How the US and Canada ended their feud and clinched trade deal

Canadian Prime Minister Justin Trudeau (right) talking with US President Donald Trump during a welcome ceremony at the G-7 summit meeting in June last year. The two leaders clashed during the summit. Dairy cows at a farm in Saint-Valerien-de-Milton,
Dairy cows at a farm in Saint-Valerien-de-Milton, south-east of Montreal, Canada. As part of the US-Canada trade accord, each side made a major concession, with the Canadians making a commitment to reduce dairy tariffs, according to people familiar with the talks.PHOTO: REUTERS
Canadian Prime Minister Justin Trudeau (right) talking with US President Donald Trump during a welcome ceremony at the G-7 summit meeting in June last year. The two leaders clashed during the summit. Dairy cows at a farm in Saint-Valerien-de-Milton,
Canadian Prime Minister Justin Trudeau (right) talking with US President Donald Trump during a welcome ceremony at the G-7 summit meeting in June last year. The two leaders clashed during the summit. PHOTO: NYTIMES

OTTAWA/WASHINGTON • The threats were growing graver and the prospects for a new Nafta deal looked dark. But then, each side blinked.

The trade accord between the United States and Canada that came together on Sunday night emerged from a frenzied, 72-hour push that capped 13 months of glacial negotiations, according to US and Canadian officials and other people familiar with the talks. And it happened as US President Donald Trump weighed new tariffs after snubbing Canadian Prime Minister Justin Trudeau at the United Nations.

The chill between the two leaders at the UN General Assembly left talks stalled, just days before a key deadline. Then, for the first time in a year, each side made a major concession: The Canadians committed to reducing dairy tariffs, and the US gave in on protections for Canadian broadcasters and other red lines Mr Trudeau had drawn, the people said.

Mr Jared Kushner, the US President's aide and son-in-law, played a crucial role in smoothing talks while Mexican officials worked from the sidelines to nudge their partners along.

The deal stabilises the continental US$1 trillion (S$1.37 trillion) trading zone, replacing 1994's North American Free Trade Agreement (Nafta) with the re-branded US Mexico Canada Agreement, or USMCA.

The changes are not revolutionary, but remove a cloud hanging over the Canadian and Mexican economies. Mr Trump can now claim success on a campaign promise to renegotiate Nafta - anathema to workers across large swathes of the US - just in time for November's congressional elections.

"A whole combination of things led us to the right place at the right time - and then you have to have people who can close, and fortunately, we did," said Mr David MacNaughton, Canada's ambassador to the US, who participated in talks.

But it almost fell apart.

Talks began in Washington in August last year. Canadian Foreign Minister Chrystia Freeland at the time predicted "moments of drama". She was right. Progress was slow, temperatures ran high, an initial December deadline passed and negotiations bogged down.

MULTIPLE STEPS

There wasn't a single ah-ha moment. There was just a series of okay, we got this one settled.

CANADIAN PRIME MINISTER JUSTIN TRUDEAU, on the deal.

A clash on vehicles was one turning point. Washington demanded that all cars traded under Nafta contain at least 50 per cent US parts, a strategy intended in part to jar automakers off the sideline and spur their involvement, some of the people said.

 
 
 

Then Mr Trump's team shifted its stance, instead demanding a share of the cars be built at higher-wage factories, but not necessarily in the US. Nafta talks, finally, had hope.

"I think that was probably the single pivotal moment," Ms Freeland said on Monday. "And I think from then on, we felt that the outline of a deal was there."

Fits and starts continued. What Canada saw as a "deal-making moment" in the spring passed when the US insisted on a sunset clause for the new accord, a demand it later dropped.

The US bristled at Canadian inflexibility. Then came the Group of Seven Summit in June and an explosive rift between Mr Trump and Mr Trudeau. Suddenly, Canada was Mr Trump's Nafta target.

US Trade Representative Robert Lighthizer and Mr Kushner briefed the President often at the White House residence, and Mr Trump urged the pair to take their time.

The President decided on a strategy - split the Mexicans and Canadians. Mexico-US talks in the summer yielded a deal, setting up a final confrontation between the US and Canada, the people said.

Most of the people interviewed for this account of the talks asked not to be identified in order to candidly describe the negotiations.

As talks ramped up, Ms Freeland cancelled a UN speech last Saturday. The deal really only formed on Sunday morning and was finished that night, the people said.

"There wasn't a single ah-ha moment," Mr Trudeau said. "There was just a series of okay, we got this one settled." Mr Trudeau called a Cabinet meeting for 10pm on Sunday, as reporters huddled outside. The accord was announced that night, minutes before a midnight deadline.

Mr Trump offered modest praise for Mr Trudeau in comments on Monday. Mr Trudeau and Ms Freeland, in turn, praised Mr Lighthizer at length - and barely mentioned the US President.

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A version of this article appeared in the print edition of The Straits Times on October 04, 2018, with the headline 'How the US and Canada ended their feud and clinched trade deal'. Print Edition | Subscribe