[CTC] Canada, U.S. scramble to meet U.S.-imposed deadline of Friday for NAFTA deal

[Arthur Stamoulis]

https://www.thestar.com/news/world/2018/08/30/canada-us-scramble-to-meet-friday-us-imposed-deadline-for-nafta-deal.html

Canada, U.S. scramble to meet U.S.-imposed deadline of Friday for NAFTA deal
By DANIEL DALEWashington Bureau Chief
Thu., Aug. 30, 2018

WASHINGTON—A deal on North American trade remained possible, but not certain, late Thursday evening after the Trudeau government and Trump administration met into the night to try to hit a U.S.-imposed Friday deadline.

President Donald Trump said a deal was “close,” and that Canada would make a deal “at some point,” but that he was not sure if it would happen by Friday.

“It may be by Friday or it may be within a period of time,” he told Bloomberg.

Trump struck a harder line at a campaign rally in Indiana on Thursday night, repeating his threat to impose tariffs on imports of Canadian-made cars if Canada did not start to treat the U.S. more fairly. 

Is it too late for Canada in NAFTA deal?

A Canadian government official, who spoke on condition of anonymity, said the talks with the U.S. were down to just a few issues, but “the trickiest ones.”

“Anything is possible, but it’ll require a lot of work,” the official said.

A second Canadian official said a deal by Friday was “still possible” but that the media was succumbing to overly exuberant “deal fever.”

The unresolved issues included the U.S. demand for more access to Canada’s tightly protected dairy market and Canada’s demand to preserve the “Chapter 19” dispute-resolution system, which the U.S. wants to eliminate.

The system allows challenges to government-imposed trade duties, such as U.S. duties on Canadian softwood lumber, to be heard by independent panels, not the domestic courts of the government being challenged.

Foreign Affairs Minister Chrystia Freeland said she continued to be “encouraged,” although she added that there was “a lot that we’re trying to do in a short period of time.” 

Freeland had a series of Washington meetings with U.S. Trade Representative Robert Lighthizer. She said in the afternoon, for the first time this week, that they were ready to “take some decisions” on policy issues, which she did not identify.

Freeland emerged from an evening meeting with Lighthizer at 8:30 p.m. after more than three hours. She said the atmosphere remained “constructive” and that she would return for yet another meeting later in the night.

The talks could well continue beyond Friday, the date Trump’s team says it will notify Congress of a deal with Mexico whether or not Canada is involved. Canada could likely sign on as late as a month after the notification.

But both Canada and the U.S. appear to be making an effort to come to an immediate handshake. Each side believes the publicly announced deadline gives them bargaining leverage.

Trump said Wednesday that the two sides were “on track” for a Friday resolution. Prime Minister Justin Trudeau said a deal by Friday was a “possibility,” but “only a possibility.”

Here is a look at some of the key remaining issues:

Chapter 19 dispute resolution: In the original NAFTA negotiation, the Canadian government took a dramatic last-minute stand in favour of including a system that would allow U.S. “anti-dumping” and “countervailing” duties to be litigated at a five-member independent tribunal, not in U.S. courts.

Canadian duties on U.S. goods can be challenged in the same tribunals. But Canada has found the system essential, using it to challenge U.S. softwood lumber duties among others, and considers it a must-have in any new deal.

Chapter 11 investor-state dispute settlement: NAFTA also includes a provision that allows companies to sue governments over policy decisions they believe have violated the governments’ obligations to investors.

Trudeau has not taken a public position on this system, leading to questions about whether it too would be a last-minute sticking point, but another Canadian official said the prime minister, as Trump’s team is, is happy to eliminate it. Canada has faced more Chapter 11 challenges than the U.S. or Mexico.

Canadian cultural businesses: Canada is demanding the preservation of NAFTA’s exemption for cultural industries, such as music and movies.

Canada maintains an extensive system of subsidies and regulations intended to support “Canadian content.” Since they discriminate against U.S. businesses, those policies would not be allowed under free-trade rules without an exemption.

The U.S. has sought to eliminate or substantially modify the exemption, arguing that Canada has abused it.

Canadian dairy: Trump has complained at length about Canada’s high dairy tariffs, and his team has insisted on changes to Canada’s protectionist supply management system. Trudeau has repeatedly promised to defend supply management, which uses quotas and tariffs to shield domestic farmers from foreign competition.

A Canadian official says Trudeau is willing to make incremental concessions to the U.S. on dairy in exchange for the U.S. agreeing to keep Chapter 19 and the cultural exemption. One possible model for concessions: the Trans-Pacific Partnership, from which Trump withdrew, in which Canada agreed to allow foreign imports to make up 3.25 per cent of the domestic dairy market.

Intellectual property: The U.S. wants stronger and longer protections for intellectual property ranging from drugs to creative works. Canada has pushed back. 

Steel and aluminum tariffs: Trump has imposed tariffs on Canadian steel and aluminum, saying he would remove them if a NAFTA deal were reached. But it is not clear exactly when in the approval process he would agree to rescind them: upon the initial handshake or at some later date, such as upon the signing of the agreement.

Online shopping: Canada has one of the world’s lowest thresholds for applying duties on goods bought by residents from abroad. Canadian online shoppers pay these fees on any purchases above $20.

The U.S. wants Canada to raise the threshold, which would make U.S. products more affordable to Canadian shoppers. Mexico agreed in the preliminary deal to raise its own threshold to $100 from $50.

Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826




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