Luis Alonso Lugo

Trade talks with Canada proceed after Trump comments leak

WASHINGTON (AP) — Talks to keep Canada in a North American trade bloc broke up Aug. 31 and will resume next week with the two longtime allies divided over such issues as Canada’s dairy market and U.S. efforts to shield drug companies from generic competition. President Donald Trump notified Congress on Aug. 31 that he plans to sign an agreement in 90 days with Mexico to replace the North American Free Trade Agreement — and hopes Canada can brought on board, too. Congress eventually would have to approve any agreement. The U.S. and Mexico reached a deal on Aug. 27 that excluded Canada. The top Canadian trade envoy, Foreign Affairs Minister Chrystia Freeland, then hurried to Washington for talks aimed at preserving Canada’s membership in the regional trade agreement. But Freeland couldn’t break an impasse in four days of negotiations with U.S. Trade Representative Robert Lighthizer. The U.S.-Canada talks will resume Wednesday. The negotiations had taken an odd turn for the worse Friday over news that President Donald Trump had told Bloomberg News that he wasn’t willing to make any concessions to Canada. Trump said he wanted the remarks to remain off-the-record; otherwise, the president said, “it’s going to be so insulting they’re not going to be able to make a deal.” The comments were leaked to the Toronto Star, and on Friday afternoon, Trump took to Twitter to angrily confirm the Star’s report: “Wow, I made OFF THE RECORD COMMENTS to Bloomberg concerning Canada, and this powerful understanding was BLATANTLY VIOLATED. Oh well, just more dishonest reporting. I am used to it. At least Canada knows where I stand!” Freeland tried to brush off the controversy in a news conference. “My negotiating counterparty is Ambassador Lighthizer,” she said. “He has brought good faith and good will to the table.” “It is Trump’s bluster at best, but obviously he is not going to force anyone into a bad deal,” said Jerry Dias, president of the Canadian private-sector union Unifor. “It is clear the U.S. economy is much bigger than ours, but trying to embarrass the Canadian team, trying to insult Canadians, is not going to get him anywhere.” Still, Freeland expressed confidence that Canada could reach a deal with the United States on a revamped trade accord that could please all sides. “We know a win-win-win agreement is within reach,” she said. Some questioned the Trump administration’s hardball approach — cutting a deal with Mexico and pressing Canada to comply or risk being left out. “The approach the Trump administration has taken — ‘my way or the highway’ — doesn’t seem designed to get to yes,” said Michael Camunez, CEO of Monarch Global Strategies who served in President Barack Obama’s Commerce Department. Philip Levy, senior fellow at the Chicago Council on Global Affairs and a White House economist under President George W. Bush, added, “The president’s approach of brinksmanship is so far not very successful in international agreements.” The 24-year-old NAFTA tore down most trade barriers dividing the United States, Mexico and Canada. Trade between the three countries surged. But many manufacturers responded to the agreement by moving factories south of the border to take advantage of low Mexican wages, then shipping goods north to the United States and Canada. Trump has charged that the deal wiped out American factory jobs. He has vowed to negotiate a better deal — or withdraw from NAFTA altogether. Talks on a new trade deal started a year ago but bogged down over U.S. demands, including some meant to return manufacturing to the United States. A few weeks ago, the United States began negotiating with Mexico, leaving Canada on the sidelines. Outgoing Mexican President Enrique Pena Nieto wanted to sign a deal before he left office Dec. 1. The deal announced Aug. 27 would, among many other things, require that 40 percent to 45 percent of a car be made in a North American country where auto workers made at least $16 an hour — that is, not in Mexico — before qualifying for duty-free status. Canada doesn’t have much of an objection to the auto provisions of the U.S.-Mexican deal, which would benefit Canadian workers, too. Ottawa does have other complaints. Neither U.S. nor Canadian negotiators are talking publicly about the issues that divide them. But Daniel Ujczo, a trade attorney of the law firm Dickinson Wright in Columbus, Ohio, and others say the flashpoints include trade barriers that protect Canadian dairy farmers and Ottawa’s insistence on keeping NAFTA provisions for resolving disputes. Also nettlesome is a provision in the U.S.