The Globe and Mail reported:
Canadian and U.S. negotiators reached the outline of a NAFTA deal after intensive weekend talks but were awaiting approval from President Donald Trump and Prime Minister Justin Trudeau late Sunday.
Four sources briefed on the closed-door discussions said the two sides were hoping to finalize the deal overnight with an announcement Monday.
Mr. Trudeau convened a 10 p.m. ET Sunday cabinet meeting at his office and will meet the cabinet again at 11 a.m. ET on Monday to discuss the deal, said two government sources. The Mexican Economy Ministry, meanwhile, said it would present text of its preliminary NAFTA deal with the U.S. to the Mexican Senate.
At the heart of the framework agreement is a trade-off between dairy market access – Mr. Trump’s chief trade complaint about Canada – and the Chapter 19 dispute-resolution system, whose preservation Canada has long marked as a red line in talks, said two government and industry sources briefed on the discussions.
The potential agreement would preserve Chapter 19, a provision that Mr. Trudeau has repeatedly vowed to defend, while opening up Canada’s protected dairy market to more American imports, said two of the sources with knowledge of the talks.
It would also allow Canadian consumers to purchase five times more foreign merchandise online without paying import duty than they are currently allowed, the two sources said.
Three sources said a side agreement, meanwhile, would see U.S. tariffs lifted on Canadian steel and aluminium, and a guarantee that the Trump administration will not impose tariffs on most auto imports from Canada. In exchange, however, Canada would accept a quota system that would place stricter limits on the export of Canadian-made vehicles into the U.S. market, said two sources.
The deal could end the nearly 14-month-long negotiations on one of Mr. Trump’s signature campaign promises to overhaul the North American free-trade agreement – which he blames for job losses in the U.S. manufacturing sector – and tilt the playing field of continental trade in America’s direction.
The U.S. has been pressing Canada to make a deal since late August, when the Trump administration reached a preliminary NAFTA pact with Mexico. Mr. Trump wants to send text of the deal to Congress Monday, starting a 60-day countdown to a final signing. He has repeatedly threatened to decimate Canada’s auto industry with 25-per-cent tariffs if an agreement is not reached.
Canadian and American negotiators spent all weekend in talks, conducted via videolink, in a bid to reach the deadline, said two government and industry sources. Foreign Minister Chrystia Freeland and Ambassador to the U.S. David MacNaughton hunkered down with Mr. Trudeau’s top aides, Katie Telford and Gerald Butts, at the Prime Minister’s Office in Ottawa to work through the deal.
A shirt-sleeved Mr. Trudeau arrived in person at the office Sunday evening.
“There are still a couple of tough issues but we are doing our best,” Mr. MacNaughton told reporters outside, adding that he was “cautiously optimistic” of a deal by Monday.
Canadian Labour Congress President Hassan Yussuff, who sits on the government’s NAFTA advisory panel, told The Globe and Mail that a deal is imminent.
“So far, so good,” he said. “They are plugging away.”
Peter Navarro, a trade adviser to Mr. Trump, told Fox News Sunday morning that the two sides were “negotiating in good faith” and there would be a result by Monday.
“I promise you this: Tomorrow morning, you’ll have some news one way or the other, that will be big and perhaps market-moving,” he said. Mr. Navarro said “everyone is negotiating in good faith right now as we speak.”
Canada will give U.S. farmers access to the Canadian dairy market greater than the 3.2 per cent granted to 10 other countries under the Trans-Pacific Partnership, the sources said. Ottawa will also change a rule that had largely excluded U.S.-made ultrafiltered milk, a cheese-making ingredient, from Canada.
The deal will preserve Canada’s supply management system, which uses a combination of quotas and tariffs to guarantee returns for Canadian farmers. But giving a larger percentage of the market to the U.S. without tariffs is certain to rankle the dairy lobby, which wields significant political influence, particularly in Quebec, which holds a provincial election Monday.
“As the national association of dairy farmers in Canada, we have not been consulted by the government” about the potential concession, said Lucie Boileau, a spokeswoman for the Dairy Farmers of Canada.
For its part, Canada will keep Chapter 19, which allows it to challenge punitive American tariffs on imports at binational panels rather than in the U.S. court system, the industry and government sources said. The system has proven useful in the past for protecting softwood-lumber exports from duties. One U.S. industry source, however, said the Chapter 19 system would likely be watered down, such as by imposing a time limit on it.
Canada also bowed to U.S. demands to raise its de minimis threshold – the amount of online merchandise consumers can buy across international borders without paying import duty – from $20 to $100, said the sources. The move, which was opposed by the Canadian retail industry, was agreed to by Canada in exchange for still being able to collect sales tax on the purchases, a source said.
The framework deal also includes side agreements to have Mr. Trump lift steel and aluminium tariffs and exempt Canadian autos from future levies.
In exchange, Canada agreed to an auto quota system similar to one Mexico accepted in August, said two industry sources. Under the terms of the deal, all Canadian-made autos and auto parts under a specific quota – which is higher than current export levels – are exempted from any possible Section 232 national-security tariffs. In addition, any Canadian-made autos that exceed the quota but that meet stringent new auto-content rules would also be exempted. Therefore, Washington could only impose tariffs on autos that exceed the cap and fail to meet the new rules.
One U.S. industry source briefed on the talks said Canada would also agree to quotas or export restrictions on steel and aluminium, but these were not expected to be stringent: Instead, the source said, they were designed to exempt current Canadian exports while discouraging steel and aluminium from other countries being routed through Canada to get into the U.S. market.
It was not immediately clear when the tariffs would be lifted, whether as soon as the preliminary agreement is announced, or in November when the deal is signed.
https://www.theglobeandmail.com/pol...line-of-nafta-deal-pending-approval-of-trump/
