In The Media

Canada Takes ‘Hug-an-American’ Approach to Saving Nafta

by Paul Vieira & Sara Schaefer Muñoz (feat. Eric Miller)

The Wall Street Journal
January 10, 2018

Days after talks on the North American Free Trade Agreement soured over a U.S. proposal on car production, Canada’s Transport Minister Marc Garneau flew to Windsor, Ontario, to meet with Michigan Gov. Rick Snyder at an art museum overlooking the Detroit skyline.

“We have a highly integrated auto industry and supply chain,” Mr. Garneau said he told the governor in late October. “I wanted to point out that it would be important we don’t put that in jeopardy.”

As Nafta talks have grown contentious in areas such as national content in auto manufacturing, the Canadian side is working behind the scenes to press its agenda at back-channel meetings away from the negotiating table.

Canada’s Liberal government, which has adopted a more pugnacious tone with the Trump administration on trade, is working to charm governors, lawmakers and other U.S. opinion leaders.

Ottawa is betting that friends in high places across the U.S. will recognize the damage tearing up Nafta could do to supply chains and growth—and pressure the Trump administration to leave the pact alone.

“What we are depending on is that facts should win the day,” said David MacNaughton, Canada’s ambassador to the U.S. and a crucial player in lobbying efforts.

Canadians are doubling down on outreach, he said, because “while we are doing a better job of this, and getting people’s attention, we are not where we need to be.”

The “hug an American campaign,” as some Canadian officials call it, is an attempt to better drive home the country’s strong objections to the Trump administration’s push to radically alter the 24-year-old Nafta pact. Canada is balking at U.S. proposals such as doing away with tariff-arbitration panels and requiring a greater share of U.S. parts in cars, which would hobble Canada’s large auto sector.

Many observers believe the next round of talks, which will tackle the thorniest issues when they begin later this month in Montreal, could be make-or-break for Nafta’s future. Even though Canadians are crafting responses to U.S. proposals, they have also signaled their reluctance to compromise on ideas they don’t like.

Some U.S. proposals are “wholly unworkable,” Canada’s chief Nafta negotiator, Steve Verheul, told lawmakers late last year.

That is spurring a Canadian team to ramp up outreach, with hundreds of casual meetings held everywhere from a Panera Bread outlet in Florida to the sidelines of state political conferences. Canadians are focusing especially on politically important states in the Midwest that have close ties to Canada, people familiar with the strategy say.

They go to meetings armed with maps and fact sheets. They point out how nearly three-dozen U.S. states count Canada as their biggest export market. The maps break down how many jobs on a state-by-state basis rely on U.S.-Canada trade. Canada says nine million U.S. jobs depend on trade and investment with Canada.

The officials—including Prime Minister Justin Trudeau, cabinet ministers, provincial premiers, diplomats and local business leaders—have taken part in nearly 300 separate meetings with lawmakers and others since President Donald Trump was inaugurated on Jan. 20, according to government records. Among the U.S. officials targeted have been 16 cabinet secretaries, more than 250 members of Congress, and more than 50 state governors or lieutenant governors.

Given Mr. Trump’s focus on trade deficits, the Canadians brandish data pointing out that the U.S. ran a $36 billion surplus with its northern neighbor in the trade of manufactured goods in 2016, the most recent full year for which data is available. U.S. Bureau of Economic Analysis data indicate the U.S. had a small trade surplus with Canada that year when goods and services are incorporated.

It isn’t clear how effective the efforts have been in winning over Nafta skeptics, particularly those in states that have seen their manufacturing base gutted as operations moved to Mexico.

In May, Rep. Marcy Kaptur (D., Ohio), a longtime Nafta opponent, agreed to meet with Canada’s small-business minister, Bardish Chagger, at her Toledo district office. Ms. Chagger pitched her on the need to maintain the trade treaty to promote regional growth, but Ms. Kaptur said she still didn’t see the benefits for Ohio.

“I told her Nafta has to work for all parties,” Ms. Kaptur said.

In Windsor, Mr. Garneau had better luck. He said Mr. Snyder agreed that Canada and Michigan needed to be cautious about any “serious changes” to auto-sector rules. A spokeswoman for Mr. Snyder confirmed Mr. Garneau’s account.

Mexico, too, has reached out to some of its counterparts in the U.S. and expressed objections to some U.S. proposals. But Mexico has generally been more focused on the negotiations themselves, say analysts and people close to the talks. Mexican negotiators, for example, have already floated an alternative to the so-called sunset clause, which would put the pact up for renewal every five years and faces objections from Canada.

Some people familiar with the flurry of meetings say they are not just part of Canada’s strategy to save the pact, but also a foundation for the country’s Plan B if Mr. Trump pulls the plug on Nafta.

“The next question is, if [Nafta] can’t be saved, how could Canada then get the best bilateral deal?” said Eric Miller, head of Rideau Potomac Strategy Group, a Washington-based trade consulting firm. “Canada is becoming a lot more focused on the people who could influence that.”

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