There has been a great deal of background activity in the past 72 hours surrounding the U.S. and Canada trade negotiations. However, some of that activity has become more brutally obvious; a deal is not likely to happen.
Against growing visibility the Canadian team of Justin Trudeau and Chrystia Freeland were intent on using opposition to Trump for maximum domestic gain, President Trump declined a bilateral meeting with Justin from Canada at the U.N. General Assembly; and today U.S. Trade Representative Robert Lighthizer told a group an agreement was unlikely.
Additionally, in a video taken today during the U.N. luncheon it is clear President Trump has no time for the political schemes of Justin Trudeau. The moment happens at 02:45 of the video below:
It is difficult to see from the video above, however in the camera angles below it is much more transparent.
Watch video embedded within tweet:
At the Concordia Summit in New York, the following remarks from USTR Lighthizer are noted:
“The fact is, Canada is not making concessions in areas where we think they’re essential. We’re going to go ahead with Mexico; if Canada comes along now, that would be the best. If Canada comes along later, then that’s what will happen.
I think Canada would like to be in the agreement. I think the U.S. would like them to be in the agreement, but there is still a fair amount of distance between us. There are very large issues.” (link)
The big issues between the U.S. and Canada are too significant to anticipate any agreement can be reached. Additionally, the Canadian position is not to concede any ground on key aspects relating to their controlled markets.
Canada will not allow negotiations on their “cultural industries”; meaning they will not allow U.S. investment, ownership or competition within the sectors relating to media broadcasting, telecommunications or banking. Additionally, Canada will not eliminate the protectionist tariffs on the dairy industry; and will not stop subsidies for the lumber and aeronautics industry.
Lastly Canada is reluctant to agree to “rules of origin” within manufacturing, that are similar to the U.S-Mexico deal. The Canadian economic model does not currently support heavy industry, and therefore they rely on importing foreign parts for assembly and transshipment into the U.S. market.
If Canada agreed to rules and limits on foreign parts, they do not have the ability to manufacture on their own; and they have no intention on allowing heavy industry to restart which would provide for their needs. A heavy industrial base is not in alignment with the environmental and energy standards favored by the liberal government.
None of these challenges are present within the U.S-Mexico trade agreement. Both the U.S. and Mexico want high-wage manufacturing jobs to support both economies. It is much more likely the U.S. and Mexico will form an economic bloc and both nations will then enter into bilateral trade negotiations with Canada.
Within a U.S-Mexico Bilateral trade deal it is unlikely President Trump would attempt to gain access to the protected Canadian markets. A far more simple solution would be to set terms for reciprocal access of Canadian products into the U.S. Market.
The primary U.S. tool to generate trade reciprocity will be a 20 to 25% auto tariff on Canadian made vehicles. This approach would likely mean the exit of many Canadian auto-factories, and reestablishment of their plants inside the United States.