Canada Downplays Nafta Deadline With Talks to Continue Thursday

(Bloomberg) -- There’s no Nafta deal yet – despite hints of optimism as the latest deadline bears down.

U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland met twice Wednesday, in two sessions totaling nearly four hours after lower-level staff had worked through the night. Freeland emerged saying those officials’ talks would continue into the evening and she’d meet Lighthizer again Thursday.

“Trade agreements do take some time, both to negotiate and to update,’’ she told reporters Wednesday evening in Washington. When asked if there was a deadline, she said only that her “sole objective’’ was a good deal. “We are absolutely committed to getting this right.’’

A deal is likely needed within days to meet a deadline that would allow it to be signed by Mexico’s outgoing president. If the deadline is missed, U.S. President Donald Trump has threatened to proceed with Mexico only, potentially quitting the existing Nafta pact and slapping auto tariffs on Canada. The talks Wednesday focused largely on tariffs and dispute panels, according to a major stakeholder, Canadian labor leader Jerry Dias. Those subjects are two of the biggest sticking points, but time is running out for a breakthrough.

‘Challenges’ Remain

Dias, speaking to reporters in Washington after meeting Canadian negotiators, said there “hasn’t really been any major inroads’’ on key issues, but that progress was being made and Canada will only move so far. “Is there constructive dialogue? Yes. But are there challenges, the answer is still absolutely yes,’’ he said. “I don’t think we’re getting a deal this week.’’

Read more: Don’t Use Milk as Nafta Bargaining Chip, Farmers Tell Trudeau

He said Canada is seeking the elimination of U.S. tariffs on steel, aluminum and softwood lumber as part of talks, though Freeland has said she considers those separate issues. On Wednesday, she called lumber a “separate track,’’ where Canada has already launched formal complaints. “Certainly, Canada believes that both Canada and the United States would be better off if these inappropriate tariffs on Canadian softwood lumber were to be removed.’’

The pressure to secure an agreement quickly is meant to allow time to publish the text of an agreement by Sept. 30. The sides are aiming to do that to meet U.S. trade law timelines and allow the deal to be signed before Dec. 1, when Mexican President-elect Andres Manuel Lopez Obrador takes office. Canada has, however, downplayed the deadline, and several have been missed in talks so far. The U.S. Trade Representative’s office did not respond to a request for comment Wednesday.

House Ways and Means Committee Chairman Kevin Brady said Wednesday he was optimistic that the U.S. and Canada could reach a deal, but warned: “Canada needs to really step up here this week, we’re not going to change the deadlines,’’ he said on CNBC’s “Squawk Box.” The countries are in the “end zone’’ of talks, he said, adding only that there’d be “conversations’’ if they couldn’t reach agreement by the end-of-month deadline. “I think Canada will be there. I think it’s in their interest, it’s in our interest. So, ‘don’t delay’ would be my message.’’

Canadian Prime Minister Justin Trudeau said he hopes a good deal can be reached. “But we’re going to need to see a certain amount of movement in order to get there, and that’s certainly what we’re hoping for,’’ he told reporters in Ottawa on Wednesday.

Dispute Panels

Another Canadian labor leader, Hassan Yussuff, said Wednesday he was cautiously optimistic a deal was possible. “There’s enough room there for people to maneuver to find an agreement,’’ said Yussuff, head of the Canadian Labour Congress and a member of Freeland’s Nafta advisory panel. “If it doesn’t get done this weekend, then I think the pressure would obviously increase on both sides.’’

Any deal will likely see Canada give access to its dairy market, as well as concessions on intellectual property, pharmaceutical patent protection and cross-border shipping. In return, Canada would want the preservation of dispute panels to handle anti-dumping and countervailing duty cases, an exemption on cultural industries, and to avoid auto tariffs.

The dumping panels, presently enshrined in Chapter 19, are a core sticking point, Dias said, because the Canadians don’t trust U.S. courts to give them a fair hearing. “Having Colonel Sanders take care of the chickens – in other words, having all disputes handled in U.S. courts – just doesn’t make any sense for Canadians,’’ Dias said.

There is, however, impatience among some in Congress that talks are dragging on. Congress will play a key role in the process, and senior figures have warned that Trump can’t advance a deal under his current legal path if it doesn’t include Canada, whereas Trump argues he can.

--With assistance from Jenny Leonard.

To contact the reporter on this story: Josh Wingrove in Ottawa at jwingrove4@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Robert Jameson, Kim Chipman

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