22 March 2019
Canadian Foreign Minister Chrystia Freeland said Canada would only sign a new agreement that is good for the country. Photo: Reuters
Canadian Foreign Minister Chrystia Freeland said Canada would only sign a new agreement that is good for the country. Photo: Reuters

Canada rejoins talks to stay in NAFTA, deal possible this week

Canada’s top trade negotiator joined her Mexican and US counterparts in Washington in a bid to remain part of a revamped trilateral North American trade pact, as US officials expressed optimism a deal could be reached this week, Reuters reports.

But Ottawa will be under pressure to accept new terms on autos trade, dispute settlement and intellectual property rules after the United States and Mexico agreed on Monday to overhaul the North American Free Trade Agreement (NAFTA).

US President Donald Trump warned he could proceed with a deal with Mexico alone and levy tariffs on Canada if it does not come on board with the revised trade terms.

A spokesman for Canadian Foreign Minister Chrystia Freeland, who arrived in Washington on Tuesday for the talks, said Canada would only sign a new agreement that is good for the country.

Freeland rejoins the year-long talks following a hiatus of several weeks as the United States and Mexico ironed out bilateral differences in the renegotiation of the 24-year-old accord.

They have agreed on several provisions that Canada opposes, making it harder for Freeland to win concessions from US Trade Representative Robert Lighthizer.

“I think he’s going to sit there with his arms folded a lot,” said Dan Ujczo, a Columbus, Ohio-based trade lawyer who focuses on US-Canada issues. “It’s not going to be a positive discussion this week.”

“The US market and the Canadian markets are very intertwined,” US Treasury Secretary Steve Mnuchin said in an interview with CNBC. “It’s important for them to get this deal and it’s important for us to get this deal.”

He said he thought an agreement could be wrapped up this week.

Mexican Foreign Minister Luis Videgaray told Mexican television on Tuesday the three sides would work for a three-way deal. “We are now going to devote long hours to the negotiation with Canada,” he said.

Negotiations among the three partners, whose mutual trade totals more than US$1.2 trillion annually, have dragged on for more than a year, putting pressure on the Mexican peso and the Canadian dollar. Both currencies gained against the US dollar on Monday, but the peso weakened on Tuesday.

Canada’s main stock index opened higher on Tuesday on hopes for a NAFTA trade deal, before dipping. US stocks edged to record highs for a third consecutive session.

A sticking point for Canada is the US effort to dump the Chapter 19 dispute resolution mechanism that hinders the US from pursuing anti-dumping and anti-subsidy cases. Lighthizer said on Monday that Mexico had agreed to eliminate the mechanism.

Other hurdles include intellectual property rights, such as the US-Mexico 10-year data exclusivity for biologic drug makers and extensions of copyright protections to 75 years from 50, all higher thresholds than Canada has previously supported.

Trump says he still could put tariffs on Canadian-made cars if Canada did not join its neighbors and warned he expected concessions on Canada’s dairy protections.

Canada’s dairy farmers operate under a protectionist system that manages supplies and prices, and imposes high tariffs to limit imports. US demands have ranged from ending those tariffs to scrapping a pricing system for milk ingredients that hurt US exports of milk proteins.

If a deal is not reached with Canada, Mnuchin said, the US would proceed with a separate trade agreement with Mexico.

The Mexican government has also taken that position, even as it says it wants a trilateral deal.

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