Trump’s call to speed up NAFTA talks puts Canada on guard

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U.S. President Donald Trump announced he wants to "speed up" renegotiation of NAFTA, an accelerated approach that could ramp up the bargaining pressure on Canada as the country tries to find a way to emerge unscathed from a rewriting of the rules of commerce with its largest trading partner.

In White House meetings with members of Congress and motorcycle maker Harley-Davidson, Mr. Trump reiterated his key election promise to either revamp or do away with the 1994 free-trade deal between Canada, the U.S. and Mexico.

He promised either a "renovation of NAFTA or a brand-new NAFTA," describing the impact of the 23-year-old agreement as "a catastrophe for our jobs and our country," at the sit-down with lawmakers. "I want to change it and maybe we do … a new NAFTA and we add an extra 'F' in NAFTA, for free and fair trade."

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Mr. Trump added he's keen to move quickly: "All of the statutory guidelines we're adhering to, I would like to speed it up if possible. You're the folks who can do it." He said he was mindful of the 90-days' notice he must give Congress before formally starting talks with Mexico and Canada.

Foreign Affairs Minister Chrystia Freeland was guarded in her reaction Thursday, but sought to dispel confusion over Mr. Trump's comments, saying his talk about timing has not started any countdown toward negotiation.

"It is incorrect that the clock was started [Thursday] by the U.S. – that has not happened," she told the Commons, before adding that the Liberal government's priority in talks will be "jobs for Canadians."

Trade-pact negotiations with the United States have never concluded quickly. It took Canada and the United States about 18 months to negotiate the Canada-U.S. free-trade agreement (FTA) in the 1980s. In the early 1990s, it took Canada, Mexico and the United States about 14 months to craft NAFTA, not including the additional time needed for side deals on labour and the environment negotiated under president Bill Clinton.

Former prime minister Brian Mulroney, an architect of NAFTA and FTA, said Thursday that Canada must be on "high alert' to preserve access to the U.S. market. "Americans are frustrated by the slow recovery of their economy and open trade agreements have become an easy whipping boy for those looking to attach blame," he said at a FarmTech Conference in Edmonton. He added Canada should emphasize that trade with the U.S. is in healthy balance. "There is as much at stake for them as for us."

Meanwhile, John Manley, president of the Business Council of Canada, said Mr. Trump's past negotiating style in business suggests he will employ a high-pressure, hard-driving approach to NAFTA and Ottawa needs to be ready.

"We know from The Art of the Deal that he is going to come at us very hard," Mr. Manley said, referring to a 1987 book about Mr. Trump and his business approach. "The only response … is to not be on your back foot but to come forward with reasonable expectations going the other way."

In a call from Mexico City, Canadian Natural Resources Minister Jim Carr said he believes there is a good chance Canada's energy exports may get more favourable treatment than other sectors in a renegotiated NAFTA.

"I think that's a real possibility. We continue to make the case that the integration of the energy sector continentally is in the interest of all three governments," Mr. Carr said during a visit that included a large delegation of Canadian resource executives and indigenous leaders.

Asked about whether Canada's protectionist "supply management" system for producing milk and other goods might be on the table, Mr. Manley said "it's a target for [the Americans] for sure," adding that "hopefully their dairy subsidies will be as well."

The Canadian government has yet to receive a formal letter from the White House that would notify Ottawa of the U.S. desire to renegotiate NAFTA and lay out the areas the Americans want to tackle. It could be that this letter won't emerge until Prime Minister Justin Trudeau makes an as-yet unscheduled visit to Washington to meet Mr. Trump in person.

Ottawa is currently assembling negotiating proposals and trying to anticipate how Mr. Trump wants to refashion NAFTA. The President has appointed Wilbur Ross, a billionaire he's picked to lead the Department of Commerce, as the point man for the NAFTA renegotiation.

One clear American beef with NAFTA is the agreement's Chapter 19 dispute-settlement mechanism where an independent binational panel hears complaints about unfair trade and issues binding decisions – a system that American critics have lambasted as an unfair ceding of U.S. sovereignty. In the absence of Chapter 19, Canadian companies would have to turn to U.S. courts to plead their case.

One possible amendment that has circulated among Ottawa policy makers is a permanent panel of judges chosen by each country to replace the independent experts that are currently selected to administer Chapter 19 panels.

Another item on Canada's radar is a Republican proposal to impose a "border adjustment tax" on foreign imports, not unlike a surcharge former president Richard Nixon briefly imposed in 1971.

A White House spokeswoman said there is no firm timeline for delivering the 90 days' notice to Congress, or for the completion of the renegotiation. The administration is currently in the process of doing research and gathering information before serving notice. Ms. Strom said Mr. Trump's notice to Congress would contain both the date for negotiations to start and would spell out what the U.S. is seeking from Canada and Mexico in the talks.

Mr. Ross has said he backs using the President's trade promotion, or fast-track authority, to help speed negotiations through Congress. This power, in place until at least 2018 under Congressional authorization, allows the President to send trade deals through Congress without amendment while leaving the House of Representatives and Senate the authority to simply vote up or down on the finished result. Mr. Trump would still have to ensure sufficient horse-trading was conducted during NAFTA negotiations so that Congress was in a receptive mood for the revised deal.

Toronto lawyer Mark Warner says he thinks Mr. Trump hasn't given notice under trade-promotion authority (TPA) yet because he's still deciding how extensive NAFTA changes will be. "If not extensive, there is a decent argument that he does not need to get Congressional approval or use TPA. The risk is once he goes to Congress under TPA for NAFTA it undercuts his claim to be able to withdraw from NAFTA without Congressional approval."

With reports from Shawn McCarthy in Ottawa