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Trade

As US and Mexico strike deal on new Nafta, Trump makes take-it-or-leave-it offer to Canada

When US President Donald Trump announced a US-Mexico trade agreement, he also issued an ultimatum to Canada

PUBLISHED : Tuesday, 28 August, 2018, 3:25pm
UPDATED : Tuesday, 28 August, 2018, 9:45pm

US President Donald Trump’s declaration of victory in reaching a preliminary deal with Mexico to replace the North American Free Trade Agreement raised at least as many questions as it answered.

Can Canada, the third member country in Nafta and America’s No. 2 trading partner, be coaxed or coerced into a new pact?

If not, is it even legal – or politically feasible – for Trump to reach a replacement trade deal with Mexico alone?

And will the changes being negotiated to the 24-year-old Nafta threaten the operations of American and foreign companies that have built sophisticated supply chains that span the three countries?

“There are still a lot of questions left to be answered,” said Peter MacKay, a former Canadian minister of justice, defence and foreign affairs who is now a partner at the law firm Baker McKenzie.

Trump was quick to proclaim the agreement a triumph, pointing to Monday’s surge in the stock market, which was fuelled in part by the apparent breakthrough with Mexico.

“We just signed a trade agreement with Mexico, and it’s a terrific agreement for everybody,” the president declared.

“It’s an agreement that a lot of people said couldn’t be done.”

Trump also issued an ultimatum to Canada.

Donald Trump’s awkward phone call with Mexico’s president as they strike trade deal

“We will have a deal with Canada. It will either be a tariff on cars, or it will be a negotiated deal.”

He said he wanted to call the revamped trade pact “the United States-Mexico Trade Agreement” because, in his view, Nafta has earned a reputation for being harmful to American workers.

But first, he said, he would give Canada a chance to get back in – “if they’d like to negotiate fairly”.

Talking to reporters, the top White House economic adviser, Larry Kudlow, urged Canada to “come to the table”.

“Let’s make a great deal like we just made with Mexico,” Kudlow said.

“If not, the USA may have to take action.”

Canada’s Nafta negotiator, Foreign Minister Chrystia Freeland, cut short a trip to Europe to fly to Washington to try to restart talks.

“We will only sign a new Nafta that is good for Canada and good for the middle class,” said Adam Austen, a spokesman for Freeland, saying that “Canada’s signature is required”.

MacKay added: “There is still a great deal of uncertainty – trepidation, nervousness, a feeling that we are on the outside looking in.”

Critics denounced the prospect of cutting Canada out a North American trade pact, in part because of the risks it could pose for companies involved in international trade.

Many manufacturers have built vital supply systems that depend on freely crossing all three Nafta borders.

Noting the “massive amount of movement of goods between the three countries and the integration of operations,” Jay Timmons, president of that National Association of Manufacturers, said “it is imperative that a trilateral agreement be inked”.

Trump has frequently condemned the 24-year-old Nafta trade pact as a job-killing “disaster” for American workers.

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Nafta reduced most trade barriers between the three countries. The president and other critics say the pact encouraged US manufacturers to move south of the border to exploit low-wage Mexican labour.

The preliminary deal with Mexico might bring more manufacturing to the United States. Yet it is far from final.

Even after being formally signed, it would have be ratified by lawmakers in each country.

The US Congress wouldn’t vote on it until next year – after November midterm elections that could end Republican control of the House of Representatives.

Outgoing Mexican President Enrique Pena Nieto wants to sign the agreement before leaving office at the end of November, and Canada’s Prime Minister Justin Trudeau faces a national election expected by October 2019.

Trudeau spoke to Pena Nieto on Sunday and shared their commitment to reaching a successful conclusion of Nafta “for all three parties”, the prime minister’s office said.

Mexican Foreign Minister Luis Videgaray said in Washington that if Canada and the United States do not reach an agreement on Nafta “we already know that there will still be a deal between Mexico and the United States.”

Additional reporting by Reuters and The Washington Post