After a five-day break, Nafta talks between the US and Canada are due to begin again on Wednesday. Robert Lighthizer, Donald Trump’s trade tsar, and Chrystia Freeland, Canada’s foreign minister, do battle again in a federal building just a few steps from the White House.
The weekend did not pass quietly. On Saturday Mr Trump launched into a tirade against Canada on Twitter that would have been hard to ignore even for the most patient negotiators from Ottawa. But despite such a sour political climate, an agreement will ultimately depend on a few crucial details.
Here are the main sticking points that will have to be resolved before a deal can be done that would ensure Canada stays in the 24-year-old trade agreement with the US and Mexico.
Milk Matters
Canada has long maintained a policy — called its “supply management” system — to support its dairy and poultry farmers, who are concentrated in Ontario and Quebec, the two most populous and politically sensitive provinces. After decades of complaints from the US dairy industry, the Trump administration has been pushing for Canada to make big concessions and open up its market.
Ottawa has been resisting, and its most senior officials have recently insisted that they would not dismantle the scheme, creating an impasse. On Friday morning Mr Lighthizer’s office released a statement complaining that Canada had not budged on “agriculture”, exposing it as significant faultline.
Canada did make some accommodations to the EU on dairy in their recent Comprehensive Economic and Trade Agreement, so Ottawa has shown it is not completely intransigent on the issue.
Managing disputes
The original Nafta deal includes a chapter on resolving disputes that allows for a panel of representatives to decide whether countervailing or anti-dumping duties have been imposed unfairly by one of the countries in the deal.
This provision was a key demand in the original treaty negotiations, and has remained a priority for Ottawa because it has allowed its lumber industry to challenge duties imposed by the US in the past. The Trump administration, however, contends that these panels infringe on US sovereignty and is intent on scrapping them.
In Canada a debate is raging on whether it is worth sacrificing the entire deal over this, since it has only rarely delivered big wins for the country.
Meanwhile, separate concerns are rising over the fate of a different chapter that allows private entities to sue governments in a supranational setting — known as investor-state dispute settlement — which the US has also tried restricting. In last week’s deal between the US and Mexico, where they agreed terms for overhauling Nafta without Canada, the measure was preserved for five sensitive industries. Canada has offered to keep it with Mexico, and eliminate it with the US, but some last-minute haggling is expected.
Those pesky tariffs
The endgame in the Nafta talks has unfolded this summer as the US administration moved ahead with plans to impose steel and aluminium tariffs on Canada and Mexico, justifying them on national security grounds.
That decision was met with disbelief and anger in both Mexico City and Ottawa, where officials swore that there would be no new trade deal unless Washington dropped the tariffs immediately. But the deal Mexico struck with the US last week included no promise to drop national security-based tariffs by the Trump administration.
Making matters worse, the White House — which insists the two matters should be kept completely separate — has continued to threaten Canada with the imposition of new tariffs on cars. It is hard to imagine Ottawa agreeing to any deal that did not guarantee it some form of protection against such unilateral measures coming from Washington.
Culture wars
Because the original Nafta deal was reached in the early 1990s, it is short on any provisions concerning digital trade and intellectual property, meaning new provisions needed to be set in the talks.
Overall, the US has been pushing for an expansion of digital trade, including curbs on local data storage requirements and stronger patent protections. But Canada has some specific needs that must be overcome in the final stretch of the negotiation, including an insistence that its French-speaking communities, concentrated in the Quebec province, as well as its indigenous populations, be protected from a US cultural deluge.
