NAFTA deal unlikely this week, raising tariff fears

NAFTA talks are picking up again, but a deal is unlikely to be reached this week, four people familiar with discussions said — increasing the odds the latest deadline will be missed amid President Donald Trump’s threat to freeze Canada out.

Canadian Foreign Minister Chrystia Freeland spoke briefly to reporters in Washington Wednesday morning before entering a meeting with U.S. Trade Representative Robert Lighthizer, saying staff has been hard at work ahead of their first in-person session in eight days. The two countries remain at odds on core issues, including dairy and dispute panels.

A deal is unlikely this week without major movement, the people said, speaking on condition of anonymity as negotiations continue. The talks could extend into next week, and several deadlines have been missed so far. A Canadian official had said today was the likely deadline to reach a deal in order to convert it to legal text by the end of the month.

The countries had been pressuring each other on the eve of the meeting. Rep. Steve Scalise of Louisiana, a key Republican lawmaker, warned in a statement Tuesday that congressional patience with Canada was wearing thin. Prime Minister Justin Trudeau, at the same time, continues to say he would rather see no deal than be forced to accept a bad one.

“We’ve been very clear that we’re interested in what could be a good deal for Canada, but we’re going to need to see a certain amount of movement in order to get there and that’s certainly what we’re hoping for,” Trudeau told reporters Wednesday in Ottawa.

The U.S. reached a preliminary deal with Mexico in August. Barring an accord with Canada, Trump has threatened to proceed with only his southern neighbor, though Scalise stopped short of saying Congress would go along with that.

“It is growing increasingly unlikely that you can get text to the Congress by Sept. 30,” said Jennifer Hillman, a professor of law at Georgetown University and former general counsel to the Office of the U.S. Trade Representative. It’s even more unlikely to proceed quickly with only Mexico, she said. “Canada does still have some leverage.”

Scalise, the House majority whip, said if Canada does not “cooperate” then Congress would “consider options about how best to move forward,” though he didn’t specify how.

“There is a growing frustration with many in Congress regarding Canada’s negotiating tactics,” Scalise said in the statement.

There have also been numerous calls in the U.S. to include Canada. In a joint letter dated Monday, three major U.S. business groups — the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers — said it would be “unacceptable to sideline Canada,” the top buyer of U.S. goods.

Prominent members of Congress have also said that Canada should be part of any new North American trade agreement.

“I think that if all three countries are in and all signed up, there’s a much higher likelihood this gets passed,” Bruce Heyman, a former U.S. ambassador to Canada under Barack Obama, said Tuesday on BNN Bloomberg television. There’s no sign a Mexico-only deal can be passed by Congress, he said, while shrugging off the significance of Scalise’s statement. “I think Steve Scalise is carrying water for USTR,” he said.

Canadian officials are warning that they’re prepared to see the next deadline pass if they don’t get an agreement they can live with, according to two people familiar with the talks. The Canadians need effective dispute settlement provisions in anti-dumping cases, and certainty to avoid misuse of national security investigations, under which Trump has applied tariffs, one of the people said.

Sticking points in talks include dairy, where the U.S., facing a supply glut, is seeking a bigger cut of Canada’s protected market. In exchange, Canada is hoping to preserve some form of anti-dumping panels contained in Chapter 19 of the North American Free Trade Agreement, and an exemption for Canadian cultural industries.

Other American demands include longer intellectual property and pharmaceutical patent protection and a higher threshold for duty-free shipments across the U.S.-Canada border, none of which the Canadians have signaled are deal-breakers.

It’s unclear what will happen if it becomes impossible to publish text of a deal by Sept. 30. The countries could extend talks, but that means Mexico’s president-elect, Andres Manuel Lopez Obrador — who takes office Dec. 1 — will have to be the one to sign the new agreement.