PM to visit US, Mexico amid NAFTA turbulence

WASHINGTON Justin Trudeau will visit the North American capitals next week amid early signs of turbulence in continental trade negotiations that have stoked some concern from NAFTA supporters about the agreement’s long-term prospects.

The prime minister will meet U.S. President Donald Trump during a two-day visit to Washington, followed by a meeting with Mexican President Enrique Pena Nieto during a twoday visit to Mexico City.

The trip was not specifically designed around NAFTA, say Canadian officials, noting that it was in the works for some time and began with an invitation to a women-in-business summit in Washington, coupled with Trudeau’s longstanding plan to visit Mexico. But trade will come up, they said. Some officials have been unnerved by early sticking points that have emerged even before the negotiations touch the hardest issues: dairy, auto parts, the dispute-resolution system and the U.S. idea of forcing a mandatory review of NAFTA every five years.

A rare major file that has already opened involves so-called Buy American rules. And America’s neighbours were dismayed by the U.S. proposal during the last round in Ottawa: that access to U.S. public works be restricted to a one-for-one ratio — a dollar’s worth of U.S. contracts for every dollar of contacts across the border.

“Which is ridiculous,” said an official in one of the other NAFTA countries.

“Whether they’re just driving a hard bargain (or serious about this idea, we) don’t know.”

Canada’s position is that it’s unrealistic to expect perfect reciprocity given massive differences in market size. It has pushed back against some of the numbers cited by fans of Buy American rules, who argue the U.S. offers nearly 100 times more access to government procurement ($198 billion) than it gets from Canada ($2.25 billion at the federal level).

The Canadian embassy recently sent Washington lawmakers a letter citing a counter-statistic: that just three per cent of U.S. federal contracts are won by foreign suppliers, while 11 per cent of Canadian federal contracts go to foreign firms.

One Washington trade consultant says that’s not the main sign of trouble.

Eric Miller says what he finds worrying is that even on comparably simple issues like textiles and fruits and vegetables, the default U.S. position so far tends toward restrictions on trade.

He said that’s causing anxiety in boardrooms, given the Trump administration’s stated intention: to get a new deal, or terminate NAFTA. He said he’s aware of more than one Fortune 500 company that has briefed its board on the need to plan for the possibility of a world without NAFTA.

“Things are going pretty badly,’’ said Miller, head of the Rideau Potomac Strategy Group, which has advised different clients on trade issues, including Industry Canada.