PENTAGON CITY, VA – The Trump Administration is taking the gloves off. Were they ever on? President Trump told Fortune that a breakdown and pulling the plug was necessary to fix NAFTA.I was taught that trade negotiations were exercises in good faith. This rule does not apply in the world according to President Trump.Canada's Global Affairs Minister Chrystia Freeland has demonstrated her superb oratorical and communications skills to try to breathe life into the stagnation which has characterized the NAFTA 2.0 negotiations to-date. Given the hair trigger inclinations of Trump and USTR Robert Lighthizer, Canada must project a positive and optimistic perspective.With the second shoe dropping on Bombardier, and the frustration of continuing uncertainty on lumber, the forced optimism is wearing thin. Minister Freeland is characterizing the Trump Administration as the most protectionist since the 1930s. This is overly charitable – Trump, Ross, Navarro and Lighthizer will make Smoot and Hawley look like amateurs.The forced pretenses of collegiality are hollow – and misleading. The deep divisions and frustration which inform the real state of play are due in large part to the aggressive and inflexible approach of Ambassador Lighthizer. He is reflecting Trump's always shifting, unpredictable objectives and his determination to trash the best trade agreement North America has ever seen.It will be more difficult to keep up the appearances.Progress at Round 3 was minimal – a single chapter was agreed, comprised of two paragraphs about creating and maintaining access to a database to inform SMEs about the potential benefits of the agreement. This was the first chapter agreed on or “parked” in the TPP negotiations. The early closing TPP articles were not contentious. There were half a dozen of them. Now we have an agreed text on Competition. Lighthizer seems pleased with this. Looking at the TPP text, it seems relatively easy for Canada to accept, unless Lighthizer wants to extend the long arm of U.S. Competition law into Canada and Mexico. Importing private rights of action complete with treble damages would not be a welcome innovation.Why are the negotiators taking so long to recycle the low hanging fruit into NAFTA 2.0? It isn't easy to be upbeat when you are forced to work in a vacuum without sufficient time between rounds. Not to mention the forced symbolism of working on weekends and holidays. The worker bees seem to be relieved as each day ends, counting the hours and minutes to the end of another session of unpleasant uncertainty.There are delays and frustration because the U.S. has not been specific about its demands. That is about to change. Lighthizer is floating trial balloons about specific non-negotiable demands which have been labelled poison pills by the mainstream media.The absurd trade remedy decisions issued by Wilbur Ross's Commerce Department, not to mention his proposal for 5 year sunsets on trade agreements, do not inspire confidence that a reasonable, balanced deal is near. Indeed, the U.S. provocations of its neighbours, while recognizing our closeness, are the trade negotiator's equivalents to Trump's verbal war with Kim Jong-un. A bit extreme? It depends on whose ox is being gored.NAFTA, TPP and TTIP were designed to go well beyond “meat and potatoes” trade issues like tariff elimination, National Treatment, Technical Barriers and trade remedies in a positive and liberalizing way. The U.S. approach is a claw back on steroids.Lighthizer was a trade remedies lawyer who focused on steel – an industry whose appetite for protection is insatiable. His focus is anti-dumping, countervailing duties and safeguards. He has conducted long-running vendettas against WTO Dispute Settlement and NAFTA Chapter 19 judicial review of anti-dumping and countervailing duty decisions. Now is his opportunity to get even and he seems determined to meet objectives as a public official he could not as a practitioner. Other USTRs recused themselves from dealing with issues they worked on in the private sector. But, in Trump's Washington, recusing is seen as a weakness - just ask Attorney General Jeff Sessions.Lighthizer appears to be determined to drive Canada away from the negotiating table. No doubt Mexico's turn will come. The Mexican Senate has passed a resolution indicating the half dozen bright line issues which will prevent passage of NAFTA 2.0. Mexico cannot ratify NAFTA 2.0 without Senate approval.Secretary Ross' proposed five year sunset clause, scrapping Chapter 19, reduced access to Government Procurement, unbalanced Rules of Origin on automotive products, and special anti-dumping rules for seasonal fruits and vegetables are all drop dead issues for Mexico.U.S. demands are unreasonable and designed to provoke Canada to abandon these negotiations. Will Canada walk away from the negotiation? Not likely. There is no advantage to Canada in playing this game – and nothing to gain. All we would catch is blame. And it would give POTUS a reason to demonize Canada (even more) and accelerate the dismantling of NAFTA.Canada is the target of a massive misinformation campaign driven by the U.S. Administration. There is no shortage of allegations that Canada is stalling and refusing to engage. This is the basest of canards. Lighthizer is trying to please the President – an impossible task – and, as a result, has no mandate.Here in a nutshell is the real state of play:
- Canada has made it clear that the USA is the demandeur and it is up to Ambassador Lighthizer to define his demands.
- Canada cannot respond to proposals which Washington has not advanced.
- Canada will not and should not negotiate with itself.
- Trump and Lighthizer are increasing the pressure and the reality TV environment.