Friday - August 18th, 2017

Canada has 'no grounds' for optimism in NAFTA talks: ex-U.S. envoy Burney


Canada has 'no grounds' for optimism in NAFTA talks: ex-U.S. envoy Burney

Former ambassador to the United States Derek Burney is warning Canadians against undue optimism over looming North American free-trade agreement talks, cautioning the reopening of the trade deal at Donald Trump's request will usher in a period of uncertainty for businesses and that the American President could use his bully pulpit to stir trouble at the negotiating table.

Mr. Burney, who as chief of staff to prime minister Brian Mulroney in 1987 led the final round of negotiations over the Canada-U.S. free-trade deal, said Canada is likely in for a bumpy road ahead. Talks begin in Washington Aug. 16.

He said some pundits appear to have concluded that Mr. Trump's focus at the NAFTA table will be about extracting more from Mexico – based on evidence such as leaked presidential discussions where the American leader told his Mexican counterpart that, "we have had a very fair [trade] relationship with Canada."

This assumption is wrong, Mr. Burney, now a senior adviser at Norton Rose Fulbright, says.

"For those who suggest we are already home, safe and free on this negotiation, I say that is a highly premature judgment," he said in prepared remarks made public Wednesday.

"I see no grounds yet for either complacency or optimism. I do see a period of uncertainty ahead for investors, producers and service providers. We are just beginning to peel what could be a large, possibly pungent, onion."

A major unknown is how much Mr. Trump publicly interferes in negotiations from his Twitter account.

"The biggest wild card is the President himself and what he will accept as the 'price of victory,'" Mr. Burney wrote. "I do not envy the U.S. negotiator. He may be the target for a lot of coaching via Twitter."

He says the Canadian government needs to be firm about what it will and will not negotiate. (As The Globe and Mail has already reported, citing a senior Canadian official, the Trudeau government is prepared to walk away from the NAFTA talks if the Trump administration insists that a crucial dispute-settlement panel be removed from the accord. If Canada or Mexico were to leave the talks, NAFTA would stay as it is and Mr. Trump might then have to fulfill his pledge to pull the United States out of the deal.)

"We need to prepare thoroughly for all contingencies and be explicit up front about what is not negotiable. The Americans, believe me, will have a similar 'no-go' list," Mr. Burney wrote.

"Keep in mind that no deal is preferable to a bad deal. That was the basic principle guiding us in the first free-trade negotiation. Canada needs to know when and how to say 'No,'" he said.

Mr. Burney urged the Canadian government – and premiers – to continue a lobbying blitz of American political decision makers and opinion leaders as NAFTA talks proceed.

"We need to prepare strategically and tactically, working the U.S. political system as never before, mobilizing support for our objectives and explaining to Americans precisely why a good trade relationship with Canada is very much in their interest.

"It is time we heard more from Americans who benefit from liberalized trade."

The pending NAFTA talks contain many contentious issues for Canada, including the stated U.S. goal of scrapping the Chapter 19 binding dispute-settlement mechanism that American critics see as an impingement on U.S. sovereignty.

"Our Prime Minister seems to have rejected this proposal upfront, as have the Mexicans. Will they hold firm?"

The U.S. also wants to expand one-sided "Buy American" provisions that allow Washington and the states to restrict the ability of Canadian and Mexican firms from bidding on procurement contracts even while Ottawa and Mexico City allow access to their own government purchasing market.

Mr. Burney warned Canadians to be on guard for U.S. efforts to boost American content requirements for auto assembly, and fight Washington's stated intention of removing Canada and Mexico's exclusion from trade measures that the United States takes to fight a surge of imports.

The Americans are expected to seek greater access to Canada's highly sheltered dairy market and Mr. Burney said while there may be room to grant them more tariff-free access, as Ottawa was prepared to in Trans-Pacific Partnership accord talks, there should a reciprocal effort to unwind U.S. subsidies to domestic agriculture.

"The NAFTA negotiation is one of two major issues that will test our Prime Minister's leadership skills this year. The other is the pipeline imbroglio he faces … in B.C., where he is trying to reconcile two seemingly irreconcilable positions – energy development and environmental protection," Mr. Burney wrote.

"I would suggest to you that his legacy as Prime Minister and our prospects for prosperity hinge directly on how well he does in meeting both challenges."

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