U.S. Trade Representative Robert Lighthizer is warning that a new NAFTA deal must be completed in the next two weeks – even as an American demand that Canada and Mexico agree to quotas on the amount of steel and aluminum they can export to the United States throws another stumbling block in the way of the negotiations.
Mr. Lighthizer told a U.S. Chamber of Commerce luncheon in Washington Tuesday that if talks to overhaul the North American free-trade agreement aren’t finalized soon, the deal might have to be punted until after congressional elections in November.
“I have no idea,” the Trump administration’s trade chief said when asked when NAFTA talks would conclude. “If we don’t get it done in the next week or two, then we’re on thin ice.”
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The White House must get its congressional authorization to negotiate trade deals renewed this summer. And under American trade law, any agreement must clear several procedural hurdles before Congress votes on it. This means negotiators are running out of time to reach a deal that can be submitted to the current Congress.
His comments came a day after the White House gave Canada and Mexico a “final” temporary exemption from its steel and aluminum tariffs. The exemption expires on June 1.
Mr. Lighthizer said Canada and Mexico can negotiate a permanent exclusion from the tariffs “hand in hand” with a NAFTA agreement. If they cannot resolve NAFTA this month, Canada and Mexico face tariffs of 25 per cent on steel and 10 per cent on all aluminum exported to the United States.
The White House is demanding any other country that wants an exclusion from the tariffs accept quotas on the metals.
One source briefed on the confidential NAFTA negotiations said it is possible the Trump administration will accept Canadian and Mexican agreement to tough new rules for the auto industry – including a requirement that 70 per cent of all steel, aluminum and glass in North American-made cars comes from within the NAFTA zone – in lieu of quotas.
NAFTA talks, in progress since August, have accelerated in recent weeks, with top officials scheduled to reconvene for further negotiations in Washington next week. But they are at loggerheads over auto-content requirements, procurement, dairy and dispute resolution, among other matters.
Mr. Trump first announced the tariffs in March, arguing they are necessary for “national security,” to ensure the United States’ ability to build tanks, fighter jets and naval ships is not dependent on foreign countries. The levies are primarily aimed at keeping Chinese metal out of the United States, but the administration has argued it is necessary to impose them on all countries in order to prevent Chinese companies from “transhipping” their goods through other countries to get around the duties.
Foreign Minister Chrystia Freeland insisted that, despite Mr. Lighthizer’s comments, steel and aluminum discussions would be separate from NAFTA. She said Ottawa would instead persuade the United States not to impose tariffs by convincing it that its current trade policies are economically inefficient.
“We remain confident that the U.S. administration understands that tariffs or quotas would hurt American jobs,” she told reporters on Parliament Hill Tuesday. “The notion that Canada, in any way, could pose a security threat to the United States is absurd.”
The prospect of a steel quota also brought strong words from Joseph Galimberti, president of the Canadian Steel Producers Association.
“Canada is not a part of the problem, but rather an ally which has long been part of the solution and we should be treated as such,” Mr. Galimberti said in an e-mail.
A quota would undermine fair trade, disrupt supply chains, chill investment and employment in Canada “and would accomplish nothing to either address the root causes of global overcapacity in steel or discourage unfair trade in steel globally,” he said.
But Canada’s view won little support among U.S. steel-industry executives who gathered in Washington Tuesday for the annual meeting of the American Iron and Steel Institute (AISI).
Canada and Mexico are not security threats to the United States, acknowledged John Ferriola, chief executive officer of steel producer Nucor Corp. But “it’s more than just a military alliance,” he said. “To have a true partnership between America and any country it has to be a military partnership and it has to be an economic partnership.”
When The Globe and Mail asked how much cheap steel from offshore countries is being diverted to the U.S. market through Canada and Mexico, the AISI officials provided no numbers.
Mr. Ferriola responded: “Too much,” which caused an eruption of laughter in the Senate Room in Washington’s Mayflower Hotel.
The U.S. executives maintained that quotas or tariffs are necessary against all countries so steel mills can return to a capacity utilization rate of 80 per cent from 74 per cent last year and 76 per cent so far in 2018.
“The steel business in this country continues to get pummelled with imports that are unfairly dumped here,” Tracy Porter, executive vice-president of Commercial Metals Co., said in response to the question about Canadian and Mexican steel. “To continue to diminish the manufacturing base of this country is a travesty that can’t be ignored.”
Mr. Porter added: “At the pace we’re going, we’re going to be relegated to some Third World country – probably in my children’s lifetime if we do not stop it now.”
Adrian Morrow
Steven Chase