Early NAFTA deal with Mexico could secure concessions from Canada, U.S. trade representative says

The U.S. is hoping for a NAFTA agreement with Mexico this summer that would prompt Canada to soften its negotiating position, U.S. Trade Representative Robert Lighthizer told a U.S. Senate subcommittee Thursday.

U.S. President Donald Trump's point man on trade made the comments during an appearance before the Senate commerce, justice, science and related agencies subcommittee.

Lighthizer said he was meeting with Mexican officials from both the outgoing administration of Enrique Peña Nieto and the incoming government of Andrés Manuel López Obrador later Thursday to discuss the future of NAFTA.

"My hope is that we will, before very long, have a conclusion with respect to Mexico and that, as a result of that, Canada will come in and begin to compromise," Lighthizer said.

"I don't believe that they've compromised in the same way that the United States has or that Mexico has."

Foreign Affairs Minister Chrystia Freeland, Canada's lead minister on the trade file, was in Mexico City Wednesday talking to both the incoming and outgoing administrations. She received assurances that Mexico City has no interest in a bilateral deal with Washington that freezes Canada out.

Lighthizer told the subcommittee that under the American Trade Promotion Authority (TPA), Congress must have 90 days' notice of a completed deal before it can stage a vote.

With Peña Nieto set to step down Dec. 1, that gives negotiators until the end of August to strike a deal that Peña Nieto could sign, with the blessing of López Obrador.

"My sense is that that's not an unreasonable time frame if everybody wants to get it done," Lighthizer said.

Steel and security

Lighthizer also told the subcommittee that the tariffs on Canadian steel must remain in place to ensure the national security of the U.S. is preserved.

Lighthizer was answering pointed questions from Democratic Senator Jack Reed when he explained the thinking behind Trump's decision to slap steel and aluminum tariffs on Canada on the grounds that Canadian metals pose a threat to U.S. national security.

"The basis for the action against Canada is a threat to the national security of the United States," Reed said.

"This is a country that has sent forces to Afghanistan. Those forces have, some of them, unfortunately have given their lives in a joint effort with the United States.

"This is a country that since the 1950s has been maintaining our early warning for attack [by] then the Soviet Union, now Russia. This is a country who uses our equipment, this is a country who has been with us every step of the way and, I guess again ... Are they a national security threat to the United States justifying legally the imposition of this 232?"

Lighthizer argued that while China was the real problem, a global approach —​ with every trading nation hit with the same tariffs — was necessary to prevent a "hole in the net" that would allow steel from China and other places to flow into the U.S. via Canada.

Stopping transshipment of steel

"If you are of the opinion that the 232 is justified, because of the need to preserve U.S. steel, if that is your decision then you have to put in place a provision, a program that actually works," Lighthizer told Reed.

"That's the context. Nobody is declaring war on Canada or saying they are an unfriendly neighbour. They're obviously not, they're a great ally and certainly one of America's closest friends and closest trading partners. But if you decide that you need to protect an industry, you can't be in a position where the protection is of no value because everything comes in through the capital of Canada."

In April, Prime Minister Justin Trudeau announced increased funding for the Canada Border Services Agency (CBSA) and Global Affairs Canada to crack down on the transshipment of foreign steel and aluminum through Canada and into the U.S.

The $30 million over five years went into immediate effect, with a guarantee of $6.8 million a year in funding each year after that.

The CBSA also was given additional powers to better identify and stop companies that try to avoid duties and to investigate whether prices charged in an exporter's home market are fair.

"Canadian workers and industries deserve a level playing field, and we will continue to protect them from unfair trade practices," Trudeau said in a statement at the time of the April 26 announcement.

"Part of that includes making sure Canadian trade enforcement agencies have the resources they need to defend the competitiveness of our businesses and our important North American trading relationships."

Taking action

Since that announcement, the Trudeau governm​ent has taken a number of actions meant to crack down on foreign steel being dumped into the North American market through Canada.

It followed up on that move Thursday when CBSA announced it was launching a "scope proceeding" — an investigation — to determine whether some fabricated industrial components from China and South Korea have been unfairly subsidized.

News of that investigation came days after the Canadian International Trade Tribunal determined that there is a "reasonable indication" that the dumping of steel from China, South Korea and Vietnam has "caused injury or (is) threatening to cause injury to the domestic industry."

Thursday also saw CBSA announce that it was launching an investigation into whether corrosion-resistant steel sheeting coming from China, India and South Korea is being illegally sold in Canada at unfairly low prices.