Canada brings tempered optimism to talks
OTTAWA — Canada enters crucial talks in Washington on the renegotiation of the North American Free Trade Agreement this week with a complex mix of self-confidence and dread about possible damage to its most important trading relationship.
The country’s economy and currency are showing surprising strength, and Canadians are basking in the attention being showered on them and their popular prime minister, Justin Trudeau, in the United States and elsewhere.
Trudeau has not been immune to criticism at home, but he is credited with using his considerable charm to build a positive relationship with the mercurial U.S. president and his family while avoiding the unpleasantness that has marred exchanges between Donald Trump and allies such as Australian Prime Minister Malcolm Turnbull and Mexico’s President Enrique Peña Nieto. He has made frequent visits to the United States, attending a Canadathemed musical on Broadway with Ivanka Trump and most recently making a pitch for free trade at the National Governors Association conference in Rhode Island in July.
“Free trade has worked. Its working now,” Trudeau told the governors, as he urged Americans to avoid a move toward protectionism. “If anything, we’d like a thinner border for trade, not a thicker one.”
But Canadian officials don’t expect it will be all plain sailing in Washington when the three-way talks begin Wednesday. While they believe Trump’s major trade gripes are with Mexico, they remain concerned about U.S. efforts to gain concessions in such politically contentious sectors as lumber, dairy and wine, as well as a threat by the Americans to weaken the dispute-settlement mechanism, which Canada achieved only with difficulty in its original free-trade talks with the United States in the 1980s.
There is also pressure from all sides to modernize the agreement to deal more adequately with trade in services and the digital economy.
“Canadians should be prepared for tough, difficult and rather unpleasant negotiations,” Larry Herman, a Toronto trade lawyer, said. “I don’t think there’s any basis for complacency.”
Herman said that the work of the teams from Canada, Mexico and the United States is complicated by the presence of two “gorillas” in the room. The first is the U.S. Congress, which has signaled its intention to be more involved in the talks than it was in the original NAFTA negotiations. The second is Trump himself.
“One tweet from the president can upset a lot of the U.S. negotiating strategy,” Herman said.
Michael Kergin, a former Canadian ambassador to Washington, said that the Trudeau government has handled relations with the White House well so far but that once detailed talks begin, that may not make much difference. “There are no friendships in foreign policy, only interests,” he said.
Despite years of efforts to broaden its trading relationships, including the recent signing of a free-trade pact with the European Union, Canada remains highly dependent on trade south of the border. Three-quarters of Canadian exports flow to U.S. customers, while only 18 percent of U.S. exports go to Canada, although Canada remains the single largest customer for U.S. goods.
Of the three partners in the original 1994 NAFTA deal, Canadians are by far the most upbeat about its benefits. According to a Pew Research Institute poll published in May, 74 percent of Canadians thought the agreement had been “a good thing” for their country, against only 17 percent who thought it had been bad.
Among Mexicans, 60 percent thought NAFTA was a good thing for Mexico, while 33 percent thought it was bad. Americans were the most negative, with 51 percent agreeing that the trade pact was good for their country, while 39 percent thought it was bad.