Canada Wants to Make Nafta More 'Progressive' -- Update

By Paul Vieira Features Dow Jones Newswires

Canada will enter talks to renegotiate the North American Free Trade Agreement with a goal to seek exemptions from Washington's Buy America directives, and push for stronger labor and environmental standards in the pact.

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Canadian Foreign Minister Chrystia Freeland on Monday provided broad outlines on what Canada's bottom line on Nafta renegotiations, which begin in earnest on Wednesday in Washington.

"We will come to the table with goodwill, and Canada's characteristic ability and willingness to seek compromise and find win-win solutions. But we are committed to a good deal, not just any deal. That will be our bottom line," she said in remarks at the University of Ottawa.

Ms. Freeland said she is confident the talks will conclude with a "happy ending," but warned there will likely be moments during the talks that turn "messy," "uncomfortable" and "unsettling," much like a home renovation.

"We all do need to be prepared for some moments of drama. That's inevitable," she told the crowd. Still, "the reality is, at heart, our American partners are very aware that this is an economic relationship that works."

Earlier Monday, President Donald Trump tweeted that U.S. lawmakers over the years "have given us (or not fixed) some of the worst trade deals in World History. I am changing that fast!"

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She said among the country's objectives would be a freer market for government procurement across the continent. This could run into opposition from the Trump administration's push to put more teeth into Buy America directives, which preserve them as part of a revamped Nafta.

She said local-content provisions, such as Buy America, "are political junk-food -- superficially appetizing, but unhealthy in the long run."

Ms. Freeland said Canada also wants to make Nafta more "progressive," through tougher labor and environmental standards. On the environment, she said Canada wants the countries to support efforts to combat climate change, and cast a skeptical eye toward countries that "[weaken] environmental protection to attract investment."

She added Canada would continue to defend the need for an independent dispute-resolution system, which currently allows companies to contest trade sanctions before independent panels instead of through national courts. The Trump administration wants the system scrapped.

Canada also plans to defend its agricultural policies, in which production and prices in dairy and poultry, for instance, are controlled through a quota system, and foreign competition is thwarted through high tariffs.

For Canada's Liberal government, the fate of Nafta is expected to be its major preoccupation for the remainder of the year given how crucial trade with the U.S. is to the country's economy.

Preserving unfettered access to the world's largest economy, which Nafta provides, will be crucial for Prime Minister Justin Trudeau and his officials at the negotiating table. The Liberal government is looking to maintain recent economic momentum -- Canadian growth was tops among Group of Seven countries in the first quarter, and forecast to lead the G-7 in 2017 -- and remove a source of uncertainty for Canadian firms. Further, Mr. Trudeau's re-election bid in 2019 will likely depend on a successful outcome of the Nafta talks.

Roughly three-quarters of Canadian exports, or roughly 20% of the country's economic output, is U.S.-bound. Canada represents just under 2% of the global economy. Yet, two-way trade between the U.S. and Canada hit nearly $550 billion in 2016, trailing only trade ties between the world's two-largest economies, the U.S. and China. The U.S. runs a large goods trade surplus with Canada when energy products are excluded, and an overall trade surplus when both goods and services are incorporated.

Economists and business groups have warned uncertainty over U.S. trade policy was holding back a meaningful pickup in business investment. The Bank of Canada is relying on a pickup in nonenergy exports and business investment to drive growth, with consumer spending and real estate expected to slow.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

August 14, 2017 10:46 ET (14:46 GMT)