy products.
The talks have taken on a frenetic pace over the last 24 hours with Jared Kushner, the son-in-law of President Donald Trump, pushing for a deal before Sunday’s deadline to start a 60-day countdown to a final revamped pact being signed by the end of November.
The U.S. reached a tentative NAFTA deal with Mexico in August and has been pressuring Canada to sign on. Mr. Trump has repeatedly threatened to hit Canada with auto tariffs if it doesn’t reach a deal, and both American and Mexican officials have warned they are willing to move forward with a bilateral pact if Ottawa takes too long to reach an agreement.
Canada is prepared to allow U.S. dairy into Canada at rates that are higher than the 3.2 per cent under the 11-country Trans-Pacific Partnership, sources said. Ottawa also made concessions on section 7, which is part of the country’s milk classification system that is used to set prices for skim milk, whole milk powder and protein concentrates.
A senior Canadian official involved in the talks said there is no final written sign-off on Chapter 19 or dairy access but the insider said the two sides are close to a deal. An American source briefed on the talks said a final deal is likely to alter and water down the dispute resolution system at the U.S.’s behest, including by imposing a time limit on it.
Canada is also ready to agree to the same arrangement as Mexico to raise its duty-free limit to $100, according to a source. Canada’s duty free is currently $20.
The American source, however, said details on the duty-free limit had not yet been finalized. Canada has argued that the $100 threshold is too high, that it will lose out on GST revenue and has objected to the fact that the new rules will apply to goods coming from all countries, not only its NAFTA partners. The source said Canada is seeking some sort of trade-off between the ability to collect taxes on the goods and the number for the threshold.
A higher duty free limit would benefit consumers, who would pay less to order goods online, but could hurt retailers by exposing them to more competition.
Holding up a final deal is U.S. negotiators’ unwillingness to remove 25-per-cent tariffs imposed on Canadian steel and aluminum and guarantee there will be no tariffs on autos in the future.
Canadian and U.S. industry sources with knowledge of the negotiations said Canada originally insisted on absolute exemptions from the tariffs, but has now started to consider American proposals that would see Canada agree to quotas in exchange for the exemptions.
One U.S. industry source said the quotas would likely be designed to match current exports and add some room for growth. The idea would be to protect the current industry while closing off Canada and Mexico as back-door routes for other countries to circumvent tariffs and ship steel into the U.S.
One Mexican source with knowledge of the talks said Canada’s quest to keep protections for its cultural industries was also on the table. The source said Mexico has backed up Canada on this issue.
The senior Canadian official said there are tentative plans for Mr. Trudeau and Foreign Affairs Minister Chrystia Freeland to hold a news conference announcing a deal either Sunday night or Monday morning if the talks continue to progress.
But the insider cautioned the talks are still ongoing and Mr. Kushner and U.S. Trade Representative Robert Lighthizer still have to get sign-off from President Trump.
The Mexican source said officials in that country are optimistic about a Sunday deal.
Ms. Freeland cancelled a planned speech to the United Nations General Assembly on Saturday as the NAFTA talks took on a heightened urgency amid signs of a breakthrough deal.
The talks between U.S. and Canadian officials have been conducted through secure video link, according to one source involved in the secret negotiations.
Ms. Freeland has not so far made plans to come to Washington, said one Canadian official. A U.S. industry source said Canada’s ambassador to the U.S., David MacNaughton, has also been doing much of the heavy lifting in the final dash for a deal, and that officials in Mr. Trudeau’s office were in on the talks as well.
On Friday evening, Mr. Trudeau tweeted that he’d had “good calls” with the CEOs of three of Canada’s largest banks – Royal Bank of Canada’s Dave McKay, Bank of Montreal’s Darryl White and Victor Dodig of Canadian Imperial Bank of Commerce. In his tweet, Mr. Trudeau thanked them for their “advice and support,” seeking to show a united front with industry leaders.
The calls were initiated by the Prime Minister and took place over the last few days, as negotiations approached a critical juncture. There is a good deal at stake for Canada’s big banks: RBC, Toronto-Dominion Bank, BMO and CIBC all have significant U.S. operations, while Bank of Nova Scotia has a sizeable footprint in Latin America, including in Mexico.
Mr. Dodig said the Prime Minister had reached out to provide an update on the state of talks. “I reaffirmed the importance of the NAFTA agreement for our clients throughout North America,” Mr. Dodig said in an e-mail on Saturday.
Through a spokesperson, Mr. White said a successful conclusion to NAFTA talks “represents the single biggest economic opportunity for all three nations,” and added: “In my view, negotiators have demonstrated remarkable tenacity and resolve as they work towards a good deal.”
Mr. McKay was not available to comment.
In late June, Mr. Trudeau also tweeted about meeting with Scotiabank CEO Brian Porter, with whom he talked trade, and with TD CEO Bharat Masrani.