(Bloomberg) -- Canada is signaling that this week’s Nafta deadline could come and go without a deal -- with Prime Minister Justin Trudeau citing a “range of paths” forward while his U.S. envoy digs in on two issues.
Trudeau and David MacNaughton, the ambassador to Washington, each addressed the North American Free Trade Agreement in separate appearances on Wednesday, striking upbeat tones without giving any indication of a frenzied push to reach an agreement. The U.S. wants to publish text of a deal with Mexico, and possibly Canada, by Sunday. Trudeau downplayed the urgency of that deadline.
“We will keep working on a broad range of alternatives, a broad range of paths are ahead of us,” Trudeau told reporters at the United Nations in New York. “We are very much looking in a positive and constructive way to getting to a renewed Nafta that will be a trilateral agreement between Canada, Mexico and the United States.”
His comments, along with those from Donald Trump’s trade czar Tuesday, suggest the U.S. will publish text of a deal with Mexico while somehow continuing talks with Canada, and holding open the possibility of tucking the northern nation into the deal at a later date. The U.S. has said it will sign a deal with Mexico by the end of November, with or without Canada.
The U.S. and Canada remain in “near-continuous negotiations,” Trudeau said, adding that his foreign minister -- who is leading the Nafta file -- will address the UN on Saturday, signalling there won’t be a last-minute bargaining push in Washington that day. “We will keep working as long as it takes to get to the right deal for Canada,” he said.
Trump Handshake
Trudeau also downplayed a brief handshake with Trump at a luncheon Tuesday, where the U.S. president remained seated despite standing to greet other leaders. The prime minister said it was a quick and cordial encounter and that people shouldn’t read too much into it.
MacNaughton, speaking Wednesday in Toronto, said Canada wants to reach a deal that Trump can hail as a victory but nevertheless has red-line issues, including the need for dispute panels and protection from tariffs.
“I don’t like playing chicken with the future of the Canadian economy,” the ambassador said at an event hosted by Politico. “On the other hand, there are things where basically we are just not prepared to give into because it would really render the agreement meaningless.”
Red Lines
On dispute resolution, the Trudeau government wants to keep some form of Nafta’s Chapter 19 panels and the U.S. wants to eliminate them. On tariffs, Canada wants protection from so-called Section 232 national security measures the Trump administration has imposed on steel and aluminum imports from Canada and other countries. The U.S. is also threatening similar tariffs on auto imports.
“If you can’t resolve disputes in a fair and balanced way, then what’s the use of the agreement?” MacNaughton said. “If you can’t have some curb on the arbitrary use of tariffs under the guise of national security with a member of NORAD and somebody who is your closest defense partner, then I don’t think it’s much of agreement.”
Auto tariffs in particular “would change the whole relationship for a long time come,” he added. He said he didn’t know when, or if, those might be imposed by the president.
Trudeau called the tariffs “unjust,” and noted that Trump has previously said publicly that a Nafta deal would mean there’d be no need for 232 tariffs. Canada needs a Nafta deal “that involves obviously feeling confident about the path forward,” the prime minister said.
A day earlier, Lighthizer also cited Chapter 19 as a sticking point, while saying the subject of 232 tariffs would probably be dealt with later, rather than as part of an overall Nafta deal as initially sought. He also said dairy is a sticking point.
Canada is looking for a way to reach a deal Trump can hail as a triumph, MacNaughton said. “Our desire is to try and find a way in which we can get this agreement done where he can, in his own way, declare victory -- to have some kind of a win for what he said he wanted to achieve.”
Any final deal on Nafta will include language around gender and indigenous rights, as initially sought by Canada, he said. Neither Lighthizer nor other U.S. negotiators ever cited that as a major sticking point in talks, he said.
(Corrects timing of Freeland’s UN speech in 5th paragraph.)
