Canada and the U.S. are rushing to close a renegotiated NAFTA this weekend under threat from the Trump administration to impose hefty tariffs on Canadian autos if a deal is not reached soon.
On Saturday, Canada’s Foreign Affairs Minister Chrystia Freeland postponed her marquee UN speech so she could focus on ongoing trade talks, government officials said.
Officials in Ottawa and Washington – talking via secure video link – are planning to negotiate through Saturday and Sunday in hopes of bridging the final gaps between the two countries and allowing Canada to sign onto the deal negotiated last month by the United States and Mexico, two sources in the Canadian government and U.S. industry said.
The United States wants to present text of the deal to the U.S. Congress by Oct. 1 to start a 60-day countdown to a final deal-signing by the end of November.
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Canada has made significant concessions to the United States on its protected dairy market in order to get a deal, four people in government and industry on both sides of the border said. The major unresolved issues are Canada’s demands to preserve the Chapter 19 dispute-settlement provision and get a guarantee from the Trump administration that it will not impose auto tariffs, the people said.
In a sign of the rapidly evolving talks, the United States and Mexico abruptly dropped plans on Friday to publish the text of their bilateral trade deal, holding it back in case it has to be revised to add Canada over the weekend.
And Mexican president-elect Andres Manuel Lopez Obrador said Prime Minister Justin Trudeau called him the previous night to ask him to intercede with U.S. President Donald Trump.
Mr. Trudeau also spoke with the heads of three of Canada’s major banks to discuss the implications of the down-to-the-wire NAFTA negotiations. He tweeted Friday night: “Good calls touching base on NAFTA negotiations with @BMO’s Darryl White, @RBC’s David McKay and Victor Dodig of @cibc. My thanks for your advice and support.”
Mr. Trump has threatened for months to hit Canada with auto tariffs if a deal is not reached. Such a move would be highly damaging for the Canadian industry, which exports nearly 90 per cent of what it produces to the United States.
One U.S. industry source briefed by American officials said Washington had told Ottawa it was serious about enforcing its latest NAFTA deadline after missing four previous ones and could swiftly move forward with auto tariffs if it is not met. The source said the United States did not want to lose face in its many trade battles by failing to enforce the latest deadline. But a Canadian official said the United States has not made any new tariff threats – Canada is simply operating under Mr. Trump’s usual threats.
A senior Canadian official said that Mr. Trudeau is aware of the serious implications to the Canadian economy of U.S. auto tariffs but Ottawa won’t give in to such pressure. Canada will refuse a NAFTA deal if the Americans do not agree to keep Chapter 19 and lift tariffs on steel and aluminium, the official said.
Mexican officials vowed to do what they could to help talks along.
“[Trudeau] asked me to call the Government of the United States,” Mr. Lopez Obrador told reporters after a meeting with a Mexican state governor. “We promised to do this … we want a good relationship with Canada and with the U.S.”
The president-elect said Canada had made a proposal, and received a counter-proposal from the U.S. Friday morning. He said Mr. Trudeau told him negotiations are “very difficult” and that “maybe it was not going to be possible” for the two sides to strike a deal.
Mexican Economy Secretary Ildefonso Guajardo Villarreal told his country’s Senate on Friday night it would soon be clear where Canada stood.
“In the next 48 hours, we will know if we’re going to go with a trilateral text or if we’re going to be forced to publish a text of the bilateral deal,” he said.
A Mexican source close to the talks said Secretary of Foreign Affairs Luis Videgaray Caso has been in contact with officials in both the United States and Canada in a bid to help them reach a deal.
Juan Pablo Castanon, president of the Business Coordinating Council, a coalition of business organizations that is Mexico’s main industry lobby, said he was optimistic Canada would join the deal imminently.
“The information we have is that they are finding creative formulas so that in the short term Canada can be incorporated,” said Mr. Castanon, who is the main voice representing Mexican business interests consulting Mr. Guajardo in the trade talks.
Observers close to the talks said Washington was firm on its timeline.
“The U.S. still sees October 1st as a final deadline, and the U.S. is prepared to show there are consequences for any country that misses a deal,” said Daniel Ujczo, an Ohio-based trade lawyer with Dickinson Wright who represents steel and auto companies invested in NAFTA.
But three sources in the Canadian government and industry and U.S. industry said there was still a long way to go on the core issues. United States Trade Representative Robert Lighthizer has refused to give in on Canada’s demand for Chapter 19 to remain in the deal. And Canada is demanding an absolute exemption from potential future auto tariffs, the sources said, while the U.S. wants a deal similar to the one Mexico signed, in which only some auto exports are shielded and some future vehicles could be hit with the levies.
Auguring well for Canada, however, is the difficulty of taking apart the world’s largest free-trade zone and splitting it into separate arrangements.
Flavio Volpe, head of Canada’s auto parts industry lobby, said tougher auto content rules Mexico agreed to in its deal with the U.S. – including sourcing 70 per cent of steel and aluminium from within the NAFTA zone – would be all but impossible to meet without all three countries involved.
“If the numbers are what we know them to be, it would be impossible for Mexican and American auto assembly to meet them without Canada,” he said.
The three countries negotiated trilaterally until the spring, when Canada made a bid to reach a quick deal with the U.S. After the Trump administration rejected that, it turned to Mexico and the two countries negotiated without Canada over the summer. At the end of August, they reached the current pact and began pressing Canada to join in.
Mexico, however, was only able to reach its deal with the U.S. by making significant concessions, including agreeing to provisions that will force higher wages in the auto industry in a bid to move manufacturing jobs to the U.S. It also had to agree to tougher content rules on textiles that could make its industry less competitive.
With reports from Steven Chase, Eric Atkins and Reuters
Adrian Morrow
Robert Fife