Canada facing ‘strong-arm’ tactics if U.S. and Mexico reach NAFTA deal on Tuesday as expected: lawyer

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The U.S. and Mexico will probably reach a two-way NAFTA deal Tuesday, paving the way for Canada to re-enter the trade talks as early as this week, says a lawyer closely following the negotiations.

But Canada would return to the table – after four weeks of bilateral talks between its two other free-trade partners – under redoubled pressure from the Americans to buckle on key issues, said Dan Ujczo, a Columbus, Ohio-based trade lawyer regularly briefed on the process.

That could mean this country will continue to face U.S. tariffs on steel and aluminum – and possibly on automobiles exported to the States – well after Mexico is freed from the levies, he said.

Ildefonso Guajardo, Mexico’s economy minister, is to meet with U.S. Trade Representative Robert Lighthizer in Washington Tuesday and is “highly likely” to finalize an agreement in principle on a range of issues, said Ujczo.

He expects that Canadian negotiators will rejoin the process to tackle the remaining topics by the end of the week.

“The current trajectory is that the U.S. and Mexico will have completed NAFTA over the coming days and then turn to Canada and advise ‘take it or leave it’ on trilateral matters,” Ujczo said in a note to clients of law firm Dickinson Wright.

And, he said, “the U.S. will attempt to strong-arm Canada on three outstanding issues.”

Those include the American demands that Canada scrap its supply-management system for dairy production, tighten its protection of intellectual-property rights and agree to disband NAFTA’s “Chapter-19” dispute-resolution system for countervailing and anti-dumping duties.

Another American source familiar with the negotiations confirmed Monday that Mexico and the U.S. are “about done” their negotiations. And Ujczo’s analysis gibes with comments by American officials lately.

At a meeting of President Donald Trump’s cabinet last Thursday, Lighthizer said he was hopeful “that in the next several days we’ll have a breakthrough” with Mexico.

“And then I hope once we get one with Mexico, that Canada will come along.”

Trump said he was in no rush, and urged Lighthizer not to agree to anything short of a breakthrough, while suggesting Canada was the inflexible party.

“We’re not negotiating with Canada right now,” the president said. “Their tariffs are too high. Their barriers are too strong. So we’re not even talking to them right now. But we’ll see how that works out. It will only work out in our favour.”

In fact, the vast majority of commerce between the two countries is duty free, while the States enjoyed a trade surplus with Canada last year of $8.4 billion, according to USTR’s own statistics.

Ujczo said Mexico has agreed to U.S. demands that 75 per cent of automobiles exported to the U.S. be made in North America, and 40-45 per cent in plants that pay workers at least $16 an hour.

In exchange for those and other auto-related concessions, the Americans have agreed to shelve a proposal that would have restricted imports of certain Mexican produce, he said.

The two countries have still not resolved the U.S. demand for a sunset clause that would require NAFTA to be re-approved every five years, something both Canada or Mexico say would be unacceptable.

But they have been discussing other trilateral issues, such as intellectual property rights and another dispute-resolution provision in the free-trade agreement, said the lawyer.

There is some pressure to complete a trilateral NAFTA agreement by the end of August, which would allow U.S. Congress to review the deal before the Dec. 1 installation of Mexico’s newly elected president.

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