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Report on Business Canada, Mexico unfazed by Trump’s threat to ‘terminate’ NAFTA

U.S. President Donald Trump gestures to the crowd as he speaks to supporters at the Phoenix Convention Center during a rally on August 22, 2017 in Phoenix, Arizona.

Ralph Freso/Getty Images

U.S. President Donald Trump is again musing about "terminating" the North American free-trade agreement – but Canada and Mexico are shrugging off the threat.After appearing to forget about NAFTA during the opening round of renegotiations in Washington last week – Mr. Trump did not tweet or make a single public comment about the talks during the five-day session – the President revived his complaints about the pact at a rally in Phoenix on Tuesday night.

"I don't think we can make a deal because we have been so badly taken advantage of … so I think we'll end up probably terminating NAFTA at some point, okay. Probably," the President told an arena of cheering supporters. "You're in good hands, I can tell you."

The comments were part of a rambling, 77-minute address similar to the unhinged speeches he gave regularly on the campaign trail. In addition to trade, Mr. Trump threatened to shut down the federal government if Congress doesn't give him the money to build a wall along the Mexican border and defended Confederate monuments as part of "our culture."

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The other two partners in NAFTA played down Mr. Trump's remarks, suggesting they do not believe the U.S. President will actually carry through with his offhand threat.

"As we said last week, trade negotiations often have moments of heated rhetoric," Adam Austen, press secretary to Canadian Foreign Affairs Minister Chrystia Freeland said in a statement. "Our priorities remain the same, and we will continue to work hard to modernize NAFTA, supporting millions of middle-class jobs."

Citing bad deals for America, President Donald Trump told a rally in Phoenix, Ariz. that he wants to terminate the North America Free Trade Agreement in order to make more favourable arrangements.

The Canadian political aide noted, as the Trudeau government often does, that nine-million U.S. jobs depend on trade with Canada. This repeated statement underlies Ottawa's belief that it is not in the United States' interest to disrupt bilateral commerce by repealing NAFTA.

Later in the day, Prime Minister Justin Trudeau declined to comment directly on Mr. Trump's threat, saying Ottawa will "stay focused on the hard work we have ahead of us at the negotiating table."

Mexican Foreign Minister Luis Videgaray expressed a similar sentiment on Twitter: "No surprises: we are already in a negotiation. Mexico will remain at the table with serenity, firmness and national interest ahead."

It was a sharply different reaction from April, when Mr. Trump last signalled he was considering triggering a withdrawal from NAFTA under article 2205 of the treaty to crank up pressure on Canada and Mexico. In a frantic afternoon, Mr. Trudeau, Mexican President Enrique Pena Nieto, U.S. industry, members of Congress and Mr. Trump's cabinet scrambled to lobby the President not to do it. In the end, Mr. Trump backed down.

The cooler response this time around suggests Ottawa and Mexico City have grown accustomed to Mr. Trump's histrionics and believe he is crying wolf.

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But the abrupt outburst highlighted the U.S. President's continuing unpredictability, an ever-present wild card in the renegotiations. And not everyone is convinced Mr. Trump's bluster can be dismissed so quickly.

Daniel Ujczo, a trade lawyer based in Columbus, Ohio, said he believes the President is still seriously considering pulling out of NAFTA and will not be taking that option off the table. For one, Mr. Trump "was against NAFTA before it was cool," and isn't likely to abandon his decades-old views any time soon.

For another, there may not be enough changes that can be made to NAFTA to satisfy the blue-collar voters in rust-belt states who decided the election. Many of the United States' major demands, such as abolishing the Chapter 19 dispute-resolution panels favoured by Canada, are simply too arcane to resonate on the ground, Mr. Ujczo said.

"I don't think there's enough red meat there. I don't think he can sell voters in Ohio on pulling out of Chapter 19. It's exciting in the North American trade world, but it's not something you talk about on a first date – it's not sexy," he said in an interview.

Lawrence Herman, a Toronto trade lawyer and former diplomat, said Canada shouldn't be sanguine about the way Mr. Trump is behaving. His hardball techniques may be par for the course negotiating real estate deals, he said, but handling trade pacts is a completely different matter.

"To be bullied and cajoled by the President of the United States is, in my view, unacceptable and unprecedented," he told The Globe. "Negotiations have to take place in an atmosphere of mutual respect. But to be threatened at the outset with termination shows a lack of respect for the process and a high degree of immaturity on the part of the President."

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Mr. Trump frequently hammered NAFTA during the campaign, blaming it for moving jobs out of the United States. After his victory, he demanded the pact be renegotiated. The process kicked off last Wednesday; subsequent rounds of talks are scheduled for Mexico and Canada, with the aim of getting a deal by year's end.

But the President, preoccupied with a racial crisis last week, was silent on NAFTA. It was a similar story behind the scenes: Sources with knowledge of the discussions said Mr. Trump and his political advisers did not appear to be directly involved. Instead, the United States left everything to its professional negotiating team led by civil servant John Melle.

Flavio Volpe, president of the Automotive Parts Manufacturers Association of Canada, said it's hard to discern any sort of tactical purpose to Mr. Trump's bombast in Phoenix. And he suggested Mr. Trump's words may be disconnected from the actual realities of the talks.

"The other two parties and the stakeholders in those two countries should know to make a distinction between what's said at the negotiating table and the techniques of an unconventional President," he said. "It's difficult to see how he advances the cause of the American interests by talking disruptively about a position they haven't taken yet."

With files from Greg Keenan in Toronto

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