By on September 25, 2018

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U.S. Trade Representative Robert Lighthizer has said the United States will begin moving forward on its bilateral trade deal with Mexico at the risk of leaving Canada behind.

The nation was already given until the end of September to reach an agreement that would effectively maintain the existence North American Free Trade Agreement, but has not indicated satisfaction with the current terms. Unfortunately, the U.S. wants to ensure a deal is in place before the next Mexican president assumes office — giving it precious little time to spend on Canada after the last year’s worth of negotiations proved ineffective.

“If we push it beyond [October 1st], then we have a new negotiation with Lopez Obrador and we don’t know where that would go at all,” Lighthizer said. “It would be unfair to all the people that have been involved — certainly the U.S. workers, farmers and ranchers — to start a new negotiation with a new president of Mexico.” 

As unfair as it might be to Canada, the new timeline was established specifically so current Mexican President Enrique Pena Nieto could sign the trade deal before he leaves office on November 30th.

While we’ve previously covered Canada’s issues with the automotive angle of this particular trade deal (it doesn’t want tariffs), Bloomberg reports that the major sticking points revolve around dumping and dairy. The United States and Canada are at odds over anti-dumping dispute panels, contained under Chapter 19 of the current deal, which the U.S. wants to remove and Canada wants to keep in place. Another major qualm revolves around Canada’s protected dairy industry. While it isn’t mentioned in the latest draft of the deal, the U.S. has repeatedly asked for its northern neighbor to make concessions.

Ideally, the U.S. would like to see a three-way pact signed. This has left United States agreeable to a future where Canada joins an established pact with Mexico later on, Lighthizer explained. However, he also noted that the U.S. and Canada are still quite a way away from having a genuine agreement. “I think Canada would like to be in the agreement, I think the U.S. would like them in the agreement but there’s still a fair amount of distance between us,” Lighthizer said. “There are very large issues, issues of dairy and Chapter 19, a number of significant issues between us.”

Meanwhile, Canadian Prime Minister Justin Trudeau commented on the growing trade tensions alongside his foreign minister, Chrystia Freeland, who is heading NAFTA talks. Trudeau said that, while the deal between the U.S. and Mexico raises the possibility of Canada signing, he’s committed to standing up for Canadian interests in negotiations. Freeland declined to comment specifically on Chapter 19, saying only that “rule of law is an extremely important part of how we do things, including trade.”

Lighthizer says that, regardless of how the final deal looks, the NAFTA name is likely dead. Donald Trump hopes to use the term “U.S.-Mexico-Canada pact,” or USMC (an acronym the Marine Corps already uses), according to the Trade Representative.

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23 Comments on “Lighthizer: U.S. Won’t Bother Waiting for Canada on New NAFTA Pact...”


  • avatar
    bd2

    NAFTA was an even worse deal for the small farmer in Mexico as cheap/subsidized agricultural products (particularly corn) devastated rural villages.

    Which led to the mass migration of working adults from those areas north.

    The movement of manufacturing from the US to Mexico has been a fairly recent phenomena, as manufacturers had previously preferred China (where costs were lower).

    But as the cost of production has risen in China (along w/ wanting shorter supply-lines and lower transport costs), Mexico has become more attractive to manufacturers.

    It was the liberal Dems who were against NAFTA (the centrist Dems sided w/ the Republicans).

    As for China, the charge to move manufacturing there was also led by the Republicans (in no small part at the request of Walmart, which has been a major financial supporter of the Republicans).

  • avatar
    IBx1

    TOOT TOOT

    Train don’t stop

  • avatar
    Sub-600

    Folks in Ottawa aren’t really concerned, they’re just happy the Sens shipped Karlsson to the Sharks, his negative attitude wasn’t helping things.

  • avatar

    The problem with the dairy question is that while it’s true that Canada severely limits dairy imports, it does so because its way of protecting the dairy industry is to limit production and let consumers pay higher prices. The US handles this a different way: it subsidizes dairy agriculture (to the tune of about 50%) and then consumers get lower prices, in exchange for higher taxes. Two different solutions for the same problem. Canadian dairy can’t compete against US prices thanks to those subsidies, so either Canada continues to protect the dairy industry, or else Canada has to subsidize the industry so that it can compete against the US.

