White House Gives Canada More Time to Rework NAFTA

WASHINGTON — The Trump administration eased off its threat to exclude Canada from the North American Free Trade Agreement, extending talks that were set to end Friday while warning that the Canadians must be “willing” to accept the United States’ terms.

After four days of marathon negotiations between Canadian and U.S. officials failed to produce an agreement, the White House told Congress it would enter into a revised trade deal with Mexico and that it was up to Canada to decide whether to remain in the trilateral NAFTA pact.

“Today the president notified the Congress of his intent to sign a trade agreement with Mexico — and Canada, if it is willing — 90 days from now,” Robert E. Lighthizer, the U.S. trade representative, said in a statement.

The White House agreement to keep talking has less to do with a change of heart than with political realities: Congress, which has ultimate authority over trade agreements, has warned the White House that any revised deal must include both Canada and Mexico. Canada is the major export destination for 36 American states, and many of the president’s political supporters insisted that he first “do no harm” to the deal. Without Canada, Republican lawmakers would be likely to scuttle any new NAFTA pact, dealing President Donald Trump an embarrassing loss.

Yet the political necessity of keeping Canada in NAFTA did not stop Trump from poking Canada in the eye, accusing it on Friday of taking “advantage” of the United States, continuing to threaten it with auto tariffs and appearing to enjoy it when disparaging comments he had made about Canada in private became public in the middle of tense negotiations.

Trump rattled the trade talks at the eleventh hour when The Toronto Star on Friday published off-the-record comments Trump had given during an interview with Bloomberg News. Trump, according to the report, said he had no plans to make concessions to Canada and that any agreement would be “totally on our terms.”

The president responded in a tweet Friday, saying his agreement to speak off the record had been “blatantly violated,” before adding, “At least Canada knows where I stand!”

Whether Canada and the United States can reach a deal remains to be seen. Several big sticking points remain, and the president’s comments have only inflamed Canadians, who do not want Prime Minister Justin Trudeau to give in to America’s demands.

“This idea that Canada is somehow going to get bullied into a bad deal, I can suggest to you that that’s not going to happen,” Jerry Dias, the leader of the Canadian union Unifor, said Friday. “I think if he was serious about a trade deal, he wouldn’t make those types of comments, because all they do is inflame the situation, and frankly it’s foolish.”

Canadian negotiators suggested Friday that they were simply ignoring Trump’s comments, viewing them as bluster and focusing instead on the trade officials in the negotiations.

“My negotiating counterparty is Ambassador Lighthizer, and as I said he has brought good faith and goodwill to the table,” Chrystia Freeland, Canada’s foreign minister, said. “It is going to take flexibility on all sides to get to a deal in the end.”

The decision to move forward capped off a rocky negotiating session Friday, as the United States and Canada struggled to reach agreement on several contentious issues, including Canada’s barriers on dairy imports, its rules governing movies, books and other media, and a mechanism for settling trade disputes between the two countries, people briefed on the talks said.

Canada has insisted on protections for its publishing and broadcasting industries over concerns these businesses would be overwhelmed by the much larger U.S. market. It has also resisted Trump’s repeated calls for Canada to overhaul its dairy industry. Unlike the United States, which directly subsidizes farmers, Canada uses a supply management system to regulate the volume of imports and keep prices stable for its farmers.

Canada has given foreign countries more access to its dairy market in past trade agreements, and agricultural experts said negotiators were prepared to make similar offers in the current NAFTA negotiations. However, Canada’s offers have failed to pass muster with the administration, which wants greater access to its market than Canada appears willing to provide. At a rally in Indiana on Thursday night, Trump expressed his frustration with Canada and its dairy protections. The president accused Canada of not treating the United States fairly and said that if negotiations failed, he would punish Canada with car tariffs.

“If it doesn’t happen, then we’ll put tariffs on the cars coming in from Canada, and that’ll be even better,” Trump said, complaining about the unfairness of Canadian dairy tariffs. “But I think it’s going to happen, and we’ve really developed a very good relationship.”

As he met with a group of supporters in Charlotte, North Carolina, on Friday, Trump again groused about the dairy barriers.

“They’ve taken advantage of our country for many years,” Trump said. “They have tremendous trade barriers, and they have tremendous tariffs. Dairy products are almost 300 percent tariffs. Nobody talks about that.”

On Friday morning, the U.S. trade representative put out a statement saying that Canada had yet to make any concessions on dairy products.

“The negotiations between the United States and Canada are ongoing,” a spokeswoman for the U.S. trade representative said. “There have been no concessions by Canada on agriculture.”

Freeland said repeatedly this week that Canada and the United States had agreed not to discuss the details of the talks in public while negotiations were taking place.

The countries are also sparring over a provision of NAFTA known as Chapter 19, which allows foreign countries to appeal the duties the United States levies on them for providing subsidies and dumping products into the U.S. market. Administration officials confirmed they had eliminated the provision in their agreement with Mexico, but the Canadians have insisted that it is necessary to protect industries, like lumber, from biased rulings in the United States.

And Trump’s steel and aluminum tariffs remain an issue for both Canada and Mexico, which want those levies lifted before agreeing to a final NAFTA deal.

Administration officials said Friday that Canada was welcome to stay in NAFTA if it was willing to make concessions.

“We continue to be in a process to work with Canada in terms of whether they want to be a part of this historical agreement,” a senior administration official said in a briefing call Friday afternoon.

Lighthizer called the talks with Canada “constructive” and said “our officials are continuing to work toward agreement.”

The next deadline will come in 30 days, when U.S. trade negotiators are required to submit the text of their trade agreement to Congress. By then, negotiators must know for sure whether Canada is in or out of the pact. Giving notice to Congress by Friday will allow the deal to be finalized before Mexico’s new administration takes over in December.

Successfully renegotiating NAFTA would be a significant accomplishment for Trump, who has criticized the 25-year-old pact since its inception and promised to remake it on the campaign trail.

Yet the economic effects of the agreement that was reached with Mexico this week remain unclear. Trade experts who have analyzed the preliminary details have suggested the proposals would do little to accomplish the bold claims Trump has made about how overhauling NAFTA would help the economy, including greatly expanding U.S. manufacturing jobs or cutting the U.S. trade deficit with Mexico.

New regulations requiring carmakers to use more domestic content and pay higher wages will most likely raise prices for consumers and could create new opportunities for automobile manufacturers in Europe and Asia to have a competitive advantage in the United States. NAFTA, which was negotiated by President George H.W. Bush and signed into law by President Bill Clinton, helped lock together the economies of North America and prompted businesses to reorganize their supply chains around the continent, making industries like automakers more globally competitive.

U.S. trade with Canada and Mexico more than tripled in the quarter century since the deal was passed, and now many products that are imported into the United States from Mexico contain many American materials and components.

Even so, economists generally believe that the deal provided just a small boost to the U.S. economy. And while the deal created distinct winners and losers, with some American towns suffering deeply as their factories moved to Mexico, many economists say it actually had little to no effect on overall U.S. employment, as the gains and losses from the deal balanced out.

Speaking at a university in Oshawa, Ontario, on Friday morning, Trudeau said that “we have also been very clear: We will only sign a deal if it is a good deal for Canada.”