To hear Chrystia Freeland tell it, NAFTA and steel are like apples and oranges.
Canada’s foreign minister is in Washington this week to avert an economic storm that could see Canada sideswiped by crippling U.S. tariffs on imports of steel and aluminum – if President Donald Trump follows through on his latest threat not to extend an exemption for Canada and Mexico which is due to expire June 1.
That is on top of the around-the-clock effort by Canada, the United States and Mexico to get a deal on a renegotiated North American Free Trade Agreement – in time for the current iteration of the U.S. Congress, and ahead of what’s expected to be a turning-point election in Mexico on July 1.
Freeland emerged from a recent meeting with U.S. trade czar Robert Lighthizer with the threat of both problems still hovering in the oppressive Washington humidity.
She insisted the steel issue remains separate from the renegotiation of NAFTA, a deal that Trump has repeatedly blasted and threatened to rip up.
“Canada has said from the outset, this is in our view entirely separate from the NAFTA negotiation,” she said after her two-hour, face-to-face meeting inside the office of the U.S. Trade Representative, the site of intensive NAFTA talks over the last several weeks.
American trade analysts say there’s an obvious connection, but Freeland may be downplaying it in an attempt to bargain effectively.
“Everything in Trump world is linked, ultimately,” Eric Miller of the Rideau Potomac Strategy Group, said in an interview Tuesday.
“In that context Minister Freeland is making a big push for aluminum and steel exemptions,” he added.
“The Trump administration could well say we feel we have made enough progress on NAFTA in order to give an exemption to Canada and Mexico.”
“Everything in Trump world is linked, ultimately.”
— Eric Miller, Rideau Potomac Strategy Group
If Trump follows through with the tariff threat, then it will have been in Freeland’s interest to separate steel from NAFTA to increase the ability to move forward with an agreement on the continental pact later, said Miller.
Freeland and Lighthizer continued their discussion later in the day by telephone, and she planned to return to Ottawa on Wednesday morning.
Dan Ujczo, an American trade lawyer with Dickinson Wright PLLC, said the main focus on Freeland’s trip has to be securing the steel and aluminum exemption by Friday because NAFTA’s not getting through Congress this year anyway.
Many people inside the Washington beltway are betting on Trump offering up a 30-day extension to the exemption, following a past pattern of threats and then, extension. But Ujczo said betting on that this time would be folly.
He said Trump has to follow through, otherwise his broader trade agenda with China might suffer.
“That leverage from the tariffs only works if you actually demonstrate a willingness to pull the trigger,” he said Tuesday.
“The president is deploying that strategy with China. I believe that he may do the same with North America and Europe unless they come to the table with an offer.”
In the past, Freeland has said Canada wouldn’t take NAFTA’s demise lightly, and she warned Tuesday that there will be consequences as well if Canada loses its steel and aluminum exemption.
“Our government always is very ready and very prepared to respond appropriately to every action. We are always prepared and ready to defend our workers and our industry,” she said.
“Canadian steel workers should absolutely know that the government of Canada has their back … We are very clear in making the point, which I think frankly is common sense, that in no way could Canadian steel and aluminum pose a national security threat to the United States.”
Mexico was not at Tuesday’s meeting.
“There is definitely a path forward and we are making progress.”
— Chrystia Freeland, Canadian foreign minister
Prime Minister Justin Trudeau has been talking by phone with Trump and Mexican President Enrique Pena Nieto in recent days, despite dwindling hope of reaching a deal on updating NAFTA.
Trudeau telephoned U.S. Vice-President Mike Pence on Tuesday to discuss the continental trade agreement and the potential steel and aluminum tariffs, but the Prime Minister’s Office offered no additional details of the call.
The rules surrounding autos remain a major NAFTA sticking point, which has left stakeholders and observers alike skeptical that Freeland will be able to accomplish anything substantial during her visit.
Freeland said that was a major topic of the conversation with Lighthizer, and remains key to cracking a complex negotiation.
“There is definitely a path forward and we are making progress,” Freeland said.
“The intense engagements we had both at the ministerial and official level for the past several weeks is evidence of how hard everyone is working on this.”