09/27/2017 15:08 EDT | Updated 09/27/2017 16:17 EDT

NAFTA Talks Stall, Raising Spectre Of Trump Withdrawing From Deal

The third round of talks is wrapping up in Ottawa, with little progress made.

Minister of Foreign Affairs Chrystia Freeland meets for a trilateral meeting with Mexico's Secretary of Economy Ildefonso Guajardo Villarreal, left, and Ambassador Robert E. Lighthizer, United States Trade Representative, during the final day of the third round of NAFTA negotiations at Global Affairs Canada in Ottawa, Wed. Sept. 27.

OTTAWA — The third round of talks to renegotiate the North American Free Trade Agreement was coming to a close Wednesday with the spectre of a U.S. withdrawal by President Donald Trump growing ever larger, thanks to stalled progress on major issues.

The slow pace of the Round 3 talks is being widely blamed on the lack of concrete proposals being brought by the U.S. — fuelled by internal U.S. divisions — but there are grumblings about a lacklustre showing by some Canadian negotiators.

That is stoking broader fears that an impatient Trump could trigger NAFTA's withdrawal clause if he doesn't see a win for the U.S. by years' end.

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Foreign Affairs Minister Chrystia Freeland held separate meetings with her U.S. and Mexican counterparts before she and U.S. Trade Representative U.S. Robert Lighthizer and Mexican Economy Minister Ildefonso Guajardo had their final joint talk.

The talks are ending a day after the U.S. Department of Commerce proposed a hefty 219 per cent countervailing duty on jets manufactured by Montreal's Bombardier, further straining the Canada-U.S. trading relationship.

During question period Wednesday, Prime Minister Justin Trudeau acknowledged that Freeland and Lighthizer discussed the Boeing-Bombardier dispute in their meeting.

Little progress made on key issues

A rift emerged also Tuesday with unions saying Canada was facing opposition from the United States and Mexico on its proposal to raise labour standards — targeting what are seen as anti-union practices in more than two dozen U.S. states and improving the plight of Mexican workers.

In addition to the impasse on labour, no substantive progress was made on the investor state dispute settlement process, opening up Canada's supply-managed dairy and poultry industry, and the U.S. demand for greater American content in North American-manufactured automobiles.

Mexico is deeply worried about the possibility of Trump making a move to unilaterally withdraw from NAFTA, said Moises Kalach, a leading member of the private-sector group that advises the Mexican government on the negotiations.

"We take it very seriously. He is the president of the United States," Kalach said in an interview.

Aaron Bernstein / Reuters
U.S. Trade Representative Robert Lighthizer is leading the American team at NAFTA negotiations.

Like Canada, Mexico has mounted its own full-court press on various levels of U.S. government and business. Kalach cited 200 stakeholder meetings in the U.S. and meetings with 22 state governors. Mexican business leaders also planned meetings with 20 Canadian businesses and associations this week.

The overarching takeaway from all of that consulting, said Kalach, is this: most are on a different page than Trump and see NAFTA as essential.

"We're almost 100 per cent aligned in the private sector sometimes, even with the governments of Mexico and Canada," said Kalach.

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Most companies don't agree with Trump's threats to NAFTA's Chapter 19 dispute resolution process, he said.

"It seems like the only voice out there that does not agree with some of the things we've been doing is President Trump and his team. So yes, we're worried about withdrawal and we're lobbying strongly on that."

Pushback from Congress

Peter Clark, an Ottawa-based international trade strategist who was involved in the NAFTA and Canada-U.S. free trade negotiations, said the U.S. negotiators are mainly responsible for the foot dragging, but it's unclear if that's a deliberate strategy of a manifestation of internal American divisions.

"They're getting a lot of pushback from Congress on some of the positions they want to take," said Clark.

The delays don't auger well for the fourth round of talks in Washington, he added: "I understand it's beside the Pentagon so there may be fireworks."

Canada's negotiators have been consulting with industry and civil society groups throughout Round 3. A steady stream of stakeholders have been filing out of Ottawa's old city hall building, where the talks have been taking place since Saturday.

Canada 'sleepwalking' on digital issues

One source, who spoke on the condition of anonymity because of the sensitivity of the ongoing negotiations, said he was surprised at how uninformed Canadian negotiators were on establishing new NAFTA chapters for the digital age.

The source had the impression Canada was "sleepwalking" on the issue, which has the potential to give the U.S. the upper hand in setting the rules for the new digital economy — something NAFTA never envisioned more than two decades ago.

Aaron Bernstein / Reuters
Foreign Minister Chrystia Freeland speaks at a news conference at the start of NAFTA renegotiations in Washington, D.C., August 16.

The U.S says it wants an end to measures that restrict cross-border data flows and require that data be stored in local computing facilities. But Canadian companies are urging the government to fight against that, citing privacy concerns and potential threats to their competitive advantage.

Scott Sinclair, a senior research fellow with the Canadian Centre for Policy Alternatives, said the government is offering more access to civil society organizations such as his, but that doesn't necessarily make for speedy negotiations.

"I am concerned that the pace of these negotiations and the vastness of the subject matter literally make it almost impossible that there can be full consultation and transparency and the ability to understand what's really going on," Sinclair said after his meeting with the government this week.

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