In The Media

Canada's big new trade deal: How it could affect a far bigger deal – NAFTA

by Alexander Panetta & Mike Blanchfield (feat. Eric Miller)

The Canadian Press
January 23, 2018

MONTREAL – The signing of a sprawling new trade pact involving two North American countries has revealed a rift in philosophy with the continent’s superpower and raised the question of whether those differences might complicate the NAFTA negotiations.

Canada and Mexico joined the new Trans-Pacific Partnership as the three North American countries gathered Tuesday in Montreal for a week-long round seen as potentially pivotal in gauging the prospects for a new NAFTA after a contentious few rounds.

The chief negotiators for Canada and Mexico brushed aside the idea that the TPP deal would affect NAFTA talks.

“It’s pretty much separate tracks,” Canada’s lead negotiator Steve Verheul told The Canadian Press, while walking between meetings at the negotiating round in Montreal.

“It has not come up here yet — so far.”

Note the qualifier — yet.

Some critics bemoaned the timing of a decision to dive into a new Asia-Pacific trade zone, when some of the deal’s basic principles run counter to those of the new, Donald Trump-led U.S. administration.

Trump’s team professes to detest multilateral deals; it’s keen to restrict imports from Asia; and it withdrew from the TPP as one of the incoming president’s first acts in office — exactly one year earlier, on Jan. 23, 2017.

Fast-forward one year later, Trump was back in the Oval Office making another announcement on trade with Asia. This time he held a signing ceremony to celebrate punitive duties on washing machines and solar panels, and singled out China as his target.

He sounded optimistic about NAFTA.

“NAFTA is moving along pretty well.” Mentioning his trade czar Bob Lighthizer, the president said: “If it doesn’t work out, we’ll terminate it. But I think you’re doing pretty well, Bob.”

Some fear the bonhomie could hit a brick wall.

On automobiles in particular, manufacturing jobs are a key Trump priority. The three countries have been hoping to make progress at this round, and Verheul confirmed he intends to suggest ways to help the U.S. meet some of its objectives.

But on autos, the TPP runs in the exact opposite direction of Trump’s goals. He wants taller trade barriers, and fewer Asian parts; but TPP liberalizes auto-parts trade, meaning more pieces imported from Asia, including from countries not in the deal — like China.

The current NAFTA allows 37.5 per cent of a car to come from outside the trade zone, before tariffs apply. Trump wants that cranked down to 15 per cent — but the new TPP zone moves dramatically in the other direction, to 55 per cent.

One auto stakeholder called it inconceivable that Canada would sign a deal that does the opposite of what its No. 1 customer wants.

“This could not be a dumber move at a more important time,” said Flavio Volpe of Canada’s Auto Parts Manufacturers’ Association. He accused the government of chasing a legacy item, without regard for how it might affect the far more important NAFTA negotiations: “We’re trophy hunting.”

The U.S. buys three-quarters of Canada’s overall exports.

And that’s precisely the point, according to defenders of the TPP deal. Pointing to that dependency on the U.S., several defenders said there’s a need for trade diversification. One senior federal source said it even helps Canada’s position at the NAFTA bargaining table, showing the U.S. that it will look elsewhere for partnerships, giving Canada greater leverage.

“It’s better than worth it. It’s advantageous,” said the official, who spoke on condition of anonymity because he was not authorized to speak publicly on the matter.

“The U.S. does not respect weakness.”

Another potential problem area is dairy: the U.S. wants more access to Canada’s closed market. TPP already opens it up a crack to foreign competition, and defenders of the system say it can’t handle any more liberalization.

One Washington-based consultant who knows trade, and the auto sector, offered a nuanced view.

Eric Miller said he’s thrilled the deal happened. But he acknowledged it could still create headaches at the NAFTA table. Miller, who worked for the federal government on the 2009 auto bailout, said it will complicate the conversation on auto parts.

He predicted this will intensify the American desire for rules that extensively track the origin of pieces. This will raise costs for companies, in terms of compliance and possible fines, he added. And he said U.S. customs officers will have to keep a closer eye out for Asian components in Canadian shipments.

