Canada's Trudeau faces hard choices at NAFTA talks

Montreal (AFP) –


On the eve of the resumption of talks to revamp the North American Free Trade Agreement, Canadian Prime Minister Justin Trudeau faces a dilemma.

He can either push back against US demands and risk being cut out of a continental trade deal, or give in and be accused by opposition parties of capitulating to Donald Trump.

"Trump's NAFTA threat leaves Trudeau locked in high-stakes game of poker," the Toronto Star headlined over the weekend.

With 13 months before the next general election, Trudeau has some "wiggle room" in the negotiations, University of Ottawa professor Patrick Leblond told AFP.

The Americans and Mexicans are in a hurry to sign a deal before US midterm elections in November and the transfer of power to Mexican President-elect Andres Manuel Lopez Obrador the following month.

But for Canada there is no urgency, Leblond said.

"The real question is whether or not we will accept an agreement that is worse than the one we have now, and have to live with it for the next 20 or 30 years," he added.

The last main obstacle to a trilateral deal is a dispute resolution mechanism from the 1994 pact that Canada insists on keeping and the United States wants nixed.

"There's political consensus in Canada to keep the Chapter 19 dispute resolution mechanism, and if the government goes back on its position it will be bad for Mr. Trudeau and his government," said Antonia Maioni, a political scientist at McGill University in Montreal.

"It's a big risk for Mr. Trudeau and for the country's economy," she told AFP.

- 'It's rhetoric' -

Trudeau suffered a major setback last week when a court blocked a project to build a pipeline to the Pacific that his administration has said was in the national interest.

His Liberal party remains ahead of the opposition Conservatives and New Democrats, according to the latest polling.

But his woes were compounded by uncertainty over NAFTA after the United States concluded separate negotiations with Mexico.

Canada rejoined the talks with the aim of reaching a three-way pact, but Canadian Foreign Minister Chrystia Freeland abruptly ended the last round of talks on Friday with no deal, after derogatory remarks by Trump about Canada were leaked.

Trump boasted about taking a hard line with Canada at the negotiating table, and has since threatened to cut America's northern neighbor out of a deal if it didn't cave to his demands.

Talks are scheduled to resume on Wednesday.

"Yes, Mr. Trump is going to say the worst things possible about Canada -- even yesterday, he announced that the rest of the world is profiting from the United States -- but that's rhetoric and we should not be too worried about it," said Leblond.

"You have to be careful about what he says and what he's actually doing."

If Trump follows through and excludes Canada from NAFTA 2.0, it would raise concerns in Canada, whose economy is heavily reliant on trade with its neighbor.

Canada and the United States last year traded US$673 billion in goods and services or US$1.3 million per minute, according to US official data.

More than two-thirds of Canadian exports go to the United States, equivalent to 20 percent of its GDP, while Canada is the largest export market for the United States.