-Mexico deal that shields U.S. makers of biologics — ultra-expensive drugs produced in living cells — from generic competition for 10 years instead of the eight Canada is willing to live with: The Canadians fear the protection will drive up drug prices and make their government health care system more costly. The Trump administration had insisted that it wanted a deal by Aug. 31, beginning a 90-day countdown that would let Mexico’s Nieto sign the pact before leaving office. But under U.S. trade rules, the U.S. team doesn’t have to make public the text of the revamped agreement for 30 additional days, buying more time to reach a deal with the Canadians. Denise Bode, a partner at the Michael Best Strategies consulting firm, downplayed the importance of deadlines. “If they’re making progress, they’ll continue to work until they get a resolution or realize they can’t reach a resolution,” she said. Freeland likewise shrugged off the time constraints. “For Canada, the focus is on getting a good deal,” she said, “and once we get a good deal for Canada, we will be done.” Lighthizer’s statement Aug. 31 said Trump intends to sign a new trade deal with Mexico, whether or not Canada is part of it. But it might not be that easy. When the Trump administration notified Congress last year that it intended to renegotiate NAFTA, critics note that it said it would enter 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. “There is no NAFTA without Canada,” said John Bozzella, president of Global Automakers, a trade group. “Auto rules included in the understanding reached between the United States and Mexico are predicated on Canada’s participation.” Even while gripped in negotiations with Mexico and now Canada over a new North American trade pact, the administration has been fighting major trading partners on other fronts. The president has imposed wide-ranging tariffs that, he argues, will help protect American workers and force U.S. trading partners to stop exploiting trade deals that are unfair to the United States. Since March, for example, Trump’s team has applied new tariffs of up to 25 percent on nearly $85 billion worth of steel and aluminum on the grounds that these imports pose a threat to America’s national security. The administration has also applied taxes to $50 billion in Chinese products, mostly goods used in manufacturing. And it’s considering slapping tariffs of up to 25 percent on an additional $200 billion in Chinese imports after a public comment period ends Sept. 6. Unlike the previous Chinese imports subject to U.S. tariffs, this larger group of goods includes parts and materials that U.S. companies depend on, along with consumer goods. These tariffs are the administration’s response to its charges that Beijing uses predatory tactics to try to supplant U.S. technological supremacy. Beijing’s tactics include cyber-theft and a requirement that American companies hand over trade secrets in exchange for access to China’s market. ^ Gillies reported from Toronto. AP Economics Writer Christopher Rugaber contributed to this story.

Talks with Canadian officials expected after US-Mexico deal

WASHINGTON (AP) — Canada’s minister of foreign affairs was scheduled to hold talks in Washington on Aug. 28 in hopes of reaching a trade agreement with the United States, an urgent response after President Donald Trump announced a deal with Mexico on Aug. 27 that left out Canada. The official, Chrystia Freeland, is facing a tight deadline to keep the three nations that formed the North American Free Trade Agreement 24 years ago together in a trade pact. The deal unveiled by Trump — whose administration set an Aug. 31 deadline — raised several key questions: Can Canada, the United States’ second-largest trading partner, be coaxed or coerced into a new pact? If not, is it even legal — or politically feasible — for Trump to reach a replacement trade deal with Mexico alone? And will the changes being negotiated to the 24-year-old NAFTA threaten the operations of American and foreign companies that have built sophisticated supply chains that span the three countries? “There are still a lot of questions left to be answered,” said Peter MacKay, a former Canadian minister of justice, defense and foreign affairs who is now a partner at the law firm Baker McKenzie. Trump was quick to proclaim the agreement a triumph, pointing to the Aug. 27 surge in the stock market, which was fueled in part by the apparent breakthrough with Mexico. “We just signed a trade agreement with Mexico, and it’s a terrific agreement for everybody,” the president declared. “It’s an agreement that a lot of people said couldn’t be done.” Trump suggested that he might leave Canada out of a new agreement. He said he wanted to call the revamped trade pact “the United States-Mexico Trade Agreement” because, in his view, NAFTA has earned a reputation for being harmful to American workers. But first, he said, he would give Canada a chance to get back in — “if they’d like to negotiate fairly.” To intensify the pressure on Ottawa to agree to