'Very big,' or no big deal? What this week's trade news means for Canada
On Tuesday, Trump wrote 'Tariffs are the greatest!' By Wednesday, his goal was 'zero tariffs.' Confused yet?
Even by the mind-boggling standard set by the past year in trade politics, it's been a confusing week.
Keep calm and carry on, Canada. Here's a quick guide to what really happened:
What's new for NAFTA?
Nothing, really. It's been a week of happy talk about speeding things up on all three sides, without any evidence of anyone removing the known barriers to a deal.
Of the 30 NAFTA chapters, negotiators have closed nine and ten others are almost finished, Mexican Economy Minister Ildefonso Guajardo said Thursday.
But that was all progress on the technical, nuts-and-bolts stuff. There was no agreement on the key sector in these talks: the three-way automotive trade making up roughly a quarter of all the business North Americans do with each other.
Foreign Minister Chrystia Freeland summarized it succinctly Wednesday: the negotiators are circling in for a landing on a redefinition of what constitutes tariff-free, "North American" vehicles and parts. These "rules of origin" changes, she said, will require "pretty significant choices" across the industry's supply chains — decisions often made on five-, seven- or even nine-year horizons.
The Trump administration's insistence on a five-year sunset clause would build in uncertainty that wouldn't be fair to automotive manufacturers, Freeland said. It's also "counter to the spirit of NAFTA."
The Mexican government agrees. So do "a substantial number of Republicans," U.S. Senator Lamar Alexander (R-TN) warned this week.
So who blinks first?
Unless someone does, you can apply a heavy discount to all the "cautious optimism" being expressed lately about the chances for a quick deal before the U.S. midterm elections and Mexico's transition to its new government Dec. 1.
Have NAFTA talks resumed?
Sort of. Not really, though.
The major political players are starting to meet again after hitting pause for Mexico's presidential election.
This week, both Canada and the United States held talks with Mexico's outgoing and incoming administrations.
Canada's key ministers were in Mexico City on Wednesday, while the Mexicans went to Washington on Thursday and Friday.
Freeland said Canada now understands clearly where Mexico is heading. Both sides shot down (again, for anyone who'd missed them panning it for the past year and a half) Donald Trump's pitch to replace NAFTA with bilateral deals.
Freeland also spoke to United States Trade Representative Robert Lighthizer on Monday. She said she expected bilateral conversations like these to continue, interspersed with trilateral meetings.
But when explicitly asked, she did not clarify what her professional negotiating team was doing this week.
That's something worth watching for: an official negotiating round, where offers and counter-offers can start moving across tables again.
It hasn't happened since May. It could pick up again in early August.
Has the threat of 25% car tariffs gone away?
The joint statement issued after European Commission President Jean-Claude Juncker's trip to the White House said that so long as the U.S. was engaged in talks with the EU on their new joint trade agenda, neither side would do anything to "go against the spirit of this agreement, unless either party terminates the negotiations."
In this context, 'anything' includes slapping a whopping big tariff on new cars.
Billions of dollars in new tariffs imposed by both the U.S. and the EU against each other still stand, but may be "reassessed" and "resolved," we're told.
This agreement to talk may be fragile, like so many things in Donald Trump's Washington. Although the EU was the main target of Trump's frustrations (it levies a 10 per cent tariff on U.S. cars), Canada and other countries aren't necessarily off his hook. Don't relax about "Carmageddon" just yet.
Commerce Secretary Wilbur Ross told reporters Thursday that his department's 'national security' investigation of auto imports continues, and may report back next month. Ross said Trump has directed him to "not actually implement anything pending the outcome of the negotiations."
An EU official told The Financial Times this week that an earlier suggestion for plurilateral (multi-country) talks to lower existing auto tariffs was rejected by the U.S. because of the ongoing NAFTA negotiations.
It's possible the Americans want to continue using their tariff threat as leverage in the NAFTA talks, despite Canada's desire to separate the economically-disruptive "national security" tariffs from the discussion.
