Trump touts trade deal with Mexico, threatens new tariffs on Canadian cars
Published Monday, August 27, 2018 10:32AM EDT
Last Updated Monday, August 27, 2018 6:37PM EDT
Foreign Affairs Minister Chrystia Freeland is leaving a diplomatic trip to Europe to head to Washington D.C. following the announcement of a trade deal between the United States and Mexico.
U.S. President Donald Trump said Monday that the two countries had reached an “understanding” on trade, allowing Canadian officials to be brought back into the talks.
Trump announced from the White House that five weeks of negotiations between the two countries, including discussions that ran through the weekend, had resulted in an agreement.
“A lot of people thought we’d never get here,” he said. “It’s a big day for trade. A big day for our country.”
The U.S. president also had words for Canada, which was not involved in the weekend talks between the U.S. and Mexico.
“If they’d like to negotiate fairly, we’ll do that,” he said, adding that he would be calling Prime Minister Justin Trudeau “very soon” to talk about trade.
Later that day the two leaders spoke. According to a readout from the PMO, Trump and Trudeau had a “constructive” conversation, in which the pair “welcomed the progress that has been made in discussions with Mexico and look forward to having their teams engage this week with a view to a successful conclusion of negotiations.”
Foreign Affairs Minister Chrystia Freeland was scheduled to spend the week in Europe, but announced Monday that she would be cutting the trip short in order to head to Washington to take part in negotiations.
The Canadian response
Although some observers have suggested Canada was deliberately sidelined from the talks so the other two countries could carve out a deal less favourable to Canada, the federal government said it considered Monday’s announcement of a U.S.-Mexico deal to be a positive sign.
“Canada is encouraged by the continued optimism shown by our negotiating partners,” Ministry of Foreign Affairs spokesperson Adam Austen said in a statement. “Progress between Mexico and the United States is a necessary requirement for any renewed NAFTA agreement.”
Canadian officials have said the U.S. and Mexico were primarily focused on issues only affecting their countries during the discussions that did not involve Canada.
Austen said Canada remains “in regular contact” with the U.S. and Mexico on NAFTA-related issues and will “only sign a new NAFTA that is good for Canada and good for the middle class.”
“Canada’s signature is required” on any modifications to NAFTA, Austen added.
The Prime Minister’s Office released a statement saying Trudeau and Mexican President Enrique Pena Nieto had spoken on Sunday.
“The leaders discussed the ongoing negotiation of the North American Free Trade Agreement and shared their commitment to reaching a successful conclusion to this agreement for all three parties,” the statement said.
Freeland’s sudden plans to travel to Washington helped fuel speculation that the U.S. administration was looking to have the Canadian portion of the talks wrapped up in the next few days.
Inu Manak, a visiting scholar at the Washington-based CATO Institute, said Canada and Mexico have been “on the same page” on a lot of issues, and anything left to hammer out could be more contentious.
“Negotiations could get quite difficult,” she told CTV News Channel.
Deal includes long-term sunset clause
The “understanding” announced Monday includes a sunset clause terminating the agreement, though only after a longer period of time than the U.S. had initially proposed.
Both Canada and Mexico objected to earlier U.S. demands that the renegotiated deal expire after five years unless all three countries agree on extending it.
U.S. trade representative Robert Lighthizer said the agreement between the U.S. and Mexico includes an expiration after 16 years, although the countries can choose to resolve issues every six years, after which the deal would be in effect for another 16 years.
Lighthizer said Mexico was in agreement with this portion of the deal. He said it had yet to be discussed with Canada.
Other aspects of the U.S.-Mexico deal, according to the U.S. government, include new rules on the origins of auto parts and a requirement that 40 to 45 per cent of “auto content” be manufactured by workers paid at least US$16 per hour.
The wage requirement caught the attention of Unifor president Jerry Dias, who told The Canadian Press that it would help prevent auto manufacturing jobs from leaving Canada for lower-wage jurisdictions.
“I believe this should stop the bleeding in Canada,” he said.
Any NAFTA-related agreement must be ratified by the U.S. Congress. Manak said that approval could be complicated by November’s midterm elections, as it is unlikely any agreement will be presented to Congress and put to a vote before election day.
What’s in a name?
Trump said Monday that he was going to get rid of the NAFTA name because it carries a “bad connotation” in his country.
“The United States was hurt very badly by NAFTA,” he said.
Trump said the newly announced deal would be known by the “elegant name” of “United States-Mexico Trade Agreement,” and said Canada could either join that agreement or forge a second, bilateral deal with the U.S.
Nieto was present for the announcement via speakerphone and said repeatedly that he wanted to see one deal made involving all three countries.
“I really hope and I desire, I wish that this part with Canada will be materializing in a very concrete fashion,” he said through a translator.
During his remarks, Nieto consistently referred to the deal by the NAFTA name.
In a series of Spanish-language tweets following the announcement, Nieto used the term TLCAN – the Spanish translation of NAFTA – three times.
Robert Wolfe, a professor emeritus of policy studies at Queen’s University in Kingston, Ont., told CTV News Channel that Trump’s description of the “understanding” with Mexico was at odds with what Lighthizer had announced.
“He doesn’t have a Meixco-U.S. trade agreement. What he has is an agreement between negotiators on some of the issue that had been dividing Mexico and the United States in the overall renegotiation of NAFTA,” Wolfe said.
Changing the name of the full deal including Canada might still be a savvy move for Trump, Wolfe said, given NAFTA’s relative unpopularity in the U.S.
Autos vs. dairy
Trump suggested that Canadian tariffs on American dairy products could be a key issue for U.S. negotiators, and suggested his country could look to target the Canadian auto sector in retaliation.
“The easiest thing we can do is to tariff their cars coming in. It’s a very simple negotiation. It could end in one day,” he said.
Dairy tariffs have long been a source of irritation for Trump on the subject of Canadian trade. He took aim again Monday at the nearly-300-per-cent surcharge slapped on some American butter and cream products.
“We can’t have that. We’re not going to stand for it,” he said.
The tariffs – which also include 240 per cent levies on cheese, whole milk and yogurt – affect products imported into the country beyond a specified limit set out as part of Canada’s dairy supply-management program.
The program also restricts the volume of dairy production on Canadian farms. Dairy producers have argued that the system is necessary for them to maintain their livelihoods. Some producers have accused Trump of trying to put them out of business.
According to Dairy Farmers of Canada, approximately 250,000 people work in Canada’s $20-billion dairy industry.
Trump’s tariff threat takes aim at another major pillar of the Canadian economy. The auto sector contributes about $19 billion a year to the country’s GDP, while employing 125,000 people directly and another 400,000 in spin-off jobs.
Economic Development Minister Navdeep Bains has said the federal government is looking at “every conceivable option” for responding to the still-hypothetical increases on auto tariffs.
Trump said his team would reach a deal with Canada “one way or another” – either by negotiating one or by hiking tariffs on Canadian-made vehicles.
“Frankly, a tariff on cars is a much easier way to go, but perhaps the other would be better for Canada,” he said.
Manak said even the threat of auto tariffs could be a strong negotiating tactic for the U.S.
“If that happens, it will certainly put a lot of pressure on Canada to come to the table and sign the deal,” she said.
Canadian auto stocks rallied Monday despite Trump’s threat, with several major firms posting significant gains.
The U.S. president has been threatening new tariffs on the auto sector increasingly often since July, when Canada introduced tariffs on steel, aluminum and other American products in retaliation for American tariffs targeting similar items.
With files from The Canadian Press and The Associated Press