US President Donald Trump. Picture: REUTERS/CARLO ALLEGRI
US President Donald Trump. Picture: REUTERS/CARLO ALLEGRI

Washington — US President Donald Trump said on Wednesday that he was open to bilateral trade pacts with either Canada or Mexico if a three-way deal could not be reached to substantially revise the North American Free Trade Agreement (Nafta).

The Nafta talks got off to a rocky start, with Canadian Prime Minister Justin Trudeau threatening to cancel a major arms deal with the US over the duties imposed on Bombardier.

Trump, asked by a reporter whether he could envision maintaining free trade with Canada if Nafta talks soured with Mexico, said: "Oh sure, absolutely. It’s possible we won’t be able to reach a deal with one or the other, but in the meantime we’ll make a deal with one."

Trump said a "very creative" deal was still possible to benefit all three countries.

Trump’s comments came at a White House meeting with Trudeau, who was in Washington to promote Nafta’s benefits as a new round of re-negotiations began near Washington.

Asked about Trump’s comments at a news conference later, Trudeau said he was still optimistic about the chances of modernising the 1994 trade pact.

"I continue to believe in Nafta … [but] we are ready for anything, and we will continue to work diligently to protect Canadian interests," Trudeau said.

Trudeau added that Canada was "very much aware of and very braced for" Trump’s unpredictability, but his government would work in a "thoughtful, meaningful way towards getting a good deal".

On the Bombardier issue, he said: "I highlighted to the president how we disagreed, vehemently, with [the US} decision to bring in countervailing and antidumping duties against Bombardier."

Ottawa was set to purchase 18 new Super Hornets fighter jets from Boeing until the American aerospace firm successfully petitioned the Trump administration to impose antidumping penalties on its Canadian rival Bombardier over aircraft sold in the US market.

Trudeau said that "attempts by Boeing to put tens of thousands of aerospace workers out of work across Canada is not something we look on positively. And I certainly mentioned that this was a block to us making any military procurements from Boeing."

Mexican economy minister Ildefonso Guajardo, speaking on Mexican radio, praised Trump’s comments as "very balanced" to include the possibility of a deal with either country and hold out hope for a creative solution.

On Tuesday, the US chamber of commerce accused Trump’s administration of trying to sabotage the talks with "poison pill proposals", including demands for more favourable treatment for the US side on car production, and a "sunset clause" to force regular negotiations.

In his appearance with Trudeau, Trump said: "We’ll see what happens" when asked whether Nafta was doomed.

"It’s possible we won’t be able to make a deal, and it’s possible that we will," he said. "We’ll see if we can do the kind of changes that we need. We have to protect our workers, and in all fairness, the prime minister wants to protect Canada and his people also."

US commerce secretary Wilbur Ross, one of Trump’s top trade advisers, downplayed the chances that a Nafta termination would become necessary.

"We don’t hope it will, we don’t desire that it will, we don’t believe that it will, but it is at least a conceptual possibility as we go forward," Ross said.

But US and Mexican corporate CEOs gathered in Mexico City said they would be better off with no Nafta than be saddled with a "bad agreement".


Aggressive proposals

Trade experts said the Nafta talks were likely to stall in the face of aggressive US attempts to sharply increase content requirements for vehicle and vehicle parts.

People briefed on US proposals to be presented this week said Washington was seeking to sharply lift North American content threshold in car manufacturing.

The proposals call for North American content overall to rise to 85% from the current 62.5%. In addition, the US wants to add a new 50% US-specific content requirement, something that was not in the earlier agreements.

"These will be met with widespread opposition from Canada and Mexico. I think it’s just a bridge too far," said Wendy Cutler, the Asia Society’s Washington policy director and former chief US negotiator for the Trans-Pacific Partnership trade deal cancelled by Trump.

The US side sees strengthening the rules of origin for the vehicle industry as a way to bring back some vehicle parts production, including electronics, from Asia. But Mexico strongly opposes a US-specific content requirement, which would limit the growth of its own car industry.

The difficult issue of rules of origin will be addressed mostly at the end of the current talks, according to a schedule obtained by Reuters. The negotiations were extended on Wednesday by two days to October 17.

Other US proposals opposed by Canada, Mexico and US business interests include the five-year sunset provision, radical changes to Nafta’s dispute arbitration systems, changes to intellectual property provisions and new protections for US seasonal produce growers.

US trade representative Robert Lighthizer said on Wednesday that the three nations had completed their negotiations on company competition policy, reaching an agreement that went beyond previous US trade deals to ensure "certain rights and transparency under each nation’s competition laws".

Reuters and AFP

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