Donald Trump’s unpredictable nature and hostile opposition to free trade is looming over NAFTA talks as Prime Minister Justin Trudeau and his negotiating team stay uncertain about what the U.S. President desires from a reformed pact, or if he would even sign a deal and risk alienating his base, according to high-tech resources.
Negotiating teams from Canada, Mexico and Washington sat down for another day of discussions in Ottawa on Sunday, with sources saying progress has been made around less-significant matters affecting small and medium-size business in addition to the environment and competition.
The more controversial issues involving trade dispute-resolution mechanics and rules of origin for the automobile sector are anticipated to be increased on Tuesday evening and Wednesday when Foreign Affairs Minister Chrystia Freeland, her Mexican counterpart Luis Videgaray and U.S. Trade Representative Robert Lighthizer hold trilateral discussions.
The Globe and Mail has spoken to key players — that were only authorized to speak on desktop — to put out the critical challenges ahead as negotiators aim to complete a deal by February, 2018, at the latest.
“Really nobody understands what Donald Trump wants. Does he want a bargain or does he need something he can then turn down and say to his foundation: ‘I told you these Canadians and Mexicans are untrustworthy. This is a bad deal for America,'” a senior advisor to Mr. Trudeau told The Globe on Sunday. “They aren’t sure yet what he needs.”
In discussions with Mr. Lighthizer and U.S. Commerce Secretary Wilbur Ross, Canadian officials have gotten the impression that they have a “constituency of one” (Mr. Trump) and are stuck in a “position where they want to please” the President instead of negotiate on issues of material to gain all three countries
Canadian and Mexican officials have arrived at the meetings well-prepared and briefed while the U.S. negotiating team isn’t performing to the standards expected of them, one source said, noting that the Americans have not provided a complete assortment of texts for the discussions.
Complicating the discussions is apparent friction between Mr. Lighthizer and Mr. Ross, who had been told by Mr. Trump that he “would be the big shot” from the North American free-trade agreement discussions, a source said.
Mr. Lighthizer, who’s a more experienced trade negotiator and more comfortable with Washington politics, has managed to convince the White House to let him operate the NAFTA file. He’s made it clear to his Canadian and Mexican counterparts he answers only to the President and Congress.
Canadians are still waiting for the United States to indicate a text regarding rules of origin for cars and for the Chapter 19 dispute mechanism, which the United States alleges hinders it from chasing anti-dumping and anti-subsidy cases against Canadian and Mexican companies.
On the eve of the Ottawa talks on Friday, Mr. Ross fired a salvo when he published a study he commissioned that contended there isn’t sufficient U.S. product manufacturing — called rules of origin — in Canadian- and Mexican-made autos.
Mr. Ross’s study asserted U.S. content of manufactured goods imported from Canada dropped significantly — to 15 percent from 21 per cent. U.S. content in products imported from Mexico dropped even more — to 16?per cent from 26 per cent.
The U.S. study was quickly refuted by Canadian auto-industry executives that estimate that there is between 60 percent and 70 percent U.S. content in Canadian-assembled vehicles. U.S. content in Mexican-assembled vehicles is estimated at 40 percent.
A Canadian advisor to Mr. Trudeau confessed the “Ross figures are false,” but said Canada shouldn’t take part in a public war of words with the Americans and should rather face them with the facts in the negotiating table.
Up to now, chief U.S. negotiator John Melle has yet to table or even hint at what the Americans anticipate for new rules of automobile origin, which currently stand at 62.5 percent North American automobile content to qualify for duty-free motion between Canada, the USA and Mexico.
Another significant issue that has not yet been raised and might end up being a deal-breaker is that the Chapter 19 dispute-resolution mechanism. This provides for independent, binational panels to adjudicate countervailing duty and anti-dumping instances. The USA needs these disputes resolved by judicial review in national courts.
A senior Canadian official said Mr. Trudeau regards Chapter 19 as the “red line” that Canada won’t cross. The official said Mr. Trudeau is prepared to walk away from the negotiations if the United States makes Chapter 19 a make-it-or-break-it scenario.
1 advisor to Mr. Trudeau cautioned that talks are in the first stage and noticed that the Prime Minister could play an essential role in conserving the deal since he has a superb relationship with Mr. Trump, very similar to what Brian Mulroney had with with Ronald Reagan. The source stated that Mr. Trudeau, Ms. Freeland and their team of advisers have aimed to create personal bonds with Mr. Trump, his family, closest advisers and Mr. Ross and Mr. Lighthizer.
An August poll conducted for The Globe reveals the vast majority of Canadians were supportive of the Trudeau plan of building relationships with the Trump government to advance Canadian interests.
A Nanos Research Poll, conducted between Aug. 30 and Sept. 1 of 1,000 Canadians, found that 65 percent of Canadians were comfortable or somewhat comfortable with Canadian officials being friendly with members of the Trump government. The margin of error of the random survey was 3.1 percentage points, 19 times out of 20.
Insiders say progress has been forced to rewrite NAFTA’s Chapter 11 Investor State Dispute Settlement (ISDS), along the lines of this arrangement from the recently concluded Canada-EU trade arrangement (CETA). Ms. Freeland and her staff have been pushing hard on CETA-style investor-protection provisions, including the establishment of a roster of judges to arbitrate disputes.
Canadian and U.S. negotiators are open to reforming Chapter 11 to recognize a nation’s inherent right to protect on issues like the environment or health and safety. The Trans-Pacific Partnership agreement, which Mr. Trump walked away from, had similar language.
Sources also say Canada and the United States are taking a firm stand on the enforcement of labor standards. They need a renegotiated NAFTA pact to include penalties if Mexico attempts to maintain its wages low by not living up to the labor standards set by the three nations.
At the conclusion of Sunday’s talks, chief Canadian negotiator Steve Verheul said over each of the three sides are making “good solid progress … but the end game is always the toughest and impossible to predict.”
With a report from Reuters
Courtesy: The Globe And Mail