Trudeau holds out for ‘the right deal’

Andrew Mayeda, Josh Wingrove
Bloomberg News
President Donald Trump has threatened to hit Canadian auto exports with tariffs if a new trade agreement isn’t reached.

Canadian Prime Minister Justin Trudeau said his government is trying to reach agreement this week with the U.S. to update the North American Free Trade Agreement, but it won’t sacrifice its goal of getting the “right deal.”

“The Americans and Mexicans very much want to try and get things done by Friday and we’re seeing if we can get to the right place by Friday, but as I’ve said all along it has to be the right deal for Canada and that’s what we are staying firm on,” Trudeau told reporters Wednesday in Kapuskasing, Ontario.

“We’ve been very clear we’re going to be thoughtful, constructive, creative around the table but we are going to ensure that whatever deal gets agreed to is the right deal for Canada and the right deal for Canadians.”

Earlier Wednesday, Canadian Foreign Minister Chrystia Freeland also expressed optimism, but said much work remained to be done to iron out the details.

“There are some important things that we believe we have accomplished together with the U.S. and thanks to some significant compromises Mexico was prepared to make to support Canadian workers,” Freeland told reporters Wednesday in Washington after morning meetings with U.S. Trade Representative Robert Lighthizer.

Canada's Foreign Affairs Minister Chrystia Freeland backs proposed changes to car content rules.

“When it comes to specific issues, we have a huge amount of work to do this week at the ministerial level and also the officials are really grinding through extensively,” she said.

The Canadian dollar pared losses after Freeland’s comments, and was trading little changed at C$1.2923 per U.S. dollar at 1:10 p.m. in Toronto trading. It had been down as much as 0.2 percent earlier in the day.

Freeland said she’s planning to meet with Lighthizer again at 5 p.m. on Wednesday.

Canada’s dairy market is a focal point for Wednesday’s negotiations, a U.S. official familiar with the negotiations said. Trump has repeatedly deemed Canadian tariffs on some dairy products as unfair for U.S. producers.

Trudeau on Wednesday restated his position of defending the “supply-management” system that controls production of some Canadian farm products like dairy.

Freeland said the U.S. and Canada agreed to not negotiate the unresolved details publicly.

U.S. sets Friday deadline for deal

The U.S. is pressuring Canada to strike a deal by Friday, which is when President Donald Trump’s administration plans to inform Congress that he intends to sign a new trade pact with Mexico in 90 days that would replace NAFTA.

This week’s showdown has Canada under the gun to either strike a deal both can live with, cave to Trump’s pressure tactics or dig in and see what the U.S. will do.

The U.S. and Mexico announced a bilateral deal Monday after weeks of talks with just the two nations. Under the proposed agreement with Mexico, cars will be required to have 75 percent of their content originate in the U.S. and Mexico. The current NAFTA requires that 62.5 percent originate within North America. Under the new deal with Mexico, 40 percent to 45 percent of auto content would have to be made by workers making more than $16 per hour, a condition that favors the U.S. and Canada.

Trump is now using that agreement to pressure Canada to come on board or be left out.

Prime Minister Justin Trudeau defended Canada’s controls on farm products.

Earlier Monday, Freeland expressed support for proposed changes to NAFTA’s rules for car content. “Rules of origin in cars is an incredibly complicated issue, but we had reached a high-level agreement with the U.S. in the spring, and we are encouraged by the progress they made with Mexico this summer,” the minister said. “Mexico has made some significant concessions which would be really good for Canadian workers.”

The U.S. made clear that the deadline for an agreement in principle is Friday, with no wiggle room, one official said. Despite U.S.-Mexico progress, hurdles remain for Canada, although markets are betting a deal will be reached that includes Ottawa even as Trudeau’s political rivals begin to blame him for risking NAFTA’s collapse.

Freeland said Tuesday it will be an “important and constructive week” and that Canada was encouraged by progress made without them.

The U.S. has told Canada they’ve already compromised on the issue of the sunset clause, which was a sticking point for Canada, and that they hope that helps pave the way to a quick deal, one of the U.S. officials said.

Trump OK with 2-country pact

Trump is prepared to move forward with Mexico alone, on the belief that Canada has more to lose from such an arrangement, the officials said.

There are also warnings that U.S. trade law will prevent, or impede, Trump from ramming ahead on a quick timeline with only a two-country deal, and key figures in Congress are calling for Canada to be included.

Trump has threatened to apply auto tariffs to Canadian exports if a deal isn’t reached.

The nations are pushing to sign a deal before Mexico’s president-elect takes office Dec. 1. Due to timelines set out in U.S. trade law, the U.S. would need to notify Congress of a deal by Friday, Lighthizer said this week.

However, he said a notification could be sent that left open the possibility of Canada reaching a deal sometime after Friday.

Commerce Secretary Wilbur Ross said on Tuesday that it’s likely the deal will be voted on next year after congressional midterm elections in November.