As Deadline Looms, US and Canada Close to NAFTA Deal

A US official says Canadian and US negotiators are nearing an agreement on rewriting NAFTA but a few sticking points remained ahead of the midnight deadline.

The two sides had been working over the phone through the weekend to strike an agreement, and there has been substantial progress, according to the official. The last stumbling blocks that remain are US access to Canadian dairy markets and the threat of US tariffs on autos.

Neither side believes they have a done deal until President Donald Trump signs off. Given his angry comments about Canada last week there is a sense that even with good progress, everything will depend on the president.

White House economic adviser Peter Navarro said on television this morning that a deal would be sent to Congress by tomorrow no matter whether Canada signs on or not.

Delivering the deal to Congress starts a 60-day review period before President Donald Trump can sign it. Congress can suggest changes during that time.

Congress also must approve any final trade deal. And several lawmakers have warned that they would not support a deal without Canada.

“It would be a monumental mistake to do this without Canada,” US Senator Ron Wyden of Oregon, the top Democrat on the Senate committee that oversees trade, said Friday, before the text was delivered. “It’s basically surrendering on fixing NAFTA.”

The administration hopes Trump can sign a new trade deal before Mexican President Enrique Peña Nieto leaves office on December 1. To meet that deadline, the text of the agreement had to be submitted to Congress before October.

But as the end-of-week deadline approached, it appeared talks between the United States and Canada had broken down.

On Wednesday, Trump said that he had rejected a request from Canadian Prime Minister Justin Trudeau to meet this week. But a spokesperson for Trudeau said he never asked for a meeting.

Treasury Secretary Steven Mnuchin said Thursday the United States could go forward with a bilateral deal with Mexico without its northern neighbor. He declined to comment on the timing of a possible agreement with Canada.

“We reached a deal with Mexico, why shouldn’t we be able to reach a deal with Canada?” Mnuchin said at an event hosted by The Hill. “I hope Canada can agree with the last few remaining open items.”

Trump has said he would like to ditch the name NAFTA and call the new trade deal USM, for US-Mexico, or USMC if Canada joins.

Negotiators from the three countries began talks about updating NAFTA more than a year ago, after Trump campaigned on ripping up the trade pact. He’s called it “the worst deal maybe ever signed.”

In August, the United States and Mexico resolved an issue over auto manufacturing. But several sticking points with Canada remain. Trump wants Canada to open its dairy market to US farmers, and Canada wants to preserve a mechanism for resolving disputes.

Trump has threatened tariffs on Canada’s auto exports if the two countries don’t come to a deal.

Even if Trump and Peña Nieto sign a deal before December, the process to get it through Congress would last long into next year.

Canada and Mexico are two of the biggest trading partners with the United States. A deal that leaves one of them out could cause chaos for businesses that rely on imports.

The US Chamber of Commerce has said it would be “unacceptable to sideline Canada, our largest export market in the world.” Vehicles, machinery, and agricultural products make up much of the goods traded.

Rob Scott, a senior economist at the Economic Policy Institute, believes it would be hard to get the support from Congress to pass a deal that excludes Canada.

“I think the odds of getting it approved are much lower if it’s a bilateral deal,” he said.

Patrick Leblond, senior fellow at the Centre for International Governance Innovation, said a looming question is whether Congress will force the administration to make a deal that includes Canada.

“I suspect this is what Canada is banking on as part of its strategy, albeit a risky one,” said Leblond. “This is a risk they are willing to take as the alternative would be to suffer with a bad NAFTA deal for decades.”