U.S. trade battles with Mexico pose trouble for Canada at NAFTA talks_Top Insights_Asia Pacific Daily

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U.S. trade battles with Mexico pose trouble for Canada at NAFTA talks

Top Insights2017-08-10

Canada's team heading to Washington next week for the first round of renegotiations of the North American Free Trade Agreement (NAFTA) must be wary of trade-table losses for Mexico that could also be damaging for Canada, said a trade expert here Wednesday.The NAFTA talks begin on Aug. 16 in Washington, where the trilateral pact between Canada, Mexico and the U.S. will be reopened at the demands of U.S. President Donald Trump.The 1994 agreement created what used to be the world's largest free-trade area, and it removed barriers against the passing of goods and workers throughout the three nations.It also created an independent trade dispute-settlement process.Canada's federal government so far has revealed little about what they aim to accomplish in Washington, said Keith Head, a trade expert at the University of British Columbia in Vancouver. "They haven't really made any public announcements about what they want," he told Xinhua in an exclusive interview on Wednesday.However, he said most speculation in his circles has been that the U.S. will want Canada to increase its duty and fee threshold from 20 Canadian dollars on goods ordered by Canadians from the U.S. The American rate is 800 U.S. dollars, which makes it much cheaper for Americans to shop from international websites.Head said Canada's team of negotiators would be wise, for the benefit of Canadian shoppers, to back away from their low, protectionist rate.Canada's negotiators are also expected to protect Chapter 19, which is a clause in NAFTA that requires any disagreements to be ruled on by an independent panel to prevent national biases among the judges."At first glance, that seems like something Canada ought to fight tooth and nail for," Head said. But he explained that Canada rarely uses that clause, doing so only about three times over the past decade.Head said it is also expected to be tough haggling over so-called rules-of-origin measures, which control whether a product qualifies as duty-free, depending on the product's level of North American content.The United States may want to increase those levels to boost American production to keep Asian competition at bay, Head said.Trump's team may want to set up some kind of trade barrier with Mexico to lower its trade surplus with the U.S., he said."Trump has tweeted and spoken quite specifically about a 35 percent tariff on cars and maybe other products coming from Mexico into the U.S," he said."That would be devastating," he said. "The worry for Canada would be that by doing something to Mexico, it would also have a spinoff consequence to us that could be harmful."Last year, the U.S. exported 266.8 billion U.S. dollars in goods to Canada, while importing 277.7 billion U.S. dollars, a trade deficit of 10.9 billion U.S. dollars, according to U.S. census figures.It is tough to know exactly what strategy Canada's team of negotiators will take next week, said Richard Harris, an economist at Simon Fraser University in Burnaby, British Columbia.He said the U.S. and Canadian economies are relatively stable, which one would expect would tamp down desires for major trade-pact renegotiations."Certainly, we have low unemployment, low inflation and growth is moderate," Harris said. "There are not really huge problems. Normally this would be a very low priority thing."The Canadian government didn't ask for these negotiations and are not sharing details about their requests and strategy because of that, said Adam Austen, a spokesman for Canada's Foreign Affairs ministry Wednesday."We never asked to re-open NAFTA and we have probably less to say in terms of our objectives as a result," he said.But Canada's government does aim to improve environment and labor standards, while also focusing on modernizing NAFTA, he said."There are certain technological and certain economic changes since then that the agreement didn't take into account," he said. "When we look at issues for a digital age and cross border shopping... Those things we'll certainly be coming at from a look to modernize and improve the agreement."He said the government has been focused on lobbying various levels of U.S. government, including congress members, senators, state governors and even mayors."We've been really trying to sell that Canada is the United States' most important trading partner," Austen said. "We're confident that the administration in Washington sees that as well."Austen said Canada's Foreign Affairs Minister Chrystia Freeland will release more information on Monday in Ottawa about her team's objectives in the U.S. capital.He said the first round of negotiations are expected to be quite simple. "As the rounds progress, the issues get stickier and stickier, so I don't anticipate any really hot, potentially-contentious issues to be discussed."The second round of negotiations are expected to take place next month in Mexico.

