Trucks wait to cross the Blue Water Bridge border crossing between Sarnia, Ont. and Port Huron, Mich.GEOFF ROBINS/AFP/Getty Images
Private negotiations between Canadian and American trade officials are “business-like, cordial, amicable” and even “very friendly,” Dominic LeBlanc, the federal minister responsible for North American trade, said Thursday. He added that this gives him optimism that a review of the continent’s three-country free trade agreement will yield a satisfactory result for Canada.
Despite the “public prosecution” of the United States-Mexico-Canada Agreement (USMCA) in the U.S., Mr. LeBlanc said behind the scenes there are “private, government-to-government conversations which are not discouraging.”
The minister’s comments during a fireside chat hosted by the Canadian Club countered the language used by U.S. Trade Representative Jamieson Greer, who said earlier this week that any deal with Canada must include higher tariffs. Canadian Finance Minister François-Philippe Champagne also said this week there is a growing acceptance worldwide that countries have to pay a price to access the U.S. market.
Mr. LeBlanc, who is travelling to Washington late next week to meet Mr. Greer again, is optimistic for multiple reasons. To start, U.S. President Donald Trump has repeatedly shown that he’s willing to keep the USMCA in place, save for tariffs on select sectors that he deems important to U.S. national security, such as steel.
That played out again last week after the Supreme Court struck down most of Mr. Trump’s tariffs. In response, the U.S. President quickly authorized a new set of 10-per-cent tariffs that took effect Tuesday – yet once again, Mr. LeBlanc said, the vast majority of Canadian exports were exempted, so long as they complied with the USMCA. Canada’s effective tariff rate is 4.9 per cent.
“It’s in the American economic interest to do that,” Mr. LeBlanc said.
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He also stressed that American business leaders and business associations are now speaking up and showing their support for free trade. Lobby groups such as the Agricultural Coalition for USMCA have brought together farmers, ranchers and food processors to support the deal.
Business groups also spoke up in favour of the agreement during recent hearings in front of U.S. Congress. “People didn’t get there and say, ‘We’ve got to rip this agreement up,’” Mr. LeBlanc said.
The wild card, however, is Mr. Trump. Canadian officials have had solid relations with their U.S. counterparts at various times, only for the U.S. President to intervene.
Last fall, Canada was close to a deal that would have significantly improved its tariff position for the steel, aluminum and energy sectors, but Mr. Trump lashed out after Ontario ran television advertisements in the U.S. that showed former U.S. president Ronald Reagan supporting free trade.
Despite the volatility, Mr. LeBlanc shared the advice he often gives to Canadian business leaders: “It’s not 2016 again,” he said, referring to Donald Trump’s first election, which led to a sweeping renegotiation of the North American free-trade agreement (NAFTA). “You don’t need to camp out in a hotel lobby waiting for an update in Washington. We’re not going chapter by chapter.”
Federal Minister responsible for North American trade Dominic LeBlanc stresses that American business leaders and business associations are now speaking up and showing their support for free trade.Adrian Wyld/The Canadian Press
He also suggested the talks could drag on. “If there’s no consensus in the review, then the agreement continues on,” he said, adding that it will morph into an annual review.
Canada, Mexico and the U.S. are currently working toward a July 1 deadline, at which point they have to decide whether to renew the USMCA for another 16 years or enter into annual reviews. They can also withdraw from the agreement with six months’ notice.
Should the current review drag on, it has the potential to work in Canada’s favour. The new tariffs Mr. Trump put in place this week can only last 150 days without congressional authorization. Tariffs are increasingly unpopular with U.S. voters, and midterm elections are being held in November, which means congressional approval is unlikely.
The White House has signalled it has other means to renew at least some of the tariffs, including using Section 232 (of the Trade Expansion Act of 1962), which allows tariffs for national security reasons. It’s the same section that Mr. Trump used against Canadian steel and aluminum. But the end result could be less of a blanket more of a patchwork quilt.
In Canada’s case, Mr. LeBlanc acknowledged those tariffs could remain even if the USMCA is renewed. For this reason, he echoed Prime Minister Mark Carney’s frequent comments that Canada cannot continue to rely on the U.S. the way it used to. “We need to sign more free trade or investment agreements with some of these emerging economic powers,” he said, adding that Mr. Carney’s “visit to India is a very important part of that effort.”