Canada Takes A Hardline On U.S. Protectionism As NAFTA Talks Resume

Canadian negotiators are preparing to take a hard line with their American trade counterparts as negotiations aimed at revising the North American Free Trade Agreement (NAFTA) resume this week in Mexico City.

At media briefings in Ottawa, Canadian government officials said they plan to hold the line against the Trump administration's protectionist trade demands while, at the same time, trying to quickly reach deals on easier issues in hopes of showing goodwill and building positive momentum in the talks.

The Trudeau government is well aware that taking a hard line on Washington's many “poison pill” proposals risks blowing up the talks. However, Canadian trade officials are resolved that failing to reach a deal on NAFTA is better than agreeing to a bad deal that will hurt the Canadian economy in the long run. News reports out of Mexico indicate that that country is planning to take a similar position when talks resume.

Outside the talks, Canadian officials will continue their long-running outreach campaign to NAFTA-friendly U.S. businesses and politicians, in hopes of ratcheting up domestic pressure on the White House to back off its demands and mobilize Congress to oppose President Donald Trump if he tries to pull the United States out of the pact unilaterally.

No matter which way the talks go, Canada is determined to stay at the table and force the Trump administration to decide whether it will pull the plug. A trade agreement worth $1.3-trillion in annual trade now hangs in the balance as Canada braces for a showdown with the world's most powerful country.

Washington's main protectionist demands include proposals that would require vehicles made in Canada and Mexico to contain 50-per-cent U.S. content; gut or eliminate the dispute-resolution mechanisms in Chapters 11, 19 and 20 of NAFTA; severely limit the amount of U.S. public procurement that Canadian and Mexican firms can bid on; and add a sunset clause that would end NAFTA in five years unless all three countries agreed to keep it.

Canada believes it can build negotiating momentum by swiftly reaching agreement on less contentious issues, such as slashing red tape at the border and facilitating international e-commerce.

Some negotiators see a third category in between the non-negotiable proposals and the easy ones: matters that will be tough but that Ottawa might be willing to make concessions on. These include raising Canada's $20 cap on duty-free online purchases, tightening intellectual-property protections and granting more access to Canada's protected dairy market. It will, however, be tough for the Canadians to make any compromises on such matters while the first set of protectionist U.S. demands remain on the bargaining table.