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Canada's team heading to Washington next week for the first round of renegotiations of the North American Free Trade Agreement (NAFTA) must be wary of trade-table losses for Mexico that could also be damaging for Canada, said a trade expert here Wednesday.

The NAFTA talks begin on Aug. 16 in Washington, where the trilateral pact between Canada, Mexico and the U.S. will be reopened at the demands of U.S. President Donald Trump.

The 1994 agreement created what used to be the world's largest free-trade area, and it removed barriers against the passing of goods and workers throughout the three nations.

It also created an independent trade dispute-settlement process.

Canada's federal government so far has revealed little about what they aim to accomplish in Washington, said Keith Head, a trade expert at the University of British Columbia in Vancouver. "They haven't really made any public announcements about what they want," he told Xinhua in an exclusive interview on Wednesday.

However, he said most speculation in his circles has been that the U.S. will want Canada to increase its duty and fee threshold from 20 Canadian dollars on goods ordered by Canadians from the U.S. The American rate is 800 U.S. dollars, which makes it much cheaper for Americans to shop from international websites.

Head said Canada's team of negotiators would be wise, for the benefit of Canadian shoppers, to back away from their low, protectionist rate.

Canada's negotiators are also expected to protect Chapter 19, which is a clause in NAFTA that requires any disagreements to be ruled on by an independent panel to prevent national biases among the judges.

"At first glance, that seems like something Canada ought to fight tooth and nail for," Head said. But he explained that Canada rarely uses that clause, doing so only about three times over the past decade.

Head said it is also expected to be tough haggling over so-called rules-of-origin measures, which control whether a product qualifies as duty-free, depending on the product's level of North American content.

The United States may want to increase those levels to boost American production to keep Asian competition at bay, Head said.

Trump's team may want to set up some kind of trade barrier with Mexico to lower its trade surplus with the U.S., he said.

"Trump has tweeted and spoken quite specifically about a 35 percent tariff on cars and maybe other products coming from Mexico into the U.S," he said.

"That would be devastating," he said. "The worry for Canada would be that by doing something to Mexico, it would also have a spinoff consequence to us that could be harmful."

Last year, the U.S. exported 266.8 billion U.S. dollars in goods to Canada, while importing 277.7 billion U.S. dollars, a trade deficit of 10.9 billion U.S. dollars, according to U.S. census figures.

It is tough to know exactly what strategy Canada's team of negotiators will take next week, said Richard Harris, an economist at Simon Fraser University in Burnaby, British Columbia.

He said the U.S. and Canadian economies are relatively stable, which one would expect would tamp down desires for major trade-pact renegotiations.

"Certainly, we have low unemployment, low inflation and growth is moderate," Harris said. "There are not really huge problems. Normally this would be a very low priority thing."

The Canadian government didn't ask for these negotiations and are not sharing details about their requests and strategy because of that, said Adam Austen, a spokesman for Canada's Foreign Affairs ministry Wednesday.

"We never asked to re-open NAFTA and we have probably less to say in terms of our objectives as a result," he said.

But Canada's government does aim to improve environment and labor standards, while also focusing on modernizing NAFTA, he said.

"There are certain technological and certain economic changes since then that the agreement didn't take into account," he said. "When we look at issues for a digital age and cross border shopping... Those things we'll certainly be coming at from a look to modernize and improve the agreement."

He said the government has been focused on lobbying various levels of U.S. government, including congress members, senators, state governors and even mayors.

"We've been really trying to sell that Canada is the United States' most important trading partner," Austen said. "We're confident that the administration in Washington sees that as well."

Austen said Canada's Foreign Affairs Minister Chrystia Freeland will release more information on Monday in Ottawa about her team's objectives in the U.S. capital.

He said the first round of negotiations are expected to be quite simple. "As the rounds progress, the issues get stickier and stickier, so I don't anticipate any really hot, potentially-contentious issues to be discussed."

The second round of negotiations are expected to take place next month in Mexico.

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