    The other issue Canada has is that the US disagrees with the appeals mechanism (mainly because it usually loses) and doesn’t want one. This means Canada (and Mexico) would have no mechanism to appeal a US decision to break terms of the trade agreement.

    Canada is the #1 trading partner of 33 states (as of 2016) so Canada rightly feels that it already consumes a lot of US goods (if you include goods and services together, the US has a trade surplus with Canada; with goods alone it’s slightly tilted in Canada’s favour).

    If the US’s tack is that “you need us, take what we give you or too bad”, that’s not how friends treat each other, and Canada is probably going to gradually move its trading attention to friendlier countries, which will be unfortunate for both Canada and the US because the geographic proximity obviously makes trading with each other the cheapest.

    In any event, we shall see. The US urgency is artificial. The sense here in Canada is that there is no need to urgently take a deal that isn’t what Canada wants it to be, especially with midterm elections coming, and the legal probability that Congress will have to decide to suspend NAFTA, not the President.

    • 0 avatar
      Guitar man

      Both completely wrong.

      The US dairy subsidies are for _export_. They result in higher prices for US consumers and they are used to dump US dairy products in foreign markets – principally Canada.

      It is the US, not Canada, which is opposed to an independent appeals process. And it the US, not Canada, which has lost appeals for the dozens of times it has violated the NAFTA agreement.

      • 0 avatar
        BigOldChryslers

        > The US dairy subsidies are for _export_. They result in higher prices for US consumers and they are used to dump US dairy products in foreign markets – principally Canada.

        Do you have a source for that info, Guitar Man? Everything I have read on the US dairy industry is in agreement with what PhotoJim said. In fact, I’ve read that a lot of US dairy farmers wish that the US had a regulated market more like Canada, as opposed to canada dismantling its system.

        > It is the US, not Canada, which is opposed to an independent appeals process. And it the US, not Canada, which has lost appeals for the dozens of times it has violated the NAFTA agreement.

        You read PhotoJim’s statement backwards. You are both in agreement on this. Canada wants to keep the Chapter 19 appeals process; the US wants to scrap it.

      • 0 avatar

        You misread me on the appeals mechanism. Read what I wrote again. Canada wants to keep the mechanism; the US does not.

        As for dairy, everything I have read has been at odds with what you’ve said, but if you are right, you actually strengthen my point. Canadians don’t care about US domestic dairy prices; it’s the cost of imported US dairy products versus the cost of domestic Canadian dairy products that will dictate what happens to the market. If the US heavily subsidizes export prices, that’s dumping and that’s harmful to the Canadian dairy industry.

    • 0 avatar
      MoDo

      Canada had 140,000 dairy farmers before supply management, now we only have 14,000. All supply management does is hike the price of dairy and poultry by 50%. FREE trade means those dairy farmers can sell their goods into the US which they currently do not.

      • 0 avatar
        BigOldChryslers

        A lot of farming today has been consolidated into large “factory farms”, as opposed to many smaller family farms. Many countries, including the US, have subsidies or other protectionist policies in place around their farming industries.

        Currently diary is not part of NAFTA, but is that really a big deal? In the grand scheme of things, the amount that opening Canada-US dairy trade will affect the trade balance is very small, but may devastate Canadian dairy farmers in the process.

        The real problem, as I understand it, is that US dairy farmers overproduce, resulting in depressed prices and no profit, so they need government subsidies to stay solvent. The US is looking to sell their subsidized milk into the Canadian market. That’s called dumping, which will hurt domestic Canadian producers, and is a good reason to not allow unfettered access. In short, the Canadian dairy industry protections are incompatible with the US dairy industry protections.

