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Trump’s path to a new NAFTA deal runs through Canada, lawmakers say

Trump’s path to a new NAFTA deal runs through Canada, lawmakers say
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Senate Republicans insisted on Canada’s participation in a North American free trade deal Tuesday, a demand that would force President Trump to reach a compromise with Canadian Prime Minister Justin Trudeau if he is to secure a major trade victory.

By reaching a separate initial trade deal with Mexico and giving the United States’ closest ally only a few days to effectively take it or leave it, the president has put Trudeau in a tight spot.

Canadian officials, after being boxed out of talks for weeks, must decide quickly whether to sign on to a preliminary deal to alter the North American Free Trade Agreement that Trump has brokered with Mexican leaders. This would require Trudeau to set aside the string of Trump insults hurled at him several months ago when talks soured.

As of early Tuesday afternoon, as Canadian Foreign Minister Chrystia Freeland was arriving in Washington, Canadian officials still hadn’t seen the official text of the deal they have been asked to accept, according to one official close to the negotiations who spoke on the condition of anonymity to discuss confidential deliberations.

Trump said Monday that if Canada refuses to sign on to the new deal, he will terminate the NAFTA agreement.

But many U.S. lawmakers say Trump’s approach is neither wise nor legal, potentially creating fresh hurdles. Congress must sign off on any trade deal before it can take effect.

Most GOP senators strongly support NAFTA, saying it has brought jobs to their states. Although they have reluctantly gone along with the Trump administration’s attempts to renegotiate the three-party deal, the idea of leaving Canada out was met with near universal condemnation Tuesday.

“Obviously Canada’s got to be willing to reach an agreement but it would be really short-sighted for us to have an agreement only with Mexico,” said Sen. Jerry Moran (R-Kansas).

Several lawmakers argued that a bilateral U.S.-Mexico deal could not even be brought before Congress because the fast-track rules governing the NAFTA renegotiations pertained specifically to a three-party deal.

Sen. John Cornyn (Tex.), the No. 2 Senate Republican, told reporters Tuesday that there would be “technical problems” with Congress voting on a bilateral Mexico-U.S. trade deal under fast-track procedures that were expected to apply to a trilateral NAFTA renegotiation.

Special fast-track provisions for trade allow bills to pass the Senate with a simple majority instead of the 60 votes often required for major legislation, and they are seen as necessary tools to get such deals through Congress.

“I think there are technical problems with that, so my hope is that Canada comes on board rather quickly,” Cornyn said. “I hope we can get this done, and I hope Canada’s on board. Because that would eliminate some of the technical, procedural problems . . . that might otherwise arise.”

Sen. Patrick J. Toomey (R-Pa.), whose views often reflect those of many of the free-trade Republicans in Congress, expressed similar views about Senate passage of a deal excluding Canada. “NAFTA was enacted with legislation. . . . Similarly a change to NAFTA requires legislation,” he said.

There was also skepticism generally about the Trump administration’s announcement of a deal with Mexico, given the scant details available and GOP lawmakers’ wariness about the president’s impulsive and scattershot approach on trade – the issue that, more than any other, has divided him from his allies on Capitol Hill.

“None of us even know really what deal it is they’ve agreed to,” said Sen. Bob Corker (R-Tenn.), a frequent Trump critic. “It seems like this is more for optics and people feeling good about the future as it relates to the midterms than it is reality, but I could be wrong.”

Legal experts are also skeptical that Trump has the ability to pull out of NAFTA without approval from Congress.

“Trump can’t just pull out of NAFTA on his own. It took an act of Congress to get into NAFTA, and it will take an act of Congress to get out of it,” said Jennifer Hillman, a former general counsel for the United States Trade Representative under former President Bill Clinton.

After top advisers talked optimistically about working with Canada to reach a deal, other White House officials took a harder line — seemingly echoing Trump’s statement that “we’ll see” if Canada can join the deal later.

“This deal is pretty well put together with Mexico,” Commerce Secretary Wilbur Ross told Fox Business Network on Tuesday. “So the president, as he’s indicated, is fully prepared to go ahead with or without Canada. We hope that Canada will come in. I think it’s a good idea if they do. There’s really not much they should object to. But if not, they will then have to be treated as a real outsider.”

Treasury Secretary Steven Mnuchin, speaking on CNBC, offered a similar assessment, saying it might be necessary for the United States to cut one deal with Mexico and then a work on a completely separate arrangement with Canada.

