WASHINGTON — Canada's NAFTA negotiators are on a fact-finding mission this week in Washington, seeking places where compromises might be found in the new year when the talks enter a critical, potentially do-or-die phase.
Officials from the three NAFTA countries began gathering Monday at a downtown hotel for a week of meetings between formal rounds. Canadian officials say they expect less-controversial chapters to get closer to completion.
They don't foresee formal offers, counter-offers, and text-tabling happening on some of the hardest issues.
Instead, one official said, the Canadian team intends to try learning more about what the U.S. hopes to achieve as an end goal, on auto parts for instance, to see whether there might be constructive pathways for achieving it that all countries can live with.
"We're prepared to have conversations to better understand their priorities," said the Canadian official, speaking on condition of anonymity given the sensitivity of the talks. "Perhaps there are other solutions...We are always prepared to think creatively."
Several of the toughest issues have seen early impasses. They include auto parts, agriculture, and dispute-resolution mechanisms. Canada and Mexico have described some U.S. proposals as non-starters, and have frustrated some U.S. officials by refusing to make counter-offers so far.
The United States has proposed that North American content in cars must total 85 per cent — up from 62.5 per cent — in order to qualify for duty-free status. It also wants 50 per cent of every car traded under NAFTA to be assembly in the United States.
ON THE CLOCK
One trade watcher warns the clock is ticking.
Dan Ujczo says several situations will soon push the NAFTA situation to a head, with President Donald Trump facing a decision, likely by March, on whether to take steps to withdraw the U.S. from continental trade agreement.
Those include the approaching Mexican election and U.S. midterm primaries; the conclusion of the easier, non-controversial NAFTA chapters; a U.S. debate over whether to extend its so-called fast-track law; and the end of the currently scheduled round of talks, all of which are happening around the same time.
The Dickinson Wright lawyer says Trump will be tempted to make a big move around that time, before the U.S. midterm election season — so he can say he kept his promise to either rip up or renegotiate NAFTA.
That means, with the next formal round of talks scheduled for next month in Montreal, Canada and Mexico will be under pressure to start counter-proposing soon, Ujczo said.
"I think this [week in Washington] is a clean-up-the-text round. Clean up the text, and really tee up the issues for 2018. [But] my biggest fear is we're going to run out of clock in 2018," he said in an interview.
‘NOTHING IS NOT AN OPTION’
"If it becomes clear after Montreal that people aren't negotiating, that there's not a negotiation happening on autos and agriculture, they're going to say, 'What are you gonna do now, Mr. President?' And then the reality is, even if he doesn't want to act, he has to do some things by March.
"If I was Canada and Mexico I wouldn't give him an excuse to issue a notice to withdraw...You've got to counter-propose on some of these issues. And come up with creative solutions. Doing nothing is not an option here."
Trump himself has cited the trade issue as a major reason he got elected.
The president said so in a speech to a partisan rally last Friday, where he revealed that he and Prime Minister Justin Trudeau have debated in private about whether the U.S. has a trade deficit with Canada.
Trump insists it does. The most recent statistics from his own U.S. Trade Representative say it doesn't.
The fact that this controversial yardstick for economic success is even the subject of a debate, especially given that the balance is so tiny compared to the U.S. trade deficit with other countries, especially China, doesn't bode well, according to the former U.S. ambassador to Canada.
Bruce Heyman tweeted over the weekend: "When our trade negotiations devolve into a public he said/he said situation or a disagreement over a deficit or surplus that amounts to less than 3 per cent of total trade we are at an ominous point."
Canada's chief negotiator described the state of play in recent testimony to Parliament.
Steve Verheul said Canada is capable of making constructive suggestions, but he called the auto proposal completely unworkable, and said his side is trying to figure out what the U.S. really wants from this negotiation.
He said the other countries can offer solutions, if the U.S. wants solutions that benefit the region.
"We will not accept U.S. proposals that would fundamentally weaken the benefits of NAFTA for Canada, and undermine the competitiveness of the North American market in regard to the rest of the world," Verheul said.
"That is one of the issues we're struggling with: What does the U.S. need for a win? Because I think we can certainly bring a lot of creativity to the table in developing outcomes that could be characterized as a U.S. win, or as a North American win."