The deal has blindsided Canada which thought that the bilateral Mexico negotiations were to settle specific issues with the Mexicans before returning to the three country talks. The whole process has been completely lacking in transparency. Not only that but the negotiating teams from the three countries were replaced by just one key official from each country.
Trump’s strategy
Trump has used the bilateral negotiations with Mexico not to solve some key issues that would be part of the NAFTA agreement after three party talks had solved remaining issues but to carve out a separate agreement with Mexico. He is also replacing NAFTA with this agreement.
As a recent BNN article put it: “President Donald Trump said the U.S. is signing a new trade accord with Mexico to replace the North American Free Trade Agreement and called on Canada to join the deal soon or risk being left out. Trump announced the agreement with Mexico in a hastily arranged Oval Office event Monday with Mexican President Enrique Pena Nieto joining by conference call. Pena Nieto said he is “quite hopeful” Canada would soon be incorporated in the revised agreement, while Trump said that remains to be seen but that he wanted those negotiations to begin quickly.”
Note that NAFTA is gone, there is a new agreement with Mexico. The illusion of a three way deal is kept by the fact that Canada is said to be able to join the deal. The Mexican president talks of Canada joining the deal. Yet there is no mention of three way talks and it is clear that the deal will involve separate negotiations with Canada.
The article claims that Canadian Foreign Minister Chrystia Freeland is leaving a trip to Europe early for NAFTA talks on Tuesday. However, Trump said the name NAFTA would be dropped from the accord because of its unpopularity. Trump said: “We’re going to call it the United States/Mexico Trade Agreement. NAFTA has a bad connotation because the United States was hurt very badly by NAFTA for many years.” If Canada could be part of the deal why would it be called the United States/Mexico Trade Agreement? Presumably it is because there is to be a separate bilateral deal with Canada. The bilateral act somehow miraculously replaces NATA. If it does then surely Canada must be required to sign not just given the chance to sign.
Indeed Trump has said as much when he threatened to use auto tariffs to get a bilateral deal done with Canada.
A Bloomberg article quotes Trump as saying he hopes to negotiate with Trudeau: “Trump said he would speak with Canadian Prime Minister Justin Trudeau “in a little while” and hoped to begin negotiations with him “almost immediately.””
Trump threatens tariffs on cars made in Canada
As mentioned, Trump also stated that he will use the prospect of auto tariffs to get a bilateral deal done with Canada. Trump said to the press assembled in the Oval Office: “I think with Canada, frankly, the easiest thing we can do is to tariff their cars. It’s a tremendous amount of money and it’s a very simple negotiation. It could end in one day and we take in a lot of money the following day. But I think we’ll give them a chance to probably have a separate deal.”
Such complete arrogance. Canada should walk away from any negotiations that are being carried on by threats and outright bullying.
Avery Shenfield of CIBC Capital Markets said that any offer the US makes to Canada now will be to take it or leave it. Shenfield wrote in a note to clients: “We still think Canada and the U.S. will come to the table and get a deal done. But by saying Canada could be left out, the U.S. is threatening to take a tough line in those talks.”
Shenfield could be right since given global capital wants it to join Canada will likely give in to US demands unless they involve such items as giving up our supply management system in the dairy area.
Trump intends to move ahead with bilateral agreement
The US intends to submit a letter to Congress this coming Friday according to US Trade Representative Robert Lighthizer. The US hopes Canada will join the pact this week but could sign on later he claimed. This suggests that the Trump administration believe it has congressional authority to move ahead with its current plan as a bilateral deal.
Mickey Cantor who oversaw the US entry into NAFTA claimed Trump would have to go to Congress to ratify the deal with Mexico: “They’d have to go back to the Congress. To walk away from an arrangement with the two and try to set up bilateral deals would probably cause a tremendous political response.”
Adam Austen spokesman for Canadian Foreign Minister Chrystia Freeland issued a statement on Monday that warned against jumping to conclusions. “Canada’s signature is required,” spokesman Adam Austen said in an email. “We will only sign a new Nafta that is good for Canada and good for the middle class” and “we will continue to work toward a modernized Nafta.”
This assumes that the bilateral agreement with Mexico is actually the renegotiated NAFTA otherwise the claim that Canada’s signature is necessary would be wrong. Given the agreement will involve three parties once Canada signs, the name US/Mexico Trade Agreement is not suitable. Perhaps an appropriate new name would be the Trump Act