Other Trump advisers — particularly U.S. Trade Representative Robert E. Lighthizer — have indicated that they fully intend to try to bring Canada back into the deal.

If ratified, the “preliminary agreement with Mexico,” as the White House termed it Monday, would update the NAFTA rules governing trade between the two countries. The full text has not been made available, and many details remain unresolved. But excerpts released Monday include new rules aimed at bolstering the North American auto industry against foreign competition. The pact also included intellectual property protections and labor rights rules.

The stock market rallied sharply after the partial deal was announced, with many investors believing it offered a first sign that Trump was shifting away from the protectionist trade approach he adopted earlier this year.

Bringing Canada into the deal would require resolving a host of thorny disputes between the United States and one of its largest trading partners.

The United States wants Canada to agree to change its dairy and intellectual property protection policies, among other things, while Canada wants Washington to drop tariffs on steel and aluminum imports.

Some provisions — including new rules requiring more high-wage North American auto manufacturing — would be favorable for Canada.

“If they really want to have a deal, we can probably work through the issues,” said an official close to the negotiations.

One major sticking point might have already been addressed, however. Trudeau had repeatedly rejected a White House demand that the trade deal expire after five years. As part of the agreement with Mexico, the White House agreed to a 16-year term for the trade agreement, with the potential for consistent renewal. Parties would have the opportunity to raise objections to the deal after six years, and it could not immediately be learned whether Canada would accept this U.S. concession.

The trade dispute has heightened the personal tension between Trump and Trudeau, driving an extraordinary public feud between the leaders of the allied neighbors at a July meeting of the Group of Seven industrial nations. At the meeting, Trudeau criticized Trump’s metals tariffs and called it “insulting” that the administration would impose tariffs on Canadian goods in the name of national security. Trump reacted by calling Trudeau “dishonest” and “weak” in a Twitter post and by threatening tariffs on the Canadian automobile industry, as well as by withdrawing the United States from the meeting’s joint statement.

The warnings from Toomey and other Republican lawmakers appeared to make Trump defiantly defend his approach on Tuesday.

“I smile at Senators and others talking about how good free trade is for the U.S.,” he wrote on Twitter. “What they don’t say is that we lose Jobs and over 800 Billion Dollars a year on really dumb Trade Deals . . . and these same countries Tariff us to death. These lawmakers are just fine with this!”

Trump is referring to the $811 billion gap between how much the United States imports and how much it sells to other countries. Trump has said the trade deficit is evidence the country is losing jobs to foreign competitors. Many economists say it actually promotes economic growth overall, as it allows U.S. consumers to buy lower-cost goods from overseas.

Washington’s brusque treatment of its northern neighbor reflects Trump administration officials’ irritation with Canada’s approach, which dates to the early months of the talks when Canadian negotiators dismissed as unserious several hard-line U.S. demands.

“Canada is seen as not negotiating fairly or in good faith while Canada sees itself as being punished for having the temerity to be standing up for Canadian interests,” said Eric Miller, president of Rideau Potomac Strategy Group.

Canada is surprised to find itself in this lonely position. Mexican officials privately had dismissed the idea of joining Trump to celebrate any deal that did not include Canada. Yet Mexican Foreign Minister Luis Videgaray and his team appeared in the Oval Office for Trump’s stage-managed phone call with Mexican President Enrique Pena Nieto.

Instead of working alongside Mexican negotiators to improve the partial deal, Canada will be battling against the odds to defend some of its core commercial interests, analysts said.

The sheer number of issues requiring decisions make it unlikely that a three-way deal will be agreed by Friday, the day U.S. officials plan to formally notify Congress of the pact with Mexico.

“It isn’t impossible to get a deal. But in all likelihood, we’re going to move well past the Friday deadline,” said Dan Ujczo,a trade attorney at Dickinson Wright. “There’s both political and practical reasons why it extends beyond Friday.”

The White House is hoping to use a complex legal arrangement to have Mexico ratify the new trade arrangement. This would require the White House to send a letter to Congress on Friday, stating that it has entered into a trade agreement with Mexico. That letter could stipulate that Canada may enter the trade deal in the future.

But within 30 days, the White House will have to send the formal trade agreement to Congress, and at that point it will have to resolve all differences with Canada. After that point, Congress would have an additional 60 days to review the completed deal before the Mexican government approves it in late November, before its new president takes office Dec. 1.

Heather Long and Felicia Sonmez contributed to this report.




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