US-Canada trade talks miss deadline as Trump courts Mexico

The days of high-stakes negotiations between Canada and the United States deteriorated, failing to obtain an updated North American free trade Agreement (Nafta) prior to Friday’s deadline set by Washington.

On Saturday morning, Donald Trump tweeted: “There is no political necessity to keep Canada in the new NAFTA deal. If we don’t make a fair deal for the U.S. after decades of abuse, Canada will be out. Congress should not interfere w/ these negotiations or I will simply terminate NAFTA entirely & we will be far better off.”

On Friday, Robert Lighthizer, the US trade representative, said Donald Trump had notified Congress of his intent to sign a trade agreement with Mexico. Talks between Canada and the US would resume next Wednesday with the aim of eventually hammering out a trilateral deal, he added.

“Today the president notified the Congress of his intent to sign a trade agreement with Mexico – and Canada, if it is willing – 90 days from now,” he said in a statement.

Lighthizer’s statement amounts to a relaxation of the Trump administration’s threat to exclude Canada from Nafta if it did not meet Friday’s deadline.

But after four days of US-Canada negotiations failed to produce a deal, Lighthizer was also indicating that the US position had not shifted and it remains up to Canada to be “willing” to accept US terms outlined by Monday’s US-Mexico deal if it chooses to remain in the trilateral pact.

The events on Friday followed four days of feverish negotiations that marked a tense moment in a longstanding relationship that has hit its lowest point in recent memory.

Chrystia Freeland remained upbeat that Canada would eventually be able to find a consensus with the US. “We know that a win-win-win agreement is within reach,” the Canadian foreign minister told reporters. “We continue to work very hard and we are making progress. We’re not there yet.”

With just hours left before the Friday deadline, negotiations between the longstanding allies had reportedly soured after a report circulated that Trump had made off-the-record comments stating that any trade deal with Canada would be “totally on our terms”.

The Toronto Star first reported the remarks, and Trump later appeared to confirm that he had asked some of his statements to remain confidential during an interview with Bloomberg. “At least Canada knows where I stand,” the president noted in a tweet.

When asked on Friday about Trump’s comments, Freeland would only say that Lighthizer and his team had come to the negotiating table in “good faith and goodwill”.

Trump’s reported remarks echoed earlier concerns voiced by Canada’s trade team that an agreement would not be reached by Friday, a source told Canada’s Globe and Mail.

A sticking point in negotiations is Canada’s demand to retain an independent trade dispute mechanism – an issue Lighthizer has reportedly refused to budge on despite repeated offers of concessions from Canada.

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The need for a trade dispute mechanism – long described as a red line by Canadian officials – could take on a greater importance for Canada since Trump’s recent threat to abandon the World Trade Organisation. Any such action by the US would leave Canada and Mexico with few options to mediate any potential trade disputes.

After announcing earlier this week that he had reached a bilateral deal with Mexico, Trump had set a deadline of Friday for Canada to find a place in his overhaul of Nafta, the 24-year-old accord that accounts for more than $1tn (£0.77tn) in annual trade.

If this didn’t happen, Trump mused, Canada could be subject to punitive tariffs that analysts say would wreak havoc on Canada’s car industry.

The news sent Canada scrambling, suggesting its negotiators had just days to secure their spot in a pact that currently underpins the three-quarters of exports Canada sends south of the border and the 2.5m Canadian jobs that depend on US trade.

The tight timeline – coming after more than a year of renegotiations between Nafta’s three member nations – is designed to accommodate a 90-day waiting period required in the US and push the deal through before an upcoming change in Mexico’s government.

The US president did not mention that Canada is one of the few major economies that buys more goods and services from the US than it sells.