Trudeau, Freeland Make Case for NAFTA As Trade Negotiators Prepare for Next Round

Canadian Prime Minister Justin Trudeau concluded a trip to the US this past weekend to discuss trade and other areas of cooperation with state and local leaders, touting the potential for an updated North American Free Trade Agreement (NAFTA) while cautioning that the final deal would still need to go far enough to serve Canadian interests.

The NAFTA negotiations are due to resume later this month in Mexico City, just weeks after ministers confirmed that they were advancing in some of the “bread and butter” issues in modernising the accord. This included the conclusion of an anti-corruption chapter. Ministers openly acknowledged, however, that they were struggling to make headway on the most contentious issues – despite more detailed talks on these areas.

Trudeau made stops in Chicago, Illinois; San Francisco, California; and Los Angeles, California, according to a brief report issued by his office, with the trip dedicated to various other facets of the US-Canada relationship, including on topics such as climate action and energy.

“There is a clear path forward [on NAFTA] and we’re working very hard together on that path,” Trudeau said late last week in California, according to excerpts of his remarks reported by various news outlets. “This accord should and can be modernised and updated, with effort, hard work and willingness to compromise on all sides, this is eminently achievable,” he added, highlighting the close relationship between the two North American neighbours.

Earlier that week, however, Trudeau said that any modernised NAFTA would also have to be high in quality – and that Ottawa would not accept anything less.

“We will not be pushed into accepting any old deal, and no deal might very well be better for Canada than a better deal,” he said in Chicago, while noting that the trilateral pact has been key in governing cross-border trade in the region and providing exporters with a stable business climate.

Freeland: Challenges ahead, but progressive chapters among Canada’s strongest

While Trudeau met officials in the mid-Western and Western parts of the United States, Canadian Foreign Minister Chrystia Freeland testified to domestic lawmakers on the progress and prospects for the trade talks – while noting the challenging dynamic of the negotiations, particularly between Ottawa and Washington.

She noted that Canada considers its proposals, formal and informal, as being “creative ideas” meant to spur discussion forward. These proposals were in response to the US’ “unconventional proposals” on areas such as rules of origin for automobile manufacturing and investor-state dispute settlement, among others.

“Serious challenges do remain, particularly with regard to the United States’ unconventional proposals. As the Prime Minister said yesterday in Chicago, our objective is a good deal – not just any deal,” she said to the House of Commons’ Standing Committee on Foreign Affairs and International Development.

Canada and the US have openly sparred over a host of trade issues in recent months, both in the NAFTA context as well as bilaterally on softwood lumber trade and at the WTO on trade remedies. The disagreements were raised by ministers at the latest round of talks in Montreal, where Freeland and her American counterpart, US Trade Representative Robert Lighthizer, highlighted their differences on various substantive issues such as automobile rules of origin, along with how to interpret data on the US-Canada trading relationship.

“At the negotiating table, Canada always takes a fact-based approach. We are always polite, and we are adept at seeking creative solutions and win-win-win compromises. But we are also resolute. Canada will only accept an agreement that is in the national interest and which respects Canadian values,” Freeland added during testimony which also addressed other foreign policy priorities. At the same hearing, she also referred to her country’s upcoming presidency of the G7, and its plans to “defend” and “strengthen” the rules-based international order in that context.

At the hearing, Freeland also answered questions relating to Canada’s proposed NAFTA chapters on gender and indigenous rights, saying that in her view “our core progressive ideas are in the labour, environmental, gender, and indigenous chapters, and each of those chapters is different and speaks to a different need and to different parts of the agreement.”

She noted, for example, that the proposed indigenous rights chapter was a first for Canada, while the labour proposal “is the most progressive labour proposal Canada has ever advanced in the trade negotiations. This is a set of proposals that would bite.” She referred to the debate over globalisation leaving some people “behind” and that both the labour and environmental chapters are meant to avoid a “race to the bottom” where Canadian workers would be competing with foreign counterparts whose countries may not have similarly robust standards in these areas.

On gender, she noted that the Canadian proposal means to build on what Canada has agreed with Chile in a planned revision to its existing trade deal, without specifying further. The Canadian-Chile chapter was announced last year and outlines a series of cooperative activities aimed at boosting women’s economic participation at national and international levels, along with setting up a trade and gender committee in the FTA, though the new chapter would not be subject to dispute settlement.

New proposals on car manufacturing?

Meanwhile, Mexico is reportedly set to put forward its own proposal on automobile rules of origin, according to a high-level official interviewed by the Reuters news agency.

Details of how Mexico might approach the subject were not yet clear at press time, but Mexican Deputy Secretary for Industry and Commerce José Rogelio Garza Garza indicated that the proposal would be submitted in time for the negotiating round later this month.

At the previous round, Canada had suggested including expenditures on research and development and other high-tech inputs into the rules of origin calculation. Lighthizer told reporters that this suggestion could lead to less regional content, rather than more, with an adverse effect on jobs in the three-country coalition. Washington is pushing for significant increases in both regional and US content requirements for automobiles to benefit from preferential treatment under NAFTA.

Canada’s suggestions on rules of origin were not presented as a formal proposal in Montreal. Mexican officials have lately suggested that they might be amenable to some changes on rules of origin, while warning that it could be costly to revise significantly the current rules in this area.

Meanwhile, Canada’s chief NAFTA negotiator, Steve Verheul, said on Tuesday 13 February that the scheduling of the talks, with meetings every few weeks, has complicated efforts at making major progress, and raised other concerns with the US’ approach to issues such as public procurement.

The high-level meetings and statements come also as speculation continues to grow over whether a modernised NAFTA is possible in the near term, or even at all, given both tensions on substantive issues and political approaches, as well as the electoral calendar in the US and Mexico.

Questions also remain over what approach Canada, Mexico, and the United States might take if the negotiations prove too difficult, including whether this could entail a withdrawal by the US or another party, or some other measure.

Public statements by ministers and chief negotiators to date have also suggested that tensions are running higher between the US and Canada than with the US and its southern neighbour, Mexico, with US Trade Representative Robert Lighthizer indicating as much on Tuesday 13 February, according to comments reported by Bloomberg.

He repeated past criticisms on Canada’s suggested approach to rules of origin for cars and its separate legal complaint on US trade remedy measures at the WTO, launched earlier this year.