POLITICS
06/09/2018 16:42 EDT | Updated 06/09/2018 16:42 EDT

Tariffs, Sunset Clause Are Both NAFTA Dealbreakers, Canada Tells U.S.

The finance minister says he is engaged in intense talks with his U.S. counterparts.

QUEBEC — The Trudeau government has told President Donald Trump he needs to get rid of the punishing U.S. tariffs on Canadian steel and aluminum if there is any hope of successfully renegotiating the North American Free Trade Agreement.

Finance Minister Bill Morneau said that message was communicated clearly to Trump during his meetings at the G7 summit with fellow leaders, and in his face-to-face talk with Prime Minister Justin Trudeau.

Before departing the G7 summit in Quebec on Saturday, Trump said he wants to make a deal on NAFTA, and he's open to working with the current pact or striking separate agreements with Canada and Mexico — as long as they agree to renegotiate every five years.

Canada wants a deal too, but the Trudeau government views the U.S.'s proposed five-year sunset clause as a non-starter.

And now, Morneau added the tariffs to Canada's list of deal breakers on NAFTA. He said progress is being made, but more work needs to be done to conclude the negotiations.

"We're not going to be able to do that work under the threat of tariffs. And we're not going to be able to do that work when our retaliatory tariffs, which are real, they're significant," Morneau said in a Saturday interview.

Ben Nelms / Reuters
Canada's Minister of Finance Bill Morneau holds a news conference after the G7 Finance Ministers Summit in Whistler, B.C. on June 2, 2018.

The government announced it would impose more than $16.6-billion in retaliatory tariffs, effective July 1, on a variety of U.S. goods. Mexico and the European Union have also planned retaliatory tariff packages.

Trump said that would be a bad idea.

"If they retaliate, they're making a mistake," he said.

"They do so much more business with us than we do with them ... the numbers are so astronomically against them ... we win that war a thousand times out of a thousand."

Morneau said the tariff retaliation would cause "increasing friction" that would impede progress on NAFTA, but added there is a need "to step back from that destructive action so that we can actually get to the real work."

Morneau said he is engaged in intense talks with his U.S. counterparts in the hopes of finding a way forward.

AFP/Getty Images
U.S. President Donald Trump and Canadian Prime Minister Justin Trudeau hold a meeting on the sidelines of the G7 Summit in La Malbaie, Que.

Trudeau and the other G7 leaders used their meeting to try to persuade Trump to abandon the tariffs, which affect all of America's G7 allies.

Trump said they are based on legitimate national security concerns, and he said he stood firm against the concerns of his fellow G7 leaders during their talks.

Once again, he emphasized that the days of the U.S. getting the short end of the stick in its trading relationships with the world were over under his watch.

And he made clear that extends to the current deal the U.S. is renegotiating with its continental neighbours, Canada and Mexico.

"We're either going to have NAFTA in a better negotiated form or we're going to have two deals," the U.S. president said.

Christinne Muschi / Reuters
U.S. President Donald Trump speaks to the press as he leaves the G7 Summit in La Malbaie, Que. on Saturday.

But by insisting on re-negotiating every five years, Trump is diametrically opposed with Canada, which says the sunset clause would create perpetual uncertainty and harm long-term investment.

Disagreement over the sunset clause was the deal breaker that scuttled a possible meeting between Trump and Trudeau in Washington late last month in an attempt to bring the NAFTA talks to a conclusion.

Vice President Mike Pence told Trudeau he would have to agree to that before Trump would agree to meet him.

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Trudeau refused, and the meeting was off. But the lead ministers from both countries talked trade on the sidelines of the G7 leaders' meeting on Friday.

"On NAFTA we either leave it the way it is as a three-some deal with Canada, the United States and Mexico and change it very substantially — we're talking about very big changes. Or we're going to make a deal directly with Canada, directly with Mexico," Trump said Saturday.

"If a deal isn't made, that would be a very bad thing for Canada and a very bad thing for Mexico. To United States, frankly, it would be a good thing but I'm not looking to do that. I'm not looking to play that game."

Trump repeated his criticism of Canada's supply managed dairy industry, one of his favourite targets in Twitter posts, including this week prior to his arrival in Canada.

"Let's say Canada, where we have tremendous tariffs. The United States pays enormous tariffs on dairy. As an example, 270 per cent, nobody knows that."

Pierre Lampron, the president of Dairy Farmers of Canada, shot back at Trump's claims about his industry.

"President Trump is targeting the dairy sector because he wants to dump U.S. dairy into Canada," Lampron told The Canadian Press, adding that Canada imports five times more dairy from the U.S. than it exports.

"President Trump wants nothing less than wiping out Canadian dairy farming."