“It will certainly make things more complicated,” Miller said. “(And) these NAFTA discussions (on autos) become all the more important.”

That being said, Miller said the TPP deal is great for lumber exporters, livestock producers and many other Canadians and he believes it’s smart for Canada to diversify its trade.

“I think it’s great news for Canada and Canadian exporters,” Miller said. “This helps to advance the cause of trade diversification … (and) I think it actually helps Canada’s leverage in NAFTA.”

Miller added, “This sends a signal: that Canada has options.”

Mexico’s chief negotiator agreed that the new pact made a broader point. Kenneth Smith Ramos denied that it would affect NAFTA, but he said: “It sends a signal that we can work together with Canada in the context of international trade negotiations.”


Showing 4 reactions

Please check your e-mail for a link to activate your account.
  • followed this page 2018-01-24 18:25:02 -0500
  • followed this page 2018-01-24 18:24:47 -0500
  • followed this page 2018-01-24 18:24:32 -0500
  • followed this page 2018-01-24 18:24:18 -0500
SUBSCRIBE TO OUR NEWSLETTERS
 
SEARCH
PODCAST

An Update on the NAFTA Renegotiations

May 21, 2018


On today's Global Exchange Podcast, we touch base with CGAI's North American trade experts in light of a busy week on the NAFTA file in Washington. After months of hard-pressed negotiations, and 6 weeks of 'perpetual' discussions in Washington, the deal has reached its next turning point, with Congressional leadership signalling that they'd need a new deal by May 17th in order to have it passed before U.S. mid-term elections in the Fall. With no deal in sight, and the Congressional deadline now in the rear-view mirror, we sit down with Sarah Goldfeder, Laura Dawson, and Eric Miller to ask where we go from here.


IN THE MEDIA

Between Trump, Iran and North Korea, Canada’s G7 has a high potential for chaos

by Chris Hall (feat. James Trottier & Colin Robertson), CBC News, May 18, 2018

The struggle Trudeau could face if Kinder Morgan walks away from Trans Mountain

by Robert Tuttle & Michael Bellusci (feat. Dennis McConaghy), Bloomberg News, May 18, 2018

Canada 'a laughing stock': Experts react to Trans Mountain indemnity

by April Fong (feat. Dennis McConaghy), BNN Bloomberg, May 18, 2018

AUDIO: NAFTA update

with Danielle Smith (feat. Sarah Goldfeder), Global News Radio, May 18, 2018

VIDEO: NAFTA Deadline Day (@ 3:00)

with Don Martin (feat. John Weekes), CTV Power Play, May 17, 2018

VIDEO: Deal or no deal on NAFTA: Canada and U.S. send mixed messages

with Rosemary Barton (feat. Colin Robertson), CBC The National, May 17, 2018

Trump’s 'submission' strategy is not working so expect NAFTA talks to drag on

by Kevin Carmichael (Feat. Eric Miller), Financial Post, May 17, 2018

Backstop deal may be last hope for TransMountain pipeline, says former oil executive

by CBC News (feat. Dennis McConaghy), CBC News, May 17, 2018

Stuck with limited oil export options, Liberals may regret B.C. tanker ban

by John Ivison (feat. Dennis McConaghy), National Post, May 17, 2018

Feds OK early start to construction of navy’s new supply ships

by Lee Berthiaume (feat. Dave Perry), The Canadian Press, May 17, 2018


LATEST TWEETS

HEAD OFFICE
Canadian Global Affairs Institute
Suite 1800, 421-7th Avenue SW
Calgary, Alberta, Canada T2P 4K9

 

OTTAWA OFFICE
Canadian Global Affairs Institute
8 York Street, 2nd Floor
Ottawa, Ontario, Canada K1N 5S6

 

Phone: (613) 288-2529
Email: contact@cgai.ca
Web: cgai.ca

 

Making sense of our complex world.
Déchiffrer la complexité de notre monde.

 

© 2002-2018 Canadian Global Affairs Institute
Charitable Registration No. 87982 7913 RR0001

 


Sign in with Facebook | Sign in with Twitter | Sign in with Email