U.S. trade tensions may drag on for the foreseeable future: Canada’s former top trade negotiator

Former chief trade negotiator Steve Verheul speaking to members of the media in Montreal, Que., on Jan. 25, 2018. Photo by Christinne Muschi/Bloomberg files

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Canada and the United States remain “far apart” in their trade negotiations as the July deadline for a review of the Canada-U.S.-Mexico Agreement (CUSMA) looms, says former chief trade negotiator Steve Verheul.

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“The U.S. is looking for Canada to make concessions on sensitive issues, and Canada is looking to see the U.S. move on big issues,” he said on Thursday at the Public Policy Forum’s Canada Growth Summit in Toronto.

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As a result, Verheul said he doesn’t see a lot of room to negotiate in the short term, so the July deadline for reviewing CUSMA — which U.S. President Donald Trump negotiated in his first term — is likely to pass without any major announcement.

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Some news reports have said Canada and the U.S. were close to a grand bargain last fall, but that it fell apart at the 11th hour. Verheul said the U.S. is more likely to come to the trade table as a result of its domestic politics rather than anything Canada does.

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“Canada can’t force the U.S. to a conclusion or force the U.S. to an end game,” he said. “We can’t entice them to an end game.”

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Verheul said the good news is that he does not believe Mexico is making much progress in its trade negotiations with the U.S. either, and he believes the U.S. wants to protect North America as a trade zone. That means all three countries coming together could jumpstart trade discussions.

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“There is a more common ground there with respect to how we deal with the North American market,” he said.

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The problem, Verheul said, is that as Canada diversifies its trade by striking deals with countries outside North America, it becomes harder to agree to protective trade zones with Mexico and the U.S.

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In the meantime, despite U.S. tariffs, he said a high proportion of goods being traded between the North American countries are flowing across borders duty-free because they are protected under CUSMA, which is “taking the heat off of all three countries.”

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Others say there is far more urgency in resolving the trade tensions.

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Louise Blais, a Canadian diplomat and Quebec’s special envoy for the upcoming CUSMA review who spoke on a panel with Verheul, said businesses and consumers in Canada are hurting badly from the U.S. tariffs and inflation.

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“The fact of the matter is companies are going bankrupt as we speak,” she said.

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The longer trade tensions persist, the harder it will be to patch up the situation, Blais said, adding that the pandemic already eroded the resilience many companies had built up, so the new trade tensions are exacting lasting damage.

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“Now we’re experiencing this process and it’s just starting to be too much,” she said.

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