U.S. fires starter's pistol on NAFTA; length of negotiation ahead: undetermined
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WASHINGTON — The United States has officially served notice of its intention to renegotiate the 1993 North American Free Trade Agreement, triggering a 90-day consultation window before talks begin later this summer with Canada and Mexico.
The Trump administration rang the opening bell Thursday with a letter to the key congressional power-brokers who must now be consulted as U.S. negotiators prepare their list of priorities.
The letter itself was mundane.
It cited the need to modernize a creaky old agreement, add new provisions relevant to the modern economy, and mentioned things already negotiated in the Trans-Pacific Partnership, the deal abandoned by Donald Trump: digital trade flows, intellectual property, limits on state-owned enterprises.
It barely filled a single page and was drastically scaled back from the laundry list of complaints included in a draft version earlier this year. Some U.S. proponents of a hardball approach expressed disappointment.
But it's still early.
The vagueness of that letter left wiggle room for the administration to adjust its priorities over the coming months, as it prepares a more detailed list to be released in about 60 days.
One key U.S. player has hinted at a tougher approach.
He may have signalled it by choosing the day of the NAFTA notice to make another announcement involving Canada, one expected for a while: that the U.S. will explore whether Canadian subsidies could lead to U.S. duties on Bombardier.
"Free and fair trade is the new standard for U.S. trade deals," said Commerce Secretary Wilbur Ross, who issued separate statements on NAFTA and Bombardier. "Since the signing of NAFTA, we have seen our manufacturing industry decimated, factories shuttered, and countless workers left jobless.
"President Trump is going to change that."
The long-standing assumption in the national capitals is the negotiations will ultimately touch some of the hot-button issues in Canada-U.S. trade — dairy, auto parts, lumber, pharmaceuticals, duty-free shopping, liquor imports and Buy American rules.
A principal reason these talks could grow in scope is because of the U.S.'s chosen venue for updating the deal. It is going through the U.S. Congress's fast-track law. Under it, lawmakers give up their constitutional right to amend the deal, but get consulted constantly.
Canada had initially hoped for a quicker, easier, more cosmetic procedure.
The federal government tried pitching the idea of simple changes by pointing out repeatedly in the weeks after Trump's election that NAFTA has already undergone a dozen tweaks over time — all without involving Congress.
A number of principal actors in the Trudeau government have studied the lessons of the original Canada-U.S. free-trade talks of the 1980s, and read the diaries of then-Canadian ambassador to Washington Allan Gotlieb, who chronicles the hair-yanking frustrations of trying win majority votes in both houses of Congress.
He describes an ardent free trader who spurned the deal under pressure from the uranium lobby; an influential senator who lobbied colleagues against it because of lobster-catching regulations; a potato-related holdup; and a committee chairman who just wouldn't return phone calls.
One current Canadian official sums up the potential challenge ahead, in trying to win support from dozens of people with different priorities, and different domestic interests in their respective states.
"When you send an orange into the U.S. Congress, it can come out a banana," he said.
This domestic pressure could ultimately haunt the White House.
Only one North American leader has made it a core commitment to redo NAFTA: Trump. And the grumbling of different constituencies will make it harder to win the necessary votes and keep his campaign pledge.
In private, different Canadian officials sound fine with one of several potential outcomes: A quick deal, a good deal and, in the absence of either, no deal at all. In Ottawa, Foreign Affairs Minister Chrystia Freeland said Canada will negotiate in good faith.
"We are ready to roll up our sleeves," Freeland said. "We will work hard and seriously on updating this essential agreement...
"Our focus in Canada is on getting a good deal."
Trump might soon be forced to decide what he wants. Right now, he says he wants a quick deal and a thorough deal. Getting the latter might not be easy before 2019, as the Mexican election enters full swing in a few months, followed by the U.S. midterms.
"All sorts of realities are running into each other," said Laura Dawson, a trade expert at Washington's Wilson Center.
There's already been a first Canada-U.S. meeting following the notice.
Representatives of Canada's largest private-sector union happened to be in Washington to meet Ross on the day the formal notice was issued; Jerry Dias of Unifor said Ross even joked about the timing.
Like the current U.S. administration, Unifor agrees that NAFTA has cost jobs, and sent manufacturing to Mexico. It wants stricter labour laws in Mexico, designed to drive up the cost of offshoring there.
"It was an excellent meeting," Dias said.
"He understands Canada's not the problem as it relates to NAFTA. He understands our wages are comparable, our benefits. We aren't a low-cost supply. There really is a recognition Canada isn't the problem."