Everyone from U.S. President Donald Trump to Canadian Foreign Minister Chrystia Freeland was smiling Monday as they announced a new NAFTA deal, but it took months of shouting sessions and mutual suspicion to get there.
The two sides clashed about issues as broad as auto-production rules and as tangential as world history.
Negotiations were especially tense at one point last fall when one story after another popped up on Canadian news sites about unusual U.S. proposals. U.S. Trade Representative Robert Lighthizer scolded his Canadian counterparts over media leaks. The Americans fumed as their proposals went from the negotiating table to the internet and their counterparts whispered in the hallways.
“We could literally see them [leaking],” one American official later observed.
But all those differences were swept aside over the weekend. Sources close to the action say the eleventh-hour deal came together as a result of deadline pressure, willingness to compromise and Trump’s constant threat of hitting Canada’s extensive auto industry with tariffs if it didn’t agree to a new deal.
On Friday, Ottawa celebrated news it would be allowed to keep a coveted dispute-resolution chapter. Trump’s son-in-law, Jared Kushner, played a key role to help ease differences over that issue involving Chapter 19. The Canadians then moved forward a proposal to open its dairy markets — which was enough for the U.S. to pull back on plans that were in motion to submit a deal that included just Mexico.
The trade pact announced late Sunday night still faces many hurdles, including congressional approval, before it can go into effect. But for all parties, the real victory was putting aside differences long enough to come up with a compromise.
The issue of looming U.S. tariffs on automobiles was the last detail to be nailed down. In a group chat Sunday evening involving Freeland, Lighthizer, and their officials, Canada was given what amounts to a de-facto exemption: no auto tariffs, ever, unless there’s an improbable surge in Canadian exports.
The deal was done.
The Canadians insist it wasn’t tariff pressure that led to a deal, as claimed by Trump. They said the U.S. was aware long ago of Canada‘s willingness to make concessions on its tightly controlled dairy market as well as its receptiveness to increasing the amount of online-shopping orders that could be imported duty-free.
What sealed the deal, according to the Canadians, were swift steps last week from the U.S. to get an agreement before its self-imposed October 1 deadline.
The pivotal turning point came after the U.S. began verbally communicating its willingness to maintain Canada’s coveted Chapter 19 — the section of the old North American Free Trade Agreement that allows one country to challenge another’s tariffs over allegations of unfairly traded products. The formal offer came in a document delivered Friday, prompting a celebratory reaction in Ottawa.
That’s the day Canada put forward its proposal to open dairy markets. Separately, Kushner also played a crucial role in getting U.S. officials to back off demands to drop the Chapter 19 language in exchange for accepting Canadian dairy concessions.
Lighthizer, a longtime trade attorney who spent a career helping steel companies and other domestic firms secure tariffs for unfair trading practice, viewed the dispute mechanism as a direct attack on U.S. sovereignty.
“In essence, Kushner was the peacemaker from the White House because Lighthizer on his own had such passionate feelings on Chapter 19 that this wasn’t something he was going to happily give up,” said a source close to the talks.
For their part, the Canadians hated some of Lighthizer’s ideas on trade. And they had no qualms about letting the world know.
During a heated negotiation round in Washington in October 2017, one story after another popped up on Canadian news sites about unusual U.S. proposals: a requirement that every car contain at least half American parts to qualify for reduced tariffs. The effective gutting of all dispute-resolution systems. A clause potentially killing the deal after five years.
Ping, ping, ping. The proposals went straight from the negotiating table to the internet. Canadians reacted in disbelief, as much of pro-trade Washington did.
American officials at that round fumed about the hallway whispering. Lighthizer made clear to the Canadians his hatred of media leaks.
This is after Freeland gave Lighthizer some books as a present. She knew the battle-hardened trade negotiator had a soft spot for historical tomes.
So Freeland delivered three, as part of a so-called NAFTA negotiators’ book club she created. She gave Lighthizer books on human history, including Margaret MacMillan’s “The War That Ended Peace.”
The book’s central message: A prosperous, interconnected era of accelerated globalization came to a crashing halt in the early 20th century, spiraling into a vortex of protectionism and nationalism that culminated in the most murderous three decades in human history.
The point was not subtle.
Freeland herself admitted that she was making a connection to current events. “As with today, the beginning of the 20th century was marked by unprecedented globalization and growth,” Freeland, a former globe-trotting journalist and author, said last year. The events between the turn of the century and the outbreak of war in 1914 are a useful reminder [of] the fragility of the world order and the pitfalls of protectionism and retreat.”
The odd couple of NAFTA had their flare-ups; in the spring, Lighthizer and Freeland again sparred, this time over the proposed five-year sunset clause.
He snapped at her again the next day, when details of that griping session found their way into the news. This time, Freeland was flummoxed. The Canadians insisted they had no idea where this leak originated.
In the end, they came to an amicable settlement. It included a separation period during the summer, as Lighthizer worked on a NAFTA deal with Mexico instead.
One senior White House official fumed to POLITICO recently that Freeland had gotten under everyone’s skin, sparing nobody: “And I mean nobody.”
By Monday, though, bygones were bygones.
“At different moments things looked closer. At different moments things looked further, at least from the media’s perspective,” Kushner said during a Monday press briefing. “But from the interaction we’ve had with our teams, I’d say the working relationship between Ambassador Lighthizer, myself and our counterparts in those countries has remained fully intact.”
Still, Ottawa was acutely aware of Trump’s threat to hit Canada’s massive auto industry with new tariffs.
At a rare and rambling solo press conference last Wednesday, the president reupped his auto tariff threat. In a thinly veiled reference to Freeland, he expressed disdain for Canada’s negotiating team.
“He personally attacked Freeland,” said one source close to the Canadian government. “This raised some concerns and then there began to be some discussions between Mexico and people in the Canadian government.”
Trump’s attack helped set into motion the flurry of activity that eventually led to the deal on Sunday night, the source said.
The U.S. had set a deadline of midnight on Sunday to publish a deal so that departing Mexican President Enrique Peña Nieto could sign the deal before he left office.
“It became clear when we started to see that things we said were absolute necessities in us accepting a deal — that they began to move on them, we realized they really did want to get this done before the midnight deadline,” Canadian Prime Minister Justin Trudeau said during a press conference on Monday.
Trudeau praised Freeland as having successfully completed the most complicated assignment of any Canadian cabinet minister in a generation. He even said nice things about Lighthizer.
“He is a tough, principled negotiator,” Trudeau said. “But he also understands and appreciates Canada. It’s fair to say that this would not have come together without him.”
Freeland called Lighthizer’s flexibility on autos earlier this year the true historic turning point in the negotiations.
“I said when we began that there would be moments of drama, and there have been,” Freeland said. “Through it all, Ambassador Lighthizer has been a professional, reliable and trustworthy counterpart. And I can say especially after the past few weeks of very intense negotiations, what we called our continuous negotiation, he’s someone I consider a friend.”