his terms, the president threatened to impose new taxes on Canadian auto imports. Talking to reporters, the top White House economic adviser, Larry Kudlow, urged Canada to “come to the table.” “Let’s make a great deal like we just made with Mexico,” Kudlow said. “If not, the USA may have to take action.” Canada’s NAFTA negotiator, Foreign Minister Chrystia Freeland, cut short a trip to Europe to fly to Washington on Aug. 28 to try to restart talks. “We will only sign a new NAFTA that is good for Canada and good for the middle class,” said Adam Austen, a spokesman for Freeland, saying that “Canada’s signature is required.” MacKay added, “There is still a great deal of uncertainty — trepidation, nervousness, a feeling that we are on the outside looking in.” Critics denounced the prospect of cutting Canada out a North American trade pact, in part because of the risks it could pose for companies involved in international trade. Many manufacturers have built vital supply systems that depend on freely crossing all three NAFTA borders. Noting the “massive amount of movement of goods between the three countries and the integration of operations,” Jay Timmons, president of that National Association of Manufacturers, said “it is imperative that a trilateral agreement be inked.” Trump has frequently condemned the 24-year-old NAFTA trade pact as a job-killing “disaster” for American workers. NAFTA reduced most trade barriers between the three countries. The president and other critics say the pact encouraged U.S. manufacturers to move south of the border to exploit low-wage Mexican labor. The preliminary deal with Mexico might bring more manufacturing to the United States. Yet it is far from final. Even after being formally signed, it would have be ratified by lawmakers in each country. The U.S. Congress wouldn’t vote on it until next year — after November midterm elections that could end Republican control of the House of Representatives. But initially, it looks like at least a tentative public-relations victory for Trump, the week after his former campaign manager was convicted on financial crimes and his former personal attorney implicated him in hush money payments to two women who say they had affairs with Trump. Before the administration began negotiating a new NAFTA a year ago, it had notified Congress that it was beginning talks with Canada and Mexico. So the Aug. 27 announcement raises the question: Is the administration authorized to reach a deal with only one of those countries? A senior administration official, who briefed reporters on condition of anonymity, said yes: The administration can tell Congress it had reached a deal with Mexico — and that Canada is welcome to join. But other analysts said the answer wasn’t clear: “It’s a question that has never been tested,” said Lori Wallach, director of the left-leaning Public Citizen’s Global Trade Watch. Even a key Trump ally, Rep. Kevin Brady, the Texas Republican who is chairman of the House Ways and Means Committee, expressed caution about Monday’s apparent breakthrough. Brady said he looked forward “to carefully analyzing the details and consulting in the weeks ahead to determine whether the new proposal meets the trade priorities set out by Congress.” And the No. 2 Senate Republican, John Cornyn of Texas, while hailing Monday’s news as a “positive step,” said Canada needs to be party to a final deal. “A trilateral agreement is the best path forward,” Cornyn said, adding that millions of jobs were at stake. There are political reasons to keep Canada inside the regional bloc: “Mexico will have a difficult time selling ‘Trump’s deal’ back home if Canada does not think it is a good deal,” said Daniel Ujczo, a trade attorney with Dickinson Wright PLLC. “It will appear that Mexico caved.” Indeed, Mexico has said it wants Canada included in any new deal to replace NAFTA. “We are very interested in this being an agreement of three countries,” said President-elect Andres Manuel Lopez Obrador. At the same time, Foreign Minister Luis Videgaray told reporters that “Mexico will have a free trade agreement regardless of the outcome” of U.S.-Canada negotiations. 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. For months, the talks were held up by the Trump administration’s insistence on a “sunset clause”: A renegotiated NAFTA would end after five years unless all three countries agreed to continue it. Mexico and Canada considered that proposal a deal-killer. On Aug. 27, the Trump administration and Mexico announced a compromise on that divisive issue: An overhauled NAFTA would remain in force for 16 years. After six years, the countries would review the agreement and decide whether it needed to be updated or changed. They then would either agree to a new 16-year deal or the pact would expire.
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