The third round of negotiations to rewrite the North American Free Trade Agreement has wrapped up, with the lead ministers for Canada, Mexico and the United States congratulating themselves on progress made so far.
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But the spectre of a U.S. withdrawal by President Donald Trump is looming ever larger, thanks to stalled progress on major issues.
The progress cited by Foreign Affairs Minister Chrystia Freeland includes signing off on one chapter of the re-written continental trade pact focused on small and medium-sized businesses.
Freeland said the three countries expect to sign off on the competition chapter prior to the next round of negotiations in about two weeks in Washington.
"Meaningful advances" have also been made in telecommunications, digital trade, good regulatory practices and customs and trade facilitation, she added.
U.S. Trade Representative Bob Lighthizer acknowledged, however, that difficult issues are still to come.
U.S. and Canada blamed for lacklustre showing
The slow pace of the Round 3 talks is being widely blamed on the lack of concrete American proposals — fuelled by internal divisions in the U.S. — but there is also grumbling about a lacklustre showing by some Canadian negotiators as well.
That is stoking broader fears that an impatient Trump could trigger NAFTA's withdrawal clause if he doesn't see a win for the U.S. by the end of the year.
The talks are ending a day after the U.S. Department of Commerce proposed a hefty 219 per cent countervailing duty on jets manufactured by Montreal's Bombardier, further straining the Canada-U.S. trading relationship.
During question period Wednesday, Prime Minister Justin Trudeau acknowledged that Freeland and Lighthizer discussed the Boeing-Bombardier dispute in their meeting.
A rift emerged also Tuesday with unions saying Canada was facing opposition from the United States and Mexico on its proposal to raise labour standards, targeting what are seen as anti-union practices in more than two dozen U.S. states and improving the plight of Mexican workers.
In addition to the impasse on labour, no substantive progress was made on the investor state dispute settlement process; opening up Canada's supply-managed dairy and poultry industry; or the U.S. demand for greater American content in automobiles manufactured in North America.
Freeland reiterated her oft-repeated message that the U.S. enjoys a trade surplus with Canada in variety of areas, citing the statistics on steel, manufacturing and auto parts.
She cited them not as an example of a "good measure of the success or failure of a trade deal, but to stress that our trade with the United States is reciprocal, mutually beneficial and nearly perfectly balanced," Freeland said.
She added: "We have a highly productive relationship. We want to keep it that way."
Withdrawal concerns still loom
A top Mexican business leader echoed the "do no harm" approach to the talks in an interview with The Canadian Press.
Mexico is deeply worried about the possibility of Trump making a move to unilaterally withdraw from NAFTA, said Moises Kalach, a leading member of the private-sector group that advises the Mexican government on the negotiations.
"We take it very seriously. He is the president of the United States," Kalach said in an interview.
Like Canada, Mexico has mounted its own full-court press on various levels of U.S. government and business. Kalach cited 200 stakeholder meetings in the U.S. and meetings with 22 state governors. Mexican business leaders also planned meetings with 20 Canadian businesses and associations this week.
The overarching takeaway from all of that consulting, said Kalach, is this: most are on a different page than Trump and see NAFTA as essential.
"We're almost 100 per cent aligned in the private sector sometimes, even with the governments of Mexico and Canada," said Kalach.
Most companies don't agree with Trump's threats to NAFTA's Chapter 19 dispute resolution process, he said.
"It seems like the only voice out there that does not agree with some of the things we've been doing is President Trump and his team. So yes, we're worried about withdrawal and we're lobbying strongly on that."
'There may be fireworks'
Peter Clark, an Ottawa-based international trade strategist who was involved in the NAFTA and Canada-U.S. free trade negotiations, said the U.S. negotiators are mainly responsible for the foot dragging, but it's unclear if that's a deliberate strategy of a manifestation of internal American divisions.
"They're getting a lot of pushback from Congress on some of the positions they want to take," said Clark.
The delays don't augur well for the fourth round of talks in Washington, he added: "I understand it's beside the Pentagon so there may be fireworks."
Canada's negotiators have been consulting with industry and civil society groups throughout Round 3. A steady stream of stakeholders have been filing out of Ottawa's old city hall building, where the talks have been taking place since Saturday.
One source, who spoke on condition of anonymity because of the sensitivity of the ongoing negotiations, said he was surprised at how uninformed Canadian negotiators were on establishing new NAFTA chapters for the digital age.
The source had the impression Canada was "sleepwalking" on the issue, which has the potential to give the U.S. the upper hand in setting the rules for the new digital economy — something NAFTA never envisioned more than two decades ago.
The U.S says it wants an end to measures that restrict cross-border data flows and require that data be stored in local computing facilities. But Canadian companies are urging the government to fight that, citing privacy concerns and potential threats to their competitive advantage.
Scott Sinclair, a senior research fellow with the Canadian Centre for Policy Alternatives, said the government is offering more access to civil society organizations such as his, but that doesn't necessarily make for speedy negotiations.
"I am concerned that the pace of these negotiations and the vastness of the subject matter literally make it almost impossible that there can be full consultation and transparency and the ability to understand what's really going on," Sinclair said after his meeting with the government this week.
The next round of NAFTA negociations will take place in Washington, D.C. from Oct. 11-15.