        • 0 avatar
          TrailerTrash

          in texas this is true.
          but mostly due to weather…and it is a disaster, quality wise for milk and animal.
          however, not true elsewhere in the united states.
          instead, many smaller farms have joined coops and become owners in the coop.

          but this is not the real issue here.

          canada exports manufactured goods to the usa while the usa exports mainly services to canada.

          this is what concerns americans and trump. real jobs, blue-collar especially, and economies are supported by manufacturing.

          so is the security of a nation.

          as i have said before, converting an office building into a war manufacturing factory is impossible. converting a GM or Ford plant into a war plant is real.

          • 0 avatar
            BigOldChryslers

            > canada exports manufactured goods to the usa while the usa exports mainly services to canada.

            That is not accurate. Canada sells a lot of natural resources to the US. As far as manufactured goods and manufacturing jobs, Canada is in much the same situation as the US. Both are high labour cost jurisdictions, and are seeing manufacturing jobs move away to lower cost places like Mexico and China and not return.

          • 0 avatar
            BigOldChryslers

            Just to clarify, both in imports and exports, most trade between US and Canada is in goods. US figures from 2017:
            US exports to Canada
            goods $282.3 billion
            services $58.4 billion

            US imports from Canada
            goods $299.3 billion
            services $33.0 billion

            In 2017, the US had a $17 billion deficit in goods trade, but an even larger $25 billion surplus in services trade, leading to an overall US surplus.

            The deficit in goods was up 54% versus 2016 figure, which was only $6 billion. I don’t know why that was, but leads me to suspect the 2017 goods trade deficit figure may be unusually high versus historical figures.

          • 0 avatar
            TrailerTrash

            hello…where did you get your data?
            here is my one, and many others as well…and this is goods.

            https://www.census.gov/foreign-trade/balance/c1220.html

          • 0 avatar
            BigOldChryslers

            My figures are from:
            https://ustr.gov/countries-regions/americas/canada

            The figures for trade in goods which I posted match the ones on your website, but trade in services is missing from your source.

  • avatar
    ect

    There is a provincial election in Quebec the epicentre of the Canadian dairy industry) on October 1. The current Liberal government is apparently neck-and-neck with one of the opposition parties.

    The federal Liberal government will not make any real concession on dairy until after the Quebec election is over.

  • avatar
    cognoscenti

    I’d just like to remark that the Canadians in this thread who are disagreeing with one another are doing it in a more civil manner than the Americans over in the “California Electric Car Buyers” thread.

    • 0 avatar
      kosmo

      Well, of course. Hence the term “Canadian Nice-Off”.

      When everybody politely sits still at a four-way stop, motioning the other to go!

      Great place (with even greater mountain biking).

  • avatar
    BigOldChryslers

    Trade negotiation experts have already weighed-in that it’s probably already too late to finalize the details for an Oct 1 deadline, regardless of whether Canada is on board or not. It’s also quite possible that congress won’t accept a bilateral deal replacing the existing NAFTA.

    The US and Mexico negotiated all summer without allowing Canada to come back to the table, then presented a deal to Canada and expected it to be accepted pretty much as-is. No doubt Chrystia Freeland thinks the stakes are high enough and the deal that was presented is bad enough that it’s worth calling Lighthizer’s bluff.

    • 0 avatar
      DougD

      Although BOC and I disagree on some items (Sorry BOC, sorry :) ) we do agree on dairy trade issues.
      It would be MUCH better to negotiate a fair deal, but no deal is better than a divide and conquer deal where Canada has to roll over and bite the pillow.

  • avatar
    TCragg

    I have to say that the preceding comments by all involved are among the most civil, accurate presentations of facts that I have seen thus far on the NAFTA debate. Thank-you.

  • avatar
    TrailerTrash

    i will also add that what trump is trying to do still has many hurdles.
    for instance, there are legal jumps he has to make.
    not sure if you can just stop the current agreement without congress getting involved.
    and this is exactly what canada and china might be playing here…for the post nov elections and the next congress.

    not saying trump will not win, but it will take some time and work. and canada needs to understand the usa will under trump fight for a better deal.

    and get one.

    however, it has been started and can be fixed…if all side start listening and participating.


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