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U.S. all but certain to miss weekend deadline to include Canada in three-way NAFTA deal

President Trump on Sept. 5 said the U.S. should have a fair trade deal with Canada, as the two countries resumed talks over renegotiating NAFTA. (Video: Reuters)

The Trump administration appears virtually certain to miss its self-imposed weekend deadline for reaching an agreement with Canada on a new North American trade deal, according to U.S. officials and people close to the talks.

A downbeat U.S. Trade Representative Robert E. Lighthizer said Tuesday that negotiators are “sort of running out of time” to include Canada in the trade deal with Mexico, which was finalized last month.

If the remaining gaps cannot be bridged in the next few days, the administration will request congressional approval of a Mexico-only deal, Lighthizer said in New York at the Concordia Summit, an annual policy conference.

That would open President Trump to intense criticism from key GOP lawmakers, including Sen. John Cornyn (Tex.), the No. 2 Senate Republican, as well as leading business groups, which favor preserving a unified North American market.

“Everyone’s desire is for this to be a three-country agreement,” Rep. Kevin Brady (R-Tex.), chairman of the House Ways and Means Committee, told reporters at the Capitol. “That still is the top priority for everyone — Canada, the U.S., Mexico as well — and lawmakers.”

The administration wants to announce details of a new North American accord by Sunday to meet a timetable permitting Mexican President Enrique Peña Nieto to sign it on Nov. 30, his final day in office.

Holy cow! How Canadian dairy soured the NAFTA negotiations.

Major disagreements remain over Canada’s dairy management program, a dispute-resolution process and U.S. tariffs on metals imports from Canada.

Canadian Foreign Minister Chrystia Freeland announced trade negotiations fell through with the U.S. at the Canadian Embassy. (Video: Reuters)

“There’s still a fair amount of distance between us. There are very large issues,” Lighthizer said, playing down chances of a deal.

At a separate event in New York, Canadian Prime Minister Justin Trudeau showed no interest in accepting the U.S.-Mexico terms as written. The deal would raise to 75 percent from the current 62.5 percent the percentage of each vehicle that must be made in the United States or Mexico to qualify for duty-free treatment.

It would also require a significant portion of each vehicle to be produced by workers making at least $16 per hour, a challenge for Mexico’s low-wage manufacturing centers.

“There’s a possibility there to build on what they agreed, but we know that Canada’s interests are what we have to stand up for, and we will,” Trudeau told the Council on Foreign Relations. “My focus on this throughout has been simply not escalating. Not opining. Not weighing in. My job is very simple. It’s to defend Canada’s interests, stand up for Canadians.”

The chief U.S. trade negotiator is scheduled to meet with Canadian Foreign Minister Chrystia Freeland on the sidelines of the annual United Nations General Assembly meeting in New York. But there is little chance of a last-minute deal, according to a senior administration official, who spoke on the condition of anonymity to discuss confidential talks.

The two officials have no additional negotiations scheduled between now and the deadline, according to a second official who also asked not to be named.

Under the president’s existing trade promotion authority (TPA), the administration must make public the text of any new treaty 60 days before it is signed.

Though officials want to wrap up a three-way deal by this weekend so Peña Nieto can do the honors, there is no legal reason that the talks can’t continue, according to some trade experts.

“You should view TPA as a political guide more than a strict legal guide,” said John Veroneau, a partner at Covington & Burling. “I don’t think Sept. 30 is a deadline to end all deadlines.”

Under any circumstances, Congress is unlikely to vote on any trade deal this year. Once the agreement is signed, the International Trade Commission has 105 days to prepare a required evaluation of the likely consequences.

Brady, whose panel has jurisdiction over trade, said it would be difficult for Congress to act, even in a lame-duck session.

Trump has long been a vocal critic of the 1994 North American Free Trade Agreement, blaming it for the loss of millions of American manufacturing jobs and the closure of thousands of factories.

The president recently said that Canada had “taken advantage” of the United States on trade, and he threatened to impose tariffs on autos and auto parts imported from Washington’s northern neighbor.

Canada is expected to insist that Trump drop that threat before it agrees to a new trade deal. The Commerce Department is investigating whether auto imports threaten U.S. national security, a conclusion that is required before Trump can unilaterally impose import taxes.

President Trump’s claims about NAFTA and the U.S. auto industry

Negotiations aimed at a new agreement have been underway for 13 months, but Canada and the United States remain at loggerheads. “There’s a whole series of issues,” said Eric Miller, president of Rideau Potomac Strategy, who has been briefed on the talks.

Lighthizer praised the trade deal with Mexico for containing state-of-the-art provisions governing digital trade and financial services, as well as protections for worker rights. The accord also will narrow or “rebalance” the $71 billion U.S. trade deficit with Mexico, he said. “It’s very good for us, and it’s very good for Mexico,” Lighthizer added.

Failure to meet this weekend’s deadline would open the door to unpredictable consequences, including “a new negotiation” with the incoming Mexican president, Andrés Manuel López Obrador, he said.

If Canada does not soon join the U.S.-Mexico pact, the United States will reach “a separate deal as soon as we can,” Lighthizer said.

The administration is likely to face stiff opposition from key lawmakers and the business community to the idea of a new trade deal without Canada, which ranks behind only China as a U.S. trading partner. More than $582 billion in goods crossed the northern U.S. border last year.

This month, the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers released a joint letter saying that “it would be unacceptable to sideline Canada” in a new trade agreement.

“It’s hard to imagine a scenario where we have a new arrangement with Mexico and regression with Canada. That just doesn’t make a lot of sense,” said Scott Paul, president of the Alliance for American Manufacturing.

Many U.S. labor unions, including the autoworkers, have memberships that span the border and would also probably reject any proposal that excluded Canada, he said.

Lighthizer’s public comments punctuated several days of escalating administration warnings that Canada’s refusal to make concessions threatened prospects for a deal.

“We’re getting very, very close to the deadline where we’re going to have to move ahead with Mexico all by themselves,” Kevin Hassett, chairman of the White House Council of Economic Advisers, said Friday on Fox News.

Earlier in the week, House Majority Whip Steve Scalise (R-La.) said there was “a growing frustration with many in Congress” over Canada’s approach to the talks.

Selena Ross in Montreal contributed to this report.