On the same day Trump and Juncker met, two U.S. senators introduced a bipartisan bill that would allow Congress to delay any new auto tariffs until the issue was studied further — the latest (but not the only) sign of Congress asserting itself recently on trade policy.
Should Canada take this EU-U.S. deal seriously?
Trump's vocal braggadocio — his claim that Wednesday "was a very big day for free and fair trade" — isn't matched by the substance of the joint statement his officials co-wrote.
The U.S. president declared a win for American farmers. But the EU didn't actually agree to anything on the farm front — France wasn't having it. (French farmers weren't fans of the trade deal the Obama administration was negotiating with the EU either. So it's hard to see them suddenly conceding to Trump. "The context doesn't allow it," French President Emmanuel Macron said Thursday.)
So, those soybean exports Trump celebrated? They were on their way to Europe anyway, tariff-free: a domino effect of escalating U.S.-China tariffs. China is buying soybeans from Brazil now, and the South American beans have gone up in price, so the EU already had moved to buy cheaper American soybeans instead of Brazil's.
So Juncker didn't concede anything. He simply capitalized on changing facts on the ground.
Similarly, the EU was already talking to the U.S. about buying more liquified natural gas to diversify its energy supply away from Russia.
In the same week Trump announced a $12 billion assistance package for his farmers, and without lifting any of the billions in new tariffs his administration has recently applied (you'll remember his "tariffs are the greatest!" tweet on Tuesday), he stood beside Juncker and pledged to work toward three zeros: "zero tariffs, zero non-tariff barriers and zero subsidies on non-auto industrial goods."
That, presumably, would include things like airplanes — and aerospace is one of the most heavily subsidized industries on both sides of the Atlantic.
Trade observers weren't sure whether to cheer, laugh or cry.
Obviously the European Union, as represented by <a href="https://twitter.com/JunckerEU?ref_src=twsrc%5Etfw">@JunckerEU</a> and the United States, as represented by yours truly, love each other! <a href="https://t.co/42ImacgCN0">pic.twitter.com/42ImacgCN0</a>—@realDonaldTrump
Trump doesn't have congressional authority to restart the Obama-era Transatlantic Trade and Investment Partnership (TTIP) negotiations he'd previously condemned.
The Europeans previously pledged not to make trade deals with any country offside with the United Nations Paris Agreement on climate change, which Trump also bailed on.
These talks will be in the hands of an "executive working group of our closest advisers," according to the joint EU-U.S. statement issued after the meeting with Juncker. Its membership, and that of the negotiating teams, is unclear.
In the meantime, Canadian goods and services enjoy advantages on tariffs and other areas over the U.S. in Europe, thanks to the Comprehensive Economic and Trade Agreement (CETA).
Representatives of at least one American industry that's been losing its EU market share to Canada — the lobster fishery — were wondering this week why farmers were getting a $12 billion package. U.S. Sen. Angus King of Maine issued a statement asking that the package be extended to include the lobster industry.
What's this meeting Canada's hosting?
Aside from de-escalating the car tariff threat, Juncker's biggest win in the joint statement may be the Americans agreeing to work with "like-minded partners" to reform the World Trade Organization and "address unfair trade practices."
The U.S. helped establish the WTO, but now it gets in the way of Trump's agenda. America ignores its rulings, flouts its tariff rules and blocks the appointment of new arbiters for trade dispute appeals.
The EU admits to the WTO's weaknesses — but it's making proposals to reform it, not kill it.
Now, a select group of 12 ministers from "like-minded" countries, including the EU, have been invited to Canada to discuss the issue — "likely" in October, a spokesperson for Canada's new Minister for International Trade Diversification Jim Carr told CBC News following a Bloomberg report.
Canada wants to be a "catalyst" in an efficient process, he said, so it's hosting a small group that excludes chief combatants China and the U.S. (These two largest economies eventually will need to be part of any serious reform process.)
Canada intends to make sure all WTO members are aware of its work, but the initial group, which represents different geographic regions and levels of economic development, is "deliberately small to ensure that there is ample room and time to have a meaningful and interactive conversation."