Mexico, Canada diverge in metal tariff relief hopes

Bloomberg

Fresh off signing their trade deal with the US, the governments of Canada and Mexico are diverging on the continent’s other trade fight over metals tariffs — with Mexico setting hopes for a deal sooner than Canada.
The three countries signed their new deal in Buenos Aires to replace the North American Free Trade Agreement (Nafta) despite US tariffs on steel and aluminum imports remaining in place, along with counter-tariffs from Canada and Mexico. US Trade Representative Robert Lighthizer said talks would continue and be split into two tracks: one with Canada, which sells much more of both metals to the US, and another with Mexico.
Jesus Seade, the Nafta negotiator for Mexico’s new president, has said he hopes for a deal by the end of the year, but Canada isn’t setting any timelines. Instead, it’s holding out for a victory in legal challenges against the tariffs and signalling there may be no quick fix.
“All parties are looking at how we can move forward, but negotiations take some time,” Canadian Finance Minister Bill Mor- neau told Bloomberg Television in an interview in Buenos Aires. “We’ll have to be sitting at the table to figure out how we get to the best answer. Our view is that these tariffs shouldn’t be there.”

DEAL NOT ‘COMPLETE’
The tariffs of 25 percent on steel, and 10 percent on aluminum, were imposed earlier this year on national security grounds — a justification Canada in particular has scoffed at. But there are reasons for the two countries to see different paths forward. Mexico, the smaller supplier, may be willing to accept quotas such as those applied on South Korea, in exchange for lifting the tariffs. Canada thinks both it and the US should simply drop their duties.
Reaction to the three countries’ trade deal — which still needs ratification to take effect — has been dampened by the fact that steel and aluminum
tariffs remain in place.
“To achieve the full potential of the trade agreement and to ensure ratification, the elimination of tariffs on steel and aluminum will be critical,” Ford Motor Co said in a statement.
Brett House, vice president and deputy chief economist at Scotiabank, said the tariffs are not “compatible” with the auto manufacturing rules contained in the new trade deal, and that should be reason enough to lift them. However, there are also “multiple grounds for the removal of these tariffs, including their illegality and the costly
inefficiencies they impose on North American manufacturing,” House said in a research note.

CONTINUING TALKS
The US will continue talks with Canada and Mexico in search of a resolution, Lighth-izer said. He declined to say whether he’s insisting on a quota, but he defended the tariffs and said they’re working in the US. “We don’t want to do anything that’s going to thwart that,” he said. “It’s something we’re turning our attention to.”
Mexico’s plan of action on tariffs will be up to the government of Andres Manuel Lopez Obrador. The steel tariffs “cannot be there for an extended period,” Seade, who is set to become undersecretary for North America in Lopez Obrador’s Foreign Ministry, told Bloomberg television. Elimination of the duties within “the calendar year would be very natural because it’s fully discussed. That’s my hope,” he said.
Canada has a different story. It’s the top US source of both steel and aluminum imports. Canada announced retaliatory tariffs targeting about $12 billion of US exports to Canada — both steel and aluminum, but also things such as ketchup and motorboats. But it has avoided linking them with the talks to
replace Nafta.

LEGAL CHALLENGE
“We do not accept the legality of these tariffs,” Foreign Minister Chrystia Freeland told reporters, noting that Canada is challenging the tariffs under the existing Nafta deal and at the World Trade Organization. “And frankly we are very confident we’re going to win those legal challenges,” she said.
Asked whether public statements by the US that linked steel and aluminum tariffs with trade talks will help her legal case, Fre-eland replied: “I think that is a really interesting point.” She didn’t elaborate. Canada still does not accept “that this was a legitimate area for us to include in this
negotiation,” Freeland said.