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Report on Business Freeland heads to Washington as talks over ending steel tariffs heat up

Canada's Foreign Minister Chrystia Freeland and U.S. Trade Representative Robert Lighthizer leave after delivering statements at the close of the third round of NAFTA talks involving the United States, Mexico and Canada in Ottawa Sept. 27, 2017.

CHRIS WATTIE/Reuters

Foreign Minister Chrystia Freeland is heading to Washington as talks over ending the Trump administration’s tariffs on Canadian steel and aluminum intensify after months of deadlock.

She also plans to raise the cases of two Canadians detained by China – in apparent retaliation for Canadian authorities serving an American arrest warrant on the CFO of Huawei – in hopes U.S. officials will press their counterparts in Beijing on the matter.

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Ms. Freeland’s hastily-arranged trip Wednesday to meet with U.S. Trade Representative Robert Lighthizer comes as discussions about resolving the tariffs have sped up in recent weeks, said three Canadian and one Mexican official with knowledge of the confidential talks. While the officials cautioned that it is still unclear whether the three sides will reach a deal, there has been movement on the file for the first time in months.

On Tuesday, Ms. Freeland sat down in Toronto with Mexican Economy Minister Graciela Marquez and Jesus Seade, the country’s point-man on North American trade, to co-ordinate their united front against the metals tariffs.

Both Canada and Mexico are threatening to refuse to ratify the revamped North American free-trade agreement until the tariffs end.

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“We believe in free trade with our North American partners. We have completed a free-trade agreement,” Ms. Freeland said at a downtown hotel after the meeting. “It is important, now more than ever, to re-establish free trade in steel and aluminum between Canada and United States.”

Discussions between Canada, the United States and Mexico over the tariffs have sped up recently, three Canadian and one Mexican official said. The talks have continued on and off since the fall, but have been mostly stalled for the past eight months.

The United States has continued to insist that Canada and Mexico accept quotas capping the level of steel and aluminum exports, while Canada and Mexico have opposed any such move, the sources said. One Canadian source, however, said Ottawa could be persuaded to agree to quotas if the quotas were so high that Canada would not actually reach them.

The sources were granted anonymity in order to reveal details of the confidential talks.

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One potential solution, the sources said, would be for Canada and Mexico to agree to do more to clamp down on shipments of overseas steel – particularly from China – that is routed through their countries on the way to the United States.

Discussions have included Ms. Freeland and Mr. Lighthizer; Canada’s ambassador in Washington, David MacNaughton, has also been involved in talks with Mr. Lighthizer and his office. Prime Minister Justin Trudeau raised the tariffs in two calls with U.S. President Donald Trump last week and again with Vice-President Mike Pence on Monday. Finance Minister Bill Morneau has discussed it a couple of times by telephone with Treasury Secretary Steven Mnuchin in recent weeks.

Ms. Freeland had been scheduled to speak at the World Jewish Congress meeting in Ottawa Wednesday, but changed plans to rush to Washington – suggesting renewed urgency in the attempted deal-making.

Both Canada and Mexico are preparing overhauls of their retaliatory tariffs against the U.S. to increase the economic pain as they keep up the pressure.

And Ms. Freeland plans to meet Wednesday with Chuck Grassley, the influential chairman of the U.S. Senate finance committee, who has threatened to refuse to ratify the new NAFTA until the tariffs come off.

In a conference call with reporters Tuesday, Mr. Grassley said a tariff deal could be imminent. “Maybe in 48 hours, I’ll have a more definitive answer for you,” he said.

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The Canadian officials stressed that there has been no breakthrough in discussions so far. One source said the talks have focused more on explaining each side’s position and poring over economic data on imports. Those discussions, however, have paved the way for more intensive negotiations.

Adding to the pressure, parliament is expected to rise in June and will not return until after the October election, adding an extra incentive for Washington to lift tariffs to get the deal through.

“The window for a deal is closing,” said Jean Simard, president of the Aluminum Association of Canada. “The next one is 2020.”

Working against the Canadians and Mexicans is Mr. Trump’s love of tariffs. On Twitter Tuesday, he again claimed that his country’s metals industries are “booming” because of the levies.

“It’s important that in the ratification of that free-trade agreement, what prevails is free trade,” Ms. Marquez said.

Ms. Freeland said she would talk to Mr. Lighthizer about two Canadians detained by China in apparent retaliation for Canadian authorities serving a U.S. arrest warrant on the CFO of Huawei late last year.

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“I am also looking forward to discussing with him China, and to continue to raise the issue of the detentions, in particular of Michael Kovrig and Michael Spavor – something which is always at the top of the agenda for Canada,” Ms. Freeland said.

A Canadian government source said Ottawa wants U.S. officials to continue speaking out on the two men’s detention and to press their Chinese counterparts on their cases. Ms. Freeland has raised the matter with Mr. Lighthizer previously, and brings it up with every Trump administration official she meets, the official said.

Mr. Kovrig, a former diplomat, and Mr. Spavor, an entrepreneur, were arrested in December on espionage-related charges in what appeared to be retribution for the arrest of Huawei CFO Meng Wanzhou.

Ms. Meng is accused of breaking U.S. sanctions on Iran. She is out on bail in Vancouver facing extradition proceedings, while Mr. Kovrig and Mr. Spavor are in solitary confinement and subject to daily interrogations.

Ms. Freeland has insisted that the Huawei case, whose investigation by the FBI predates the Trump administration, must not be used by Mr. Trump as a bargaining chip in his trade negotiations with China. But the fight comes amid an escalating trade war: The President raised tariffs on China last week, prompting a fresh round of retaliatory levies by Beijing.

With a report from Robert Fife in Ottawa

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