Spotlight on Freeland

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August 15, 2017

Spotlight on Freeland

Heading into the first official round of NAFTA negotiations in Washington, Canada and Mexico have staked out terrain for the coming discussion, and are increasing outreach to stakeholders, looking to reassure their citizens that they can achieve a good deal.

NAFTA week got underway with Canada’s Minister of Foreign Affairs Chrystia Freeland laying out, for the first time, the government’s core objectives going into the negotiations. Together with chief negotiator Steven Verheul and other senior officials, the minister was grilled by a House of Commons committee and ran the media gauntlet, managing to successfully launch Canada’s positions for the coming negotiations.

The US and Mexican governments are already on record with their respective NAFTA negotiating objectives, putting pressure on Canada to balance between publicly declaring its own objectives and keeping to its own strategy of not negotiating in public.

On process, Minister Freeland was clear about the need to intensify both domestic consultation in Canada, and pan-Canadian engagement with both the United States and Mexico. This builds on months of formal and informal domestic consultation processes with stakeholders, the newly-created high-level advisory council and constant feed-back loops before, during and after formal rounds of negotiations.

On substance, the minister outlined a series of offensive and defensive core objectives aimed at creating a NAFTA better reflective of todays realities. Minimizing the stated U.S. goal of addressing alleged trade deficits, Canada instead prioritized making NAFTA both modern and progressive. In keeping with its ‘inclusive growth’ agenda, Minister Freeland underscored the need for fair, as well as free trade to advance the interests of all Canadians – especially the middle class.

Modernizing NAFTA

While modernizing NAFTA for the digital age is widely agreed upon, Canada chose to focus on how NAFTA should become a model trade agreement. Repeatedly citing the Canada-European Union Comprehensive Trade & Investment Agreement (CETA) as an example, Minister Freeland set out a number of aggressive objectives on labour standards, environment provisions, gender rights, Indigenous peoples’ rights, and the investor-state dispute settlement mechanism.

Other objectives include reducing red tape, tackling restrictive U.S. government procurement, and improving the flow of professionals across all borders. In terms of politically-sensitive areas, the minister predictably, but with little fanfare, laid down markers on anti-dumping and countervailing dispute settlement (read softwood lumber), the Canadian cultural exemption and supply management. Each of these issues are politically charged with regional support potentially on the line in BC and Quebec on softwood lumber and aircraft disputes, in Quebec on the cultural exemption and across the country on supply management.

Mexico’s Quid Pro Quo

Mexico released their negotiating priorities, which are broadly aligned under four themes – increasing the competitiveness of North America, inclusive and responsible regional trade, opportunities of 21st century trade, and promoting the security of trade and investment in North America.

In contrast to the vague rhetoric, Mexico did clarify their intention to link migration issues to the outcome of the trade negotiations. Specifically, they made it perfectly clear that if the U.S. does not treat Mexico fairly on issues of trade, the Mexicans will be less inclined to manage their southern border. Illegal border crossings have dropped dramatically since the Mexican have choked off the flow of migrants from the south. In no uncertain terms Ildefonso Guajardo stated, that if the U.S. does not treat Mexico well, they “should not expect to be treated well in collaboration with security issues in the region.”

Trump’s Domestic Distractions

Among the ongoing leaks out of the U.S. government is the recent transcript of the initial call between President Trump and President Pena Nieto, in which the issue of the border wall defined the conversation. Rumours that the Trump administration may seek to include some discussion of the wall in a NAFTA negotiation continue to fester. The issue of asylum seekers at the New York/Quebec border may be the perfect antidote to any discussion of walls.

Despite the upcoming first round of negotiations in Washington, DC, the public interest in NAFTA is much lower in the United States than in the other partners. The current state of play on foreign and domestic policy, between the expulsion of diplomats in Russia to the war of words with North Korea to the domestic turmoil over race, has taken over the airways. The promised steady hand of new Chief of State John Kelly was all but invisible as the President began his vacation at his New Jersey golf club. President Trump has taken to twitter in the past week with a vengeance – targeting his own party, his appointees, and foreign leaders alike.

In the end, trade may be the one area that this President can find some success. While House Democrats ask for greater transparency into the process, there is still little evidence that they are looking to obstruct the progress of this negotiation. There are pressures to include certain equities in the discussions, but this is one area where the majority of Congress seems to want to see the administration succeed.

Round One-Show Time

The first round of negotiations in Washington this week (August 16-20) should be mostly focussed on formal statements of negotiating positions, agreement on process and carefully-choreographed leader and ministerial statements, however it’s clear that all three parties are coming to the table prepared to do battle.

Mexico and Canada have united on items that indicate that benefits from this negotiation have to be addressed to the workers of North America. This is a hard argument for the United States to counter, with a President that repeatedly talks about unfairness for the American workforce. The end result may be that many of the progressive aspects of Minister Freeland’s agenda may end up as the pieces of agreement, leaving the fight over Chapter 19 and Rules of Origin to take the heat. U.S. legislators are already grumbling about the lack of the transparency from their own team, so the more forthcoming and amiable the Canadians continue to be, the better the potential results.