Canada could stand to gain more than lose from redrafted NAFTA: trade expert

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By Christopher Guly

OTTAWA, Aug. 10 (Xinhua) -- Canada could stand to gain more than lose from redrafted NAFTA, Colin Robertson, a retied Canadian diplomat who involved in the NAFTA negotiation in 1990s, said on Thursday.

Rules of origin, dispute settlement, softwood lumber and dairy products will be among the major items on the table when Canadian negotiators sit down with their American counterparts to begin renegotiating the 23-year-old North American Free Trade Agreement (NAFTA) in Washington, D.C. on Aug. 16.

In a document released last month, U.S. President Donald Trump's administration stated that it wants to "update and strengthen the rules of ensure that the benefits of NAFTA go to products genuinely made in the United States and North America," which could impact the automobile industry.

Currently, the rules require that a vehicle must have at least 62.5 percent North American content to gain duty-free access to the U.S., Canada and Mexico, which are part of NAFTA. Washington wants "the sourcing of goods and materials" in the supply chain to also remain on the continent, which could have an impact on automakers in Canada and Mexico that import vehicle components from other countries.

"If a part comes from abroad and gets converted into building, say, a carburetor, it gets counted as a Canadian or Mexican product even though the part may have been made in a country like China," said Robertson in an interview with Xinhua Thursday.

Robertson expected the U.S. to push for raising the 62.5-percent threshold without much objection from Canada.

He said a more contentious issue will involve Chapter 19, a dispute-resolution mechanism within NAFTA that allows Canada and Mexico to appeal countervailing and anti-dumping duties imposed by the U.S. through independent tribunals rather than in U.S. courts.

The Americans want to eliminate Chapter 19 while the Canadians want to keep the tribunal provision, which has helped stave off challenges from the U.S. lumber industry against Canadian softwood lumber exports to the U.S.

However, softwood lumber was not included when NAFTA was first negotiated, and Canada and the U.S. have instead formed bilateral multi-year agreements, the last of which expired in 2015 and has led to a cross-border dispute over countervailing and anti-dumping duties, at a combined rate of about 27 percent, imposed by the U.S. on Canadian softwood imports this year.

When the first of seven rounds of NAFTA talks begin next week, U.S. negotiators can also be expected to push hard for concessions on Canada's policy on agricultural imports, which Trump has called a "disgrace."

The Americans consider Canada's supply-management system, which imposes high duties to restrict imports of milk, cheese, egg and poultry, to be protectionist and unfairly favor Canadian farmers.

But Canada could abandon that policy as part of a tradeoff with the U.S., said Robertson, a former senior official at the Canadian embassy in Washington.

He suggested that Canada offer to end its supply-management policy in exchange for more favorable consideration of softwood lumber exports to the U.S., or an allowance for Canadian-made ships be authorized to transport goods in U.S. waters that are now restricted to American-made ships under the U.S. Merchant Marine Act, popularly known as the Jones Act.

But Robertson believed Canada was in a good position to work with the U.S. on a redraft of NAFTA.

Both countries' economies are good. Canada already has experience dealing with the U.S. on trade deals, including the Canada-U.S. Free Trade Agreement, which preceded NAFTA.

Unlike the domestic opposition that former Canadian Conservative prime minister Brian Mulroney faced from the then-opposition Liberals and most provincial premiers while negotiating the NAFTA deal in early 1990s, current Liberal Prime Minister Justin Trudeau enjoys almost universal support at home to ensure Canada ideally gains, but definitely not loses much during the upcoming NAFTA renegotiations.

Then there's Trump. "He's the unknown variable," said Robertson.

But American farmers, who comprise a significant support base for the Republican president, don't want Trump tinkering with NAFTA that could cause them to lose the sizable market they have in Canada, where Canadians consume more American product per capita than do Americans of Canadian product.

And Trump will want NAFTA's future decided by year's end so that he can seek Congress's approval for whatever revised deal emerges.

"Trump seems to be more interested in doing a deal and is less concerned about the rules," said Robertson. "That could mean we move quickly through the negotiations." Enditem

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