Canada's Foreign Affairs Minister Chrystia Freeland speaks during a news conference at the Canadian Embassy after talks at the Office of the United States Trade Representative, in Washington, Friday, Aug. 31, 2018. (AP Photo/Jose Luis Magana)

A topsy-turvy day of NAFTA talks ends with plans to resume

September 01, 2018 - 8:17 am

WASHINGTON (AP) — Talks to keep Canada in a North American trade bloc are to resume this coming week with the longtime allies divided over issues such as Canada's dairy market and U.S. efforts to shield drug companies from generic competition.

President Donald Trump notified Congress on Friday 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.

"I love Canada, but they've taken advantage of our Country for many years!" Trump said in a tweet Saturday.

The U.S. and Mexico reached a deal last Monday 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. American and Canadian negotiators will return to negotiations Wednesday.

The talks had taken an odd turn for the worse Friday over news that 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. "My negotiating counterparty is Ambassador Lighthizer," she said. "He has brought good faith and good will to the table."

To Jerry Dias, president of the Canadian private-sector union Unifor, it was "Trump's bluster at best, but obviously he is not going to force anyone into a bad deal." Dias said "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 pledged 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 Monday 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 Friday, 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.

Freeland 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."

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.

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Gillies reported from Toronto. AP Economics Writer Christopher Rugaber contributed to this story.

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