Trump Warns Canada, Mexico He Will Begin NAFTA Renegotiation “Within Days Of Inauguration”

In the latest unexpected and ad hoc announcement on North American trade arrangements, the Globe and Mail reports that Trump’s Commerce Secretary pick, Wilbur Ross, has informed Canadian officials that he plans to reopen NAFTA talks within days of his inauguration, and that rules of origin and independent dispute tribunals will be central in negotiations of North American Free Trade Agreement. Ross has indicated new administration will send a formal letter notifying Canada and Mexico of plans to renegotiate Nafta within days of Trump’s inauguration.

According to the G&M, Trump “want to discuss country of origin rules and the independent dispute-settlement mechanism that are key features of the 1994 NAFTA pact, officials say.”

Country of origin rules, which govern how much content from outside NAFTA a product can contain and still qualify to be shipped duty-free, are specific to each product and spelled out in writing. They cover every kind of good and service, from suits to cars. The Trump administration is expected to take a harder line on exactly what can cross the border duty-free.

NAFTA’s tripartite dispute panels are also on Mr. Ross’s radar, officials say. The United States has long complained these independent panels are unaccountable and give too much power to Mexico and Canada.

However, in what is modest good news for Canada, a senior government official told The Globe and Mail the signals from Mr. Trump’s trade team indicate the trade focus will largely be aimed at Mexico, essentially cutting the United States’ southern neighbour out of many NAFTA benefits.

The clear indication we have gotten from that side of the operation is that they are targeting Mexico and not us,” the official said. “We are keeping an open line of communication with them so we know what things they are planning to do with Mexico and that have a major knock-on effect with us.”

Foreign Affairs Minister Chrystia Freeland has already contacted Mr. Ross, although the Trudeau government is relying heavily on former Progressive Conservative prime minister Brian Mulroney to act as an intermediary.

Still, it remains unclear just how much a renegotiation will have on Canada. Canada is the biggest trading partner of the United States, and Mr. Mulroney has strongly pressed the case about the importance of the Canadian economy to Mr. Ross and others, including the president-elect, a source said.

Mr. Trudeau sounded a positive note when asked at an event in Fredericton, N.B., on Tuesday about the threat of U.S. protectionist measures and a border tax on Canadian products.

“We are focused on having a constructive working relationship with the new administration and one in which we highlight the depth of integration and inter-connectedness between our two economies,” he told reporters. “Obviously, there are millions of Canadian jobs that depend on the U.S. market, but there are also millions of American jobs that depend on smooth integration and trade back and forth across the border of goods and services.”

Ross will have his confirmation hearing before the Senate Commerce, Science and Transportation Committee on Wednesday. He has been a vocal critic of free trade, and long advocated renegotiating NAFTA and other deals. He has called NAFTA the “poster child for unbalanced trade and investment” and accused Mexico of importing auto parts from China for vehicles it ships duty-free to the United States.

In an interview with Bell Media’s BNN in October, Mr. Ross said Canada would not have a “lot to fear” from a Trump presidency.  “You don’t hear him voice huge complaints about Canada, and there’s a good reason for that,” he said. “In the case of the trade between the U.S. and Canada, it is relatively much better-balanced than is the trade between the U.S. and Mexico.”

As for Mexico, keep an eye on the USDMXN which has been rising all session on the news.