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Trudeau finds Republican trade allies during Houston visit

Prime Minister Justin Trudeau meets with energy leaders on the margins of CERAWeek energy conference in Houston, Texas on Friday, March 10, 2017.

Sean Kilpatrick/THE CANADIAN PRESS

Prime Minister Justin Trudeau found some Republican allies in Houston on Friday as his government works to head off brewing protectionist measures that threaten Canada's exports to the United States.

After delivering a keynote speech to an energy conference on Thursday night, the Prime Minister met with Texas Governor Greg Abbott and with Senator Lisa Murkowski of Alaska and found some common ground on pro-trade policies.

Mr. Trudeau's 24-hour visit to Houston was part of a concerted effort by federal and provincial governments to engage sympathetic political, business and community leaders in the United States and win support for liberalized trade between the two deeply integrated economies.

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Trade tensions climbed this week as U.S. Commerce Secretary Wilbur Ross warned Canada and Mexico will have to allow concessions in an upcoming renegotiation of the North American free-trade agreement. On Friday, Mr. Ross said the United States will formally advise Congress in the next few weeks of plans to reopen the trade agreement. In his speech in Houston, Mr. Trudeau slammed a separate U.S. plan to institute a border tax on imports, arguing that would hurt trade for Canada and the United States.

President Donald Trump has pledged to renegotiate NAFTA in order to better protect U.S. manufacturers. At the same time, Republican leaders in the House of Representatives are advancing tax-reform plans that would impose a hefty import tax on goods shipped from Canada and other countries.

But Republicans are divided among populists who feel the middle class has been hurt by free trade, particularly in the manufacturing states such as Ohio, Pennsylvania and Michigan, and more market-oriented conservatives who embrace liberalized trade.

In his meeting with Gov. Abbott, Mr. Trudeau said he welcomed the opportunity to talk about shared connections on energy but also about the integration of the Canadian and U.S. economies. The governor – who has championed increased trade with Mexico – said his state is the top exporter among U.S. states into Canada.

Many Texas politicians and business leaders have spoken out against the proposed border levy, fearing it will drive up retail prices and hurt the state's growing trade with Mexico.

In a session at the CERAWeek conference, Republican Senator John Cornyn slammed the tax proposal and defended NAFTA. Mr. Cornyn is majority whip in the Senate and an influential member of the chamber's powerful finance committee.

He said he supports some of the goals of the House tax-reform package, notably the reduction in corporate rates, but worries about the economic and political impact of paying for those tax cuts with a border levy that would raise $1-trillion (U.S.) from consumers over 10 years.

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"The more I've looked at it, the more I worry the assumptions upon which it is based are unproven and that is a huge gamble when you are talking about $1-trillion-plus revenue," he said.

"I also worry about the politics of this when you talk about lowering corporate taxes but raising taxes on consumers."

Some major manufacturers, including General Electric Co. and Boeing Co., support the tax but it is opposed by retailers such as Wal-Mart Stores Inc. and by oil refiners who would have to pass along the added costs to their customers.

Mr. Trudeau also met with Ms. Murkowski, who chairs the Senate energy committee. Before the meeting, she spoke on the same CERAWeek panel as Mr. Cornyn and shared his views on border levies and NAFTA.

She said she would oppose any measure that would raise the cost of gasoline in her state, where motorists already pay far higher pump prices than do those in the lower 48 states.

On NAFTA, Mr. Trudeau deflected questions from reporters about the U.S. Commerce Secretary's pledge to extract concessions from Canada in the renegotiation. He said he doesn't see the trade deal as a "zero sum game" but rather provides "significant benefits for both sides."

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"Millions upon millions of good jobs on both sides of the border depend on the smooth flow of goods and people back and forth across the border," he said.

The Republican senators said they generally supported NAFTA but suggested it could be modernized given it has been in place for nearly 25 years.

"It's fair to do an assessment, but I'm not willing to throw the baby out with the bathwater," Ms. Murkowski said.

Mr. Cornyn said NAFTA has benefited Texas by building trade with Mexico, adding there are five million American jobs that depend on trade with the southern neighbour of the United States.

"NAFTA is not a dirty word in Texas," he said.

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About the Author
Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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