Canadian Prime Minister Justin Trudeau speaks at the Ronald Reagan Presidential Library in Simi Valley, Calif., on Feb. 9. Trade talks have strained relations between the United States and Canada as the neighbors remain far apart on issues. (Mike Nelson/EPA-EFE/Shutterstock)
Despite Trudeau’s calls for unity, there are signs that the trade talks have strained relations between the United States and Canada, as the neighbors remain far apart on issues such as automotive manufacturing and trade dispute resolutions.
President Trump on Jan. 17 said ending the North American Free Trade Agreement would result in the “best deal” for U.S. interests.
“They do not come to the table — our counterparts — with a lot of flexibility,” he said. “This is being driven to a large extent from the top, from the administration, and there’s not a lot of flexibility.”
Before January’s round of NAFTA negotiations, the Canadian government announced that it had launched a challenge against the United States with the World Trade Organization, claiming that the United States violates international trade rules by using tariffs to protect its domestic markets. The WTO challenge was filed by Canada in December, but officials in Ottawa waited until the NAFTA talks were to begin in Montreal to announce the action, a move seen as an attempt to put pressure on U.S. negotiators.
U.S. Trade Representative Robert E. Lighthizer said the WTO challenge is a “massive attack” on the U.S. trade system and questioned Canada’s commitment to mutually beneficial trade.
“The mood in Canada going into this next round of trade talks is close to pessimistic,” said John Manley, a former Canadian deputy prime minister who is now chief executive of the Business Council of Canada, an association of leading Canadian companies. Manley regularly meets with senior government officials on trade issues.
Even Trudeau has sounded negative about the NAFTA negotiations. In a speech this month, he said that “Canada is willing to walk away from NAFTA if the United States proposes a bad deal. . . . We are not going to take any old deal.”
More than $2 billion worth of goods and services cross the U.S.-Canada border each day. Over the years, the two nations have grappled with trade disputes over products including softwood lumber and aircraft. But the stakes are high for Canada in the NAFTA renegotiation given the country’s dependence on U.S. trade.
Today, Canada trades more with the border state of Michigan than the European Union. Canada’s trade with the United States stood at $533 billion in 2016, according to Statistics Canada. Canada’s trade with Mexico was $32 billion in 2016 — 6 percent of the U.S. value.
The United States is not as dependent on trade with Canada. In fact, Canada is no longer the United States’ top trading partner; it lost that distinction to China in 2015. In 2017, Canada accounted for 15 percent of total U.S. trade with the world, the U.S. Census Bureau reported.
The stakes for the NAFTA negotiations are high. A general election in Mexico on July 1 and the U.S. midterm elections in November are expected to interrupt the talks, adding a sense of urgency for Canada to achieve progress now.
“Heading into the next round, we will bring a lot of ideas to the table,” Verheul said. “We will be aiming to achieve real progress and we’re hoping the U.S. will bring a similar attitude.”