Canada-US trade deal possible if Nafta fails, says Trudeau

[GUANGZHOU] Canadian Prime Minister Justin Trudeau said he would consider one-on-one talks with the US on trade, if negotiations to update the North American Free Trade Agreement (Nafta) fail.

"We will always look at different opportunities," Mr Trudeau said on Thursday in response to a question about a two-way US trade deal at the Fortune Global Forum in China.

"We're ready for anything, when things come forward. The new administration has shown a willingness to disrupt the patterns of past behaviour and look for new models, and we're willing to entertain next steps forward."

The prime minister, who was in the southern Chinese city of Guangzhou to wrap up a five-day visit, said the 23-year-old Nafta "needs to be updated" and warned that cancelling the pact would harm Canadians.

His comments followed the unexpected breakdown in Canada's efforts to launch free-trade talks with China, with officials saying the two sides would continue discussions.

While Mr Trudeau reaffirmed his desire to save Nafta, which underpins US$1.2 trillion of trade, his comments will likely fuel speculation that Canada is preparing to move ahead without Mexico. The remarks come just weeks after other members of the Trans-Pacific Partnership criticised Canada for upending efforts to resurrect the trade pact without the US.

The Canadian government has repeatedly said it was committed to working with Mexico to renew Nafta, but officials have sometimes signalled a willingness to consider a two-way pact of the kind US President Donald Trump prefers. Mr Trump has threatened to scrap Nafta, if the other two signatories don't accept proposals that the administration argues will reduce US trade deficits.

"We're still very confident in the kinds of support and response that we've gotten from friends, partners, colleagues in the US who recognise that trade is a powerful driver of growth and benefit to citizens," Mr Trudeau said on Thursday.

Canada and the US had a bilateral trade deal that was superseded and suspended by Nafta. Canada's chief Nafta negotiator told lawmakers this week that the old agreement would kick in again if Nafta failed, although it would have to be re-implemented.

Starting talks with China could strengthen Mr Trudeau's hand in Nafta negotiations, demonstrating that the US's second-largest trading partner has other options. But a personal visit to Beijing - the second in as many years for Mr Trudeau - wasn't enough to overcome Chinese concerns about the "progressive" trade provisions Canada insists must be part of any deal.

Another issue under discussion was the role of state-owned enterprises, Mr Trudeau told reporters later Thursday.

In 2012, former prime minister Stephen Harper imposed restrictions on the acquisition of oil-sands companies by SOEs (ste-owned enterprises) after Cnooc Ltd bought Nexen Inc, of Calgary. Mr Trudeau said the Chinese government's involvement in strategic industries was "characteristic of their approach".

"That has particular implications when you have state-owned enterprises competing in the same sphere as private enterprises," Mr Trudeau said.

"Any discussion on trade as we move forward needs to reflect on the challenges, the opportunities, the advantages and the inconvenience when two systems that are different are trying to collaborate, so we can create benefits for both groups of citizens."

As at midday on Thursday, it appeared that Mr Trudeau would be leