Canada ‘Prepared For The Worst’ As NAFTA Talks Reach Stalemate

Canada’s Foreign Affairs Minister Chrystia Freeland said late Tuesday that the country is “prepared for the worst” as the latest round of talks aimed at revising the North American Free Trade Agreement (NAFTA) conclude in Mexico City with little progress made on resolving several sticking points involving the United States.

Minister Freeland said that while progress was made on several “bread and butter” issues, significant differences remain between Canada and the U.S. on key chapters of NAFTA, including a U.S. push to change the rules governing the Canadian auto industry and demands for a five-year sunset clause on the trilateral trade pact between Canada, the U.S. and Mexico.

“There are some areas where some extreme proposals have been put forward, and these are proposals that we simply cannot agree to," the Minister said to reporters, adding that the U.S. has refused to change its position on many of the issues Canada finds unworkable.

U.S. Trade Representative Robert Lighthizer issued a statement Tuesday expressing similar pessimism that a new agreement can be reached, saying he remains concerned with the “lack of headway” on many issues at the bargaining table.

“Thus far, we have seen no evidence that Canada or Mexico are willing to seriously engage on provisions that will lead to a rebalanced agreement. Absent rebalancing, we will not reach a satisfactory result,” reads the statement.

Asked by reporters if Canadians should prepare for life without NAFTA, Minister Freeland said that the Government of Canada's position is to “hope for the best and prepare for the worst and Canada is prepared for every eventuality.” In this regard, Minister Freeland echoed sentiments expressed by Mexican government officials, who have said publicly that Mexico is “prepared to go it alone without NAFTA” if a new deal cannot be reached.

Minister Freeland also said that the addition of a sunset clause would be redundant as there is already an exit mechanism built into the deal — by simply giving six months' written notice any of the three countries could leave NAFTA. U.S. President Donald Trump has threatened to do so on several occasions, although, despite his rhetoric, he has kept his negotiators at the table through successive rounds of talks.

For Canada, the sunset clause is one of its so-called “red lines.” Another area of disagreement is a U.S. proposal that would alter rules around automobiles. The Trump administration wants half of the content of all North American-built vehicles to be produced in the U.S. and the broader North American allotment to be increased to 85% from 62.5%. There is currently no rule governing U.S.-only production.

The U.S. also wants to expand an existing “tracing list” to demand more products — including all steel — originate in North America. Minister Freeland said both Canada and Mexico feel that plan would damage an already deeply integrated North American auto manufacturing market. Progress achieved at the latest negotiations in Mexico City was in technical areas related to anti-corruption, telecommunications, sanitation and trade facilitation.