Northwest Arkansas Democrat-Gazette

Canada optimistic on trade

Mexican framework good start, envoy says

- Informatio­n for this article was contribute­d by Luis Alonso Lugo, Paul Wiseman and Rob Gillies of The Associated Press and by Erica Werner, Damian Paletta and David J. Lynch of The Washington Post.

Canadian Foreign Affairs Minister Chrystia Freeland said her meeting Tuesday with U.S. Trade Representa­tive Robert Lighthizer was “a very good, constructi­ve conversati­on” about how to revamp the North American Free Trade Agreement.

Freeland told reporters after the meeting she and her team plan to work this week in “a full-steam effort” and said both parties will start diving into specific issues this morning.

Freeland hurried to Washington a day after the Trump administra­tion reached a preliminar­y deal Monday with Mexico to replace the North American Free Trade Agreement.

She doesn’t have much time, because Lighthizer intends to formally notify Congress of the deal with Mexico on Friday.

Freeland said both parties “are set for an important and constructi­ve week” but also warned that “we are prepared for all scenarios.”

She said significan­t concession­s from Mexico in the areas of labor and rules of origin on cars “really paved the way for what Canada believes will be a good week.”

The office of the U.S. trade representa­tive said Mexico had agreed to ensure that 75 percent of automotive content be produced within the trade bloc (up from a current 62.5 percent) to receive duty-free benefits and that 40 percent to 45 percent be made by workers earning at least $16 an hour. Those changes are meant to encourage

more auto production in the United States. The pact also included intellectu­al property protection­s and labor rights rules. Tuesday’s meeting was the first time Freeland had met with her U.S. counterpar­ts in Washington since May. In announcing the deal with Mexico on Monday, Trump said he wanted to call it the “United States-Mexico Trade Agreement,” pointedly omitting Canada. Lighthizer intends to formally notify Congress of the deal Friday. That would begin a 90-day countdown that would allow Mexico’s outgoing president, Enrique Pena Nieto, to sign the new pact before leaving office Dec. 1. Otherwise, President-elect Andres Manuel Lopez Obrador might want to reopen the negotiatio­ns and further complicate the prospects for a new agreement. To intensify the pressure on Canada, Trump threatened Monday to impose taxes on Canadian auto imports. As a result, said Philip Levy, a senior fellow at the Chicago Council on Global affairs and a White House trade adviser in the administra­tion of President George W. Bush, Freeland is negotiatin­g “under threat of auto tariffs or the demolition of NAFTA.” The Trump administra­tion says the deadline isn’t as tight as it seems. After notifying Congress of the new trade pact, it has 30 days to make public a copy of the full text. “That means they have wriggle room” to fine-tune the details and squeeze Canada into a reimagined North American trade bloc, Levy said. U.S. Treasury Secretary Steven Mnuchin sounded an optimistic note Tuesday. “Our objective is to get Canada on board quickly,” Mnuchin told CNBC. “I don’t anticipate there is going to be a lot of sticking points.” Business groups and members of Congress are already demanding that Canada remain in the regional trade agreement. When the Trump administra­tion notified Congress last year that it intended to renegotiat­e NAFTA, critics note that the administra­tion said it would begin talks with both Canada and Mexico. It’s unclear whether the Trump team even has authority to reach a pact with just one of those countries. And Congress, which has to approve any NAFTA rewrite, might refuse to endorse a deal that excludes Canada. “I don’t think we’ve seen something like this before,” said Stephen Orava, a trade lawyer who is a partner at the King & Spalding firm. “The path, both legally and politicall­y, is a lot more complicate­d and has a lot more land mines.” After taking effect in 1994, NAFTA tore down most trade barriers among the United States, Canada and Mexico. Trade within the bloc soared. But many manufactur­ers moved plants south of the border to capitalize on lowwage Mexican labor and then shipped goods back to the United States. During the presidenti­al campaign, Trump railed about the manufactur­ing jobs lost to Mexico and about the U.S. trade deficit with its southern neighbor: $69 billion last year. This week’s trade pact is meant to change the ground rules and return some manufactur­ing to the United States. Among other things, the U.S.-Mexico deal requires that 40 percent to 45 percent of cars be made in a country with auto wages of at least $16 an hour in order to qualify for duty-free status. Mexican auto workers now earn an average of just over $5 an hour, Americans nearly $22 an hour. So if Mexico was the problem in Trump’s view, how did Canada find itself in the cross hairs? Canada, after all, is one of the few major economies that buy more goods and services from the United States than they sell. (The U.S. last year recorded a narrow trade surplus with Canada of nearly $3 billion.) And having fought as allies in conflicts from World War I to Afghanista­n, the two neighbors are so close that the creators of television’s South Park built an entire movie comedy around the laughable premise that they’d go to war with each other. But real flash points have remained. The two countries have battled over U.S. charges that Canada dumps subsidized lumber in the American market and uses big tariffs to protect its dairy farmers — topics likely to arise during Freeland’s visit. In Trump’s bombastic approach to policymaki­ng, “you need a villain or some drama, and that villain is Canada,” said Laura Dawson, director of the Canada Institute at the Wilson Center think tank. On Monday, Trump once again charged that Canada imposes dairy tariffs of nearly 300 percent. “We’re not going to stand for that,” he said, neglecting to note that the United States imposes huge tariffs of its own: 350 percent on tobacco imports, for instance, and 164 percent on peanuts. In fact, tariffs aren’t really a big issue between the United States and Canada: NAFTA eliminated most of them. In some ways, the rift between the United States and Canada seems personal. Trump was angered when Prime Minister Justin Trudeau said in a news conference after a contentiou­s Group of Seven summit in June that he wouldn’t let Canada be pushed around by Washington. Trump’s trade adviser Peter Navarro upped the ante by saying there was a “special place in hell” for Trudeau — a comment Navarro later said he regretted. Canada also seemed far less willing than Mexico to accept the kind of NAFTA rewrite that Trump was demanding. “Canada was happy with the status quo,” said Christophe­r Sands, director of Johns Hopkins University’s Center for Canadian Studies. Mexico, by contrast, “is keenly aware that NAFTA is their ticket out of developing country status … They wanted to do what it took to keep a deal. They were all about making a deal happen.” The U.S. and Canada announced no breakthrou­ghs Tuesday. But trade attorney Orava said: “There’s room for flexibilit­y on all sides.” But he conceded, “It’s going to be a very intense few days.”

 ?? AP/ANDREW HARNIK ?? Canadian Foreign Affairs Minister Chrystia Freeland arrives for talks Tuesday at the U.S. Trade Representa­tive Robert Lighthizer’s office in Washington. “We are prepared for all scenarios,” Freeland said after their meeting.
AP/ANDREW HARNIK Canadian Foreign Affairs Minister Chrystia Freeland arrives for talks Tuesday at the U.S. Trade Representa­tive Robert Lighthizer’s office in Washington. “We are prepared for all scenarios,” Freeland said after their meeting.
 ?? AP/ANDREW HARNIK ?? U.S. Trade Representa­tive Robert Lighthizer heads to a meeting Tuesday with Canadian Foreign Affairs Minister Chrystia Freeland at his office in Washington. Freeland rushed to Washington after the White House announced a deal Monday with Mexico to replace the North American Free Trade Agreement.
AP/ANDREW HARNIK U.S. Trade Representa­tive Robert Lighthizer heads to a meeting Tuesday with Canadian Foreign Affairs Minister Chrystia Freeland at his office in Washington. Freeland rushed to Washington after the White House announced a deal Monday with Mexico to replace the North American Free Trade Agreement.

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