Canadian Legislative Issues

NAFTA negotiations continue to be top-of-mind for decisionmakers. On March 31, United States President Donald Trump signed an executive order directing the U.S. government to negotiate changes to the 1994 North American Free Trade Agreement (NAFTA). The list of issues ranges from agriculture and services to digital trade, investment, and government procurement.  Despite this sign that the Oval Office may be seeking larger changes than the Liberals had expected, they have been preparing for months by creating strong relations with key officials in Washington.

However, in response to the executive order, past Conservative Prime Minister Brian Mulroney, who was instrumental in negotiating the original agreement in 1994, spoke to the Liberal cabinet on April 6. This was monumental as Canada does not have a history of governments inviting past Prime Ministers who originate from a different political party. Furthermore, the move by Prime Minister Justin Trudeau showed a willingness to work across party lines for beneficial negotiations with a President who doesn’t see eye to eye with many fundamental issues that the Liberals believe in. Besides the briefing, it appears that Mulroney will become one of the government's representatives in Washington, since he continues to have strong ties with American officials, as well as the President himself.

Cabinet Ministers continue to meet with their counterparts in Washington on a regular basis, to get updates on the Administration’s thoughts and course of action. Despite the numerous meetings, on March 30, the Canadian government was caught off guard by a leaked eight-page draft letter outlining areas for renegotiation. Tougher rules of origin, more market access for American companies in various sectors, and the inclusion of a safeguard mechanism to impose temporary tariffs were all mentioned in the letter. Although this is a far cry from President Trump’s statements about NAFTA during the election, Canadian officials are still worried about how negotiations will actually play out.

Auto manufacturing is also worried, as it has benefited from the free flow of goods and services that NAFTA has fostered over the past two decades. Plants in each country rely on an integrated supply chain of parts, meaning that disruptions caused by additional tariffs or border delays would negatively impact manufacturing in all three countries.

Many Canadian industries continue to be protected, such as dairy, telecommunications, broadcasting, and aerospace. Seeing that the President wants to put "America First," he and his team may target these protected industries first which would cause major difficulties for the Liberal government. Although Trudeau’s time as Prime Minister has been fairly calm, with both opposition parties seeking new leaders and the economy making small steps towards greater growth, 2017 is looking to be a very precarious year. Trudeau and his team have established a strong position to go into negotiations by creating some top-level relationships. However, how he walks away from negotiations will determine his and his government’s fate during the next election in 2019.