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"Trench warfare... but not as hostile"

U.S.-Canada trade negotiations go down to "core issues."

by Justin Ling
Sep 6 2018, 3:50pm

Despite President Donald Trump’s persistent threats that he will keep Canada out of a North American Free Trade Agreement, negotiators are continuing to work towards a deal.

Talks resumed on Wednesday, as Trump’s self-imposed Friday deadline for a cross-border deal came and went — a deadline that, admittedly, was mostly posturing.

A senior Canadian government source told VICE News that, despite the president’s attempts to mount pressure on the Canadians to cave on one particular item, negotiations in the room are more technical horse-trading.

“It’s kind of all business in the room right now,” the official said, speaking on the condition of anonymity, as negotiations were ongoing.

Ottawa’s strategy in recent weeks has been to underscore the seriousness of the negotiations. To that end, Ottawa has flown up Trudeau’s inner circle to handle the talks, alongside Foreign Minister Chrystia Freeland and her team. Amongst them are Trudeau’s Chief of Staff Katie Telford and Senior Political Advisor Gerald Butts — the two most important political figures in the country who have not been elected to the House of Commons.

Despite some bombast from the White House — and an explosive leak of Trump vowing to make a deal with Canada “totally on our terms” — the Canadian said that U.S. Trade Representative Robert Lighthizer and his team are behaving like “real pros.” While negotiations have been hard-fought, they have not been marked by the same hyperbole tossed around by the president.

“It’s trench warfare,” the official said. “But not as hostile.”

What’s really left to negotiate

The outstanding issues are relatively few: Agriculture, the deal’s dispute resolution processes, an exemption for cultural industries, and “a couple of other items,” the Canadian official said.

Agriculture, dairy in particular, has drawn the particular attention of Trump. He has railed against Canadian tariffs which apply to American dairy and cheese. He’s used the tariffs as a frequent theme in his tweets and numerous campaign speeches.

“Tweets don’t matter at the table,” the source said.

"Tweets don’t matter at the table."

In the room, negotiators for both sides were locked largely in the minutiae of issues around Canada’s supply managed dairy sector that have been litigated by both sides for decades.

“We can’t go as far as their publicly-stated demands, and they know that,” the Canadian official said. “It’s really a game of how far do they think we’ll go, versus how far are we prepared to go.”

Ultimately, they added, “there’s nobody on our side that’s going to let NAFTA die on that issue.”

The issue around dairy “is one that the professional negotiators are doing most of the talking at the table,” the Canadian source said. Those American and Canadian negotiators have been making the same arguments to each other for various rounds of negotiations dating back two decades, the source said, underscoring that the issues at the table are not defined by the current occupant of the White House.

“They talked about it in WTO [World Trade Organizations] conversations, they talked at TPP [Trans Pacific Partnership] conversations,” the Canadian source said.

The contrast between the bombast of the president’s position and the more serious tone in the room was only highlighted by the fact that, as both sides met at Lighthizer’s office in D.C. on Wednesday, the New York Times published an unsigned op-ed from a senior Trump official who wrote that many in the White House work daily with the aim of “thwarting Mr. Trump’s more misguided impulses until he is out of office.” They continued that Trump has displayed a preference for autocrats, while he “displays little genuine appreciation for the ties that bind us to allied, like-minded nations.”

A request for comment to the Lighthizer’s office went unanswered, through a statement from his office at the end of August said that the talks, thus far, “were constructive, and we made progress.”

"There’s nobody on our side that’s going to let NAFTA die on [Canada's supply managed dairy sector]."

The issues around NAFTA’s dispute-resolution processes are less drastic than other sections of the deal.

Canada supports some provisions of the dispute-settlement clauses, which allow companies to sue governments who do not adhere to tenets of the deal. The prime minister told an Edmonton radio station on Wednesday that “we need to keep the Chapter 19 dispute resolution because that ensures that the rules are actually followed. I mean, we have a President who doesn’t always follow the rules as they’re laid out.”

But Canada itself has been at the receiving end of many of those lawsuits, and appears to be willing to water down aspects of the existing agreement.

Beyond that, the only outstanding issue that looms large over the talks pertains to the so-called cultural exemption, which protects domestic media and news markets from the free-trade provisions in the deal.

"It is inconceivable to Canadians that an American network might buy Canadian media affiliates, whether it's newspapers or TV stations or TV networks,” Trudeau told media on Tuesday. “It would be a giving up of our sovereignty and our identity and that is something that we will simply not accept.”

Given the cultural and broadcast industries are, on a GDP basis, just a small part of the deal, it seems unlikely that Washington will let that chapter derail the whole deal.

The bluster around cars

Leaks have threatened to derail the negotiations. Last week, the Toronto Star published remarks by the president, made to Bloomberg News, where he vows to make a deal with Canada “totally on our terms.” The comments with Bloomberg were off-the-record, but leaked out not long after.

In those comments to Bloomberg, Trump boasts that he has used leverage around the Canadian auto industry to extract concessions from his northern neighbours. “Every time we have a problem with a point, I just put up a picture of a Chevrolet Impala,” Trump said. The Impala is manufactured in Oshawa, Ontario. Indeed, threatening tariffs on Canadian-made cars could be hugely damaging to the Canadian economy, economists say.

Yet the Canadian official pointed out that the section of NAFTA dealing with cars is largely settled. The United States and Canada have been largely on the same side of the issue, given both countries’ automotive sectors are tightly integrated.

"It is inconceivable to Canadians that an American network might buy Canadian media affiliates."

The section of the deal on automotives — an annex to the original NAFTA agreement — was largely settled when, in bilateral talks with the United States, Mexico agreed to new minimum wages and content rules to qualify for tariff-free exports to the other countries.

It’s that agreement-in-principle with Mexico that Trump has said paves the way for a bilateral deal which excludes Canada — something he likely can’t do without Congress’ approval — and started the clock for Washington and Ottawa to reach a deal.

It’s unclear if there are any other outstanding issues around automotives between the U.S. and Canada.

Will it be enough?

While there had been ample speculation that the bilateral deal between Mexico and America was a slight to Canada, the Canadians don’t see it that way.

But one big question is whether the technical concessions that will be made at the table between the Canadians and Americans will be enough to satisfy the president, who has a penchant for sudden changes in opinion. While the official said they have confidence that Lighthizer has kept in contact with Trump’s inner circle, ensuring he has authority to sign off on issues, that has proved little guarantee in the past.

“We’d be not doing our job if we didn't keep all those things in the back of our mind,” the Canadian said.

Even once an agreement-in-principle is signed between the neighbouring countries — if it is signed — the updated agreement will still need to be ratified by each countries’ respective legislatures.

Cover image of President Donald Trump talks with Canadian Prime Minister Justin Trudeau during a G-7 Summit welcome ceremony in Charlevoix, Canada in June, 2018. Photo by Evan Vucci/AP

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