Trump Toughens Talk on Canada

By William Mauldin and Paul VieiraFeaturesDow Jones Newswires

President Donald Trump has shifted his sharpest economic criticism away from the southern U.S. border and toward the neighbor to the north.

His tougher talk on Canada -- over longstanding dairy and lumber disputes -- is raising concerns that a renegotiation of the North American Free Trade Agreement could grow more complicated and affect Ottawa as much as Mexico City.

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"We can't let Canada or anybody else take advantage and do what they did to our workers and to our farmers," Mr. Trump said Thursday at an unrelated trade announcement on steel. "We're going to have to get to the negotiating table with Canada very, very quickly."

The president's latest comments follow similar rhetoric while he was in Wisconsin this week. Mr. Trump also has increasingly aired frustration about the delays he faces in working with Congress to get started renegotiating Nafta, including during an interview this month with The Wall Street Journal.

At the same time, Mr. Trump has largely avoided confrontations with Mexico since quarreling with President Enrique Peña Nieto over who would pay for a border wall, a spat that led to a canceled visit.

The critical tone toward Canada contrasts with his warm words for Prime Minister Justin Trudeau when the Canadian leader visited the White House in February. At the time, Mr. Trump said, "We have a very outstanding trade relationship with Canada," adding that they would be only "tweaking" Nafta.

"Canada needs to prepare for any eventuality and be ready to vigorously defend Canadian interests, but overreacting to the president's rhetoric would be a mistake," said Roland Paris, professor of international affairs at University of Ottawa and Mr. Trudeau's former foreign-policy adviser.

At the heart of objections from Mr. Trump is Canada's supply-management system for the dairy industry. Under this scheme, prices for dairy products are set based on the average costs of production. Production is controlled through a regulated quota system, and foreign competition is thwarted through steep tariffs.

The governors of Wisconsin and New York said in a letter to Mr. Trump this week that a recent move by Canada closed off the Canadian market for U.S.-produced ultra-filtered milk, which is used for cheese-making.

U.S. unease has been brewing for years over the dairy restrictions, and the issue complicated negotiations of a Trans-Pacific Partnership pact, an unratified 12-nation trade deal that Mr. Trump pulled the U.S. out of in January.

In Toronto on Thursday, Mr. Trudeau defended Canada's supply-management system, arguing it was working "very well" for the country.

"Let's not pretend we are in a global free market when it comes to agriculture. Every country protects for good reason its agricultural industries," he said at an event organized by Bloomberg News, before Mr. Trump's comments.

Next week will present another test in the U.S.-Canada trade relationship when the U.S. International Trade Commission is expected to rule on whether Canada unfairly subsidizes its lumber industry. A judgment against Canada could result in a fresh set of tariffs applied to lumber imports from Canada.

Another decision focusing on dumping, or whether Canadian lumber was sold into the U.S. at a price less than fair value, has been delayed until June. Both the lumber and dairy issues are important to key members of Congress who have influence on trade policy.

Part of the problem for the Trump administration is that its pick for U.S. trade representative -- Washington lawyer Robert Lighthizer -- hasn't been confirmed by the Senate. Administration officials expect the Senate to move a waiver needed for Mr. Lighthizer's confirmation as a part of spending legislation at the end of the month.

Once Mr. Lighthizer is in place, the administration is expected to consult key lawmakers on Nafta, then send formal notification that it intends to start negotiations with Canada and Mexico in 90 days.

"We'll be reporting back sometime over the next two weeks as to Nafta and what we're going to do about it," Mr. Trump said Thursday.

(END) Dow Jones Newswires

April 20, 2017 17:59 ET (21:59 GMT)