Top members of Canada's negotiating team are making an abrupt return to the NAFTA table in Washington where they're already facing stiff pressure from U.S. President Donald Trump to join a bilateral trade deal his administration struck Monday with Mexico.
The White House is calling on Canada to endorse what Trump has described as the possible replacement of the North America Free Trade Agreement by the end of the week. Trump has already rebranded it the "United States-Mexico trade agreement."
If Canada declines, Trump has threatened to hit his northern neighbour with automotive tariffs that would cause considerable damage to both economies.
He also warned he would terminate the 24-year-old NAFTA, a treaty between Canada, the U.S. and Mexico that has been economically significant for the continent.
The bilateral trade framework announced Monday between the U.S. and Mexico intensifies the pressure on Canada's Liberal government, which is returning to NAFTA negotiations Tuesday for the first time since the spring.
Larry Kudlow, the director of Trump's National Economic Council, turned up the heat on Canada's negotiators during a televised interview Tuesday morning.
Kudlow told the Fox Business News show Varney & Co. that Trump would "love to make a deal with Canada" but it has to be in the interests of American workers and farmers.
Kudlow said he didn't want to pre-empt what U.S. Trade Representative Robert Lighthizer would put before Canada's Foreign Affairs Minister Chrystia Freeland later Tuesday, but he said Canada "really ought to look at what the U.S. and Mexico just completed as an example of what can be done if there's good faith negotiating and a willingness to compromise in the interests of both parties.
"That's what negotiations are supposed to be, not just hard line. And they might study that. And that would be very helpful, I think, both to Canada and to the whole process."
Freeland cut European trip short
For the last five weeks, the federal government has watched from afar as Canada's two continental partners moved forward with one-on-one trade talks of their own.
Following Monday's announcement, the Liberal government quickly pulled together the most senior members of Canada's negotiating team.
Freeland cut short a week-long diplomatic trip to Europe to rejoin face-to-face trade discussions in the U.S. capital. Freeland has said she stayed in close contact with Lighthizer and Mexican Economy Minister Ildefonso Guajardo throughout their summertime, bilateral talks.
Gerald Butts, Prime Minister Justin Trudeau's principal secretary, lead Canadian negotiator Steve Verhuel and other senior officials caught a morning flight Tuesday to Washington from Ottawa.
Canada will have to consider a U.S.-Mexican accord that goes far beyond the two countries' one-on-one matters, which have centred on auto content rules. The new framework addresses many issues that have been viewed as trilateral throughout the year-long renegotiation of NAFTA.
The two countries agreed on issues including intellectual property, digital trade, labour, financial services and Mexico's de minimis threshold for duty-free on-line sales that cross borders.
In addition, the new deal would expire after 16 years with reviews every six years, a senior U.S. administration official said Monday during a briefing. Canada had rejected an earlier U.S. proposal that NAFTA 2.0 be renegotiated every five years.
Trump, who has called NAFTA a "rip off" for the U.S., called Monday's announcement a big win.
He then delivered his ultimatum to Canada.
"One way or the other, we have a deal with Canada," Trump said from the Oval Office, where he was joined on a speaker phone by Mexican President Enrique Pena Nieto.
"It will either be a tariff on cars, or it will be a negotiated deal; and frankly a tariff on cars is a much easier way to go, but perhaps the other would be much better for Canada."
Pena Nieto said several times during the call that he hoped Canada would be part of the deal that will replace NAFTA. But later Monday, Mexican Foreign Minister Luis Videgaray told reporters that his country would have a free trade agreement regardless of the outcome of U.S.-Canada talks.
For Trump, striking a new trade deal with Mexico — and possibly Canada — would be welcomed as a political win for Republicans ahead of the crucial U.S. midterm elections this fall.
Mexico would like to seal a new trade agreement before the incoming government of president-elect Andres Manuel Lopez Obrador takes office Dec. 1.
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