Trump Outlines Intent to “Tweak” NAFTA in Bilateral Meeting with Trudeau

16 February 2017

Canadian Prime Minister Justin Trudeau and US President Donald Trump held their first official meeting in Washington on Monday 13 February, highlighting in a joint press conference the close ties between their two economies and pledging a mutual commitment to continued cooperation.

Trump also said that he hopes to “tweak” the North American Free Trade Agreement (NAFTA), the decades-old deal aimed at cutting tariffs and otherwise facilitating trade between the US, Canada, and Mexico, which together account for almost half a billion people.

Trump, Trudeau call for deeper ties

At Monday’s meeting, both leaders underlined the importance of continued close integration for the mutual benefit of Canada and the US, where jobs on both sides of the border are highly dependent on a strong trade relationship.

Over US$2 billion in two-way trade and 400,000 people flow across the border on a daily basis, where Canada is the number one export destination for 35 US states, according to a joint statement issued alongside the meeting.

“The fact is that millions of good jobs on both sides of the border depend on the smooth and easy flow of goods and services and people back and forth across our border,” said Trudeau.

“We continue to understand that we have to allow this free flow of goods and services and we have to be aware of the integration of our economies, which is extremely positive for both our countries,” he continued.

Trump echoed this sentiment, identifying a “stronger trading relationship between the United States and Canada” as one of many shared interests. “We have before us the opportunity to build even more bridges, and bridges of cooperation, and bridges of commerce,” he affirmed.

The economic policy course charted since Trump’s election has adhered to what he terms an “America First” policy which claims to safeguard the interests of US workers and industry and to counter the flight of companies in order to “bring back” manufacturing to American shores. (See Bridges Weekly, 26 January 2017)

In this vein, Trump has emphasised “free and fair” trade deals, directing the Office of the US Trade Representative to prioritise bilateral accords rather than the multi-country ones that had been the focus of the previous administration under former US President Barack Obama.

“The US and Canada also recognise the importance of cooperation to promote economic growth, provide benefits to our consumers and businesses, and advance free and fair trade,” said the joint statement.

“Tweaking” NAFTA

In particular, Trump has promised to re-negotiate NAFTA in an effort to ensure more favourable terms for the US, asserting that the deal as it stands is “very unfair to the American worker and very, very unfair to companies that do business in this country.”

Wilbur Ross, Trump’s pick for Commerce Secretary who would be among those representing the US in future NAFTA discussions, stated in a Senate confirmation hearing last month that he is “pro-trade, but I’m pro-sensible trade, not pro-trade that is to the disadvantage of the American worker.”  (See Bridges Weekly, 19 January 2017)

Both Ross and Robert Lighthizer, Trump’s nominee for US Trade Representative (USTR), are still pending confirmation by the US Senate. The Office of the USTR is traditionally tasked with negotiating trade deals, though Trump has indicated that the Commerce Department will play a greater role in such discussions under his administration, together with a newly-created National Trade Council under the White House. (See Bridges Weekly, 26 January 2017)

NAFTA, which entered into force under former President Bill Clinton in 1994, has been described by Trump on the campaign trail as the “single worst trade deal ever approved.” Along with dealing with trade in goods, the agreement also includes provisions on technical barriers to trade, government procurement, investment, services, and intellectual property rights.

“We’ll be tweaking it. We’ll be doing certain things that are going to benefit both of our countries,” said Trump in a joint press conference with his Canadian counterpart. The US leader emphasised an “outstanding trade relationship with Canada,” which he characterised as “a much less severe situation than what has taken place on the southern border.”

Trump has particularly singled out automakers as shifting production to Mexico. Automakers and oil and gas producers are Canada’s largest exporters to the US, where these sectors alone amounted to 30 percent of total shipments last year.

“I think it’s going to be a very exciting period of time for the US, and for the workers of the US because they have been truly the forgotten men and forgotten women. It’s not going to be forgotten anymore,” Trump stated.

He pledged, however, to “work with Mexico” in order to reach a “fair deal for both parties.”

The two leaders did not specify during their press conference what they would seek to change under NAFTA, though some trade watchers have suggested that these upgrades could include an effort to address softwood lumber, an area that has been a long-standing trade irritant between the two sides. While the US and Canada had a bilateral accord that kept tensions at bay for several years, that accord and a subsequent standstill on any new trade remedies on Canadian-produced lumber have since expired. (See Bridges Weekly, 23 June 2016 and 15 October 2015)

Separately, Trump and Trudeau did indicate an interest in increasing infrastructure investment, boosting regulatory cooperation, improving labour mobility, and continuing their joint work on energy and environmental issues given that they hold “the world’s largest energy trading relationship” and have shared goals in areas such as energy infrastructure and security.

In their joint statement, they also pledged that on the controversial issue of the Keystone XL pipeline, they “remain committed to moving forward on energy infrastructure projects that will create jobs while respecting the environment.”

One of Trump’s earliest executive orders upon taking office in January was to invite TransCanada to resubmit its application to build the cross-border pipeline, which Obama had rejected on environmental grounds. (See Bridges Weekly, 26 January 2017)

ICTSD reporting; “Trump hammers America’s ‘worst trade deal’,” CNN, 27 September 2016; “Here’s what Donald Trump could want from Canada on NAFTA,” THE CANADIAN PRESS, 3 February 2017; “NAFTA talks will be wide open, says Trump’s commerce nominee Wilbur Ross,” THE GLOBE AND MAIL, 19 January 2017; “Trump is ready to renegotiate NAFTA. Here’s what that might look like,” VOX, 9 February 2017; “Trump expects only ‘tweaking’ of trade relationship with Canada,” REUTERS, 13 February 2017; “Magna, Suncor Gird for Nafta War as Trump Meets Trudeau,” BLOOMBERG, 13 February 2017.

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