By Paul Vieira and William Mauldin
President Donald Trump and Canadian Prime Minister Justin Trudeau are scheduled to meet in Washington Monday in a visit likely to provide a glimpse of how the Trump administration will seek to overhaul the 23-year-old economic framework of North America.
Mr. Trump wants to renegotiate the North American Free Trade Agreement, or Nafta, and has vowed to extract new, better terms for the U.S. So far most of his focus has been on Mexico and the $63 billion U.S. trade deficit there.
Mr. Trudeau, the leader of Nafta's other partner, has indicated that he is intent on building a smooth relationship and finding common ground with Mr. Trump despite their many policy differences on issues including immigration.
"We both got elected on commitments to strengthen the middle class and support those working hard to join it, and that's what we are going to focus on in these meetings," Mr. Trudeau, leader of the centrist Liberal Party of Canada, said during a tour of Canada's North last week.
The prime minister had a smooth and easy relationship with former President Barack Obama, with whom he shared views on a number of issues including the goal of fighting climate change. They did differ on TransCanada Corp.'s proposed Keystone XL pipeline, which Mr. Obama opposed and for which Mr. Trump has indicated his support.
Officials haven't disclosed details about the Trump-Trudeau meeting, although the future of Nafta and ramifications of a potential border-adjusted tax are expected to be a focus, U.S.-Canada experts say. White House press secretary Sean Spicer said Wednesday that "trade and security and commerce" will be on the agenda.So far, Mr. Trump has encountered setbacks in his bid to get started on revamping Nafta, including slow confirmation for his leading trade officials and the cancellation of a previous trip to Washington by Mexico's President Enrique Peña Nieto after a bitter public dispute over a proposed wall on the southern border.
Mr. Trudeau's arrival begins the delicate maneuvering that will set the tone for formal talks to update the pact, which would require the cooperation of all three countries including their lawmakers. Mr. Trump hasn't yet formally notified Congress of plans to hold talks on Nafta, a step that is required 90 days before negotiations can begin on any trade deal eligible for expedited consideration on Capitol Hill.
"To me, what we've seen so far continues to confirm that Mexico and Canada have not yet agreed to renegotiate any particular provision of Nafta," said Matt Gold, a Fordham University adjunct law professor and former deputy assistant U.S. trade representative. "I think it's predictable that Canada and Mexico are going to slow down that process."
To date, Mr. Trudeau and other Canadian officials have been cautious in their comments about the Trump administration and Nafta, conveying instead a readiness to discuss improvements to the deal.
Some matters of interest from Canada's perspective include greater labor mobility for high-tech workers and freer services trade. U.S. lawmakers, on the other hand, have complained about Canada's lumber trade and access to Canada's dairy market.
Some of Mr. Trudeau's most senior aides have touched base with key members of Mr. Trump's team.
Commerce Secretary nominee Wilbur Ross, who is expected to lead the Nafta talks, has spoken to former Canadian Prime Minister Brian Mulroney, who worked with Ronald Reagan on a bilateral trade agreement between the U.S. and Canada that predates Nafta, which took effect in 1994.
Mr. Trump has repeatedly backed two-way rather than multilateral trade negotiations. He hasn't arranged a three-way North American summit yet, and some former trade officials say Nafta, a trilateral agreement, could devolve into separate deals with Canada and Mexico. Mr. Trump warned repeatedly in the 2016 campaign he'd pull the U.S. out of Nafta if the partner countries don't agree to an overhaul.
Canada "is hoping to approach the negotiations as opportunity to improve Nafta while also making the case it shouldn't be subject to any new forms of protectionism," said Roland Paris, a professor at University of Ottawa and Mr. Trudeau's former foreign-policy adviser. He said Mr. Trudeau needs to be ready to protect Canadian interests, "and I expect he will."
U.S.-Canada trade is largely balanced, with latest data indicating a U.S. deficit in the trade of goods of $11 billion, or a fraction of the shortfall with China, Germany and Mexico. On a goods-and-services basis, the U.S. is running a trade surplus with Canada of just over $10 billion through the first three quarters of 2016.
Mr. Trudeau will also point to the deep, integrated U.S.-Canada trade ties. Canada is the top export destination for 35 U.S. states, according to Canadian figures. Nowhere is that most prevalent than in Rust Belt states like Michigan and Ohio that carried Mr. Trump to victory.
In 2015, Canada ranked as the largest export market for U.S. automotive parts with $22 billion in parts sold, according to data compiled by the Center for Automotive Research in Ann Arbor, Mich. One third of exports from the Detroit metropolitan area, the epicenter of the U.S. auto industry, are Canada-bound.
Still, economists say Canada has much to lose from these talks. "The bilateral trade relationship is very important for the U.S., but it's beyond critical for Canada," said Doug Porter, chief economist at BMO Capital Markets. Three-quarters of all Canadian exports, or the equivalent of 20% of Canada's output, heads to the U.S.
Canadian officials estimate roughly 400,000 people and $1.5 billion in goods and services cross the 4,000-mile U.S.-Canada border each day. The two countries have one of the world's largest trading relationships, with two-way trade in merchandise goods of roughly $545 billion in 2016, trailing only China, based on the most recent Bureau of Economic Analysis figures.
U.S.-Canada trade ties and intertwined supply chains have deepened since the first milestone North American trade agreement in 1965 for the auto sector, which eliminated some features of protectionism with respect to North American trade in motor vehicles and parts.
Write to Paul Vieira at email@example.com and William Mauldin at firstname.lastname@example.org
(END) Dow Jones Newswires
February 12, 2017 09:14 ET (14:14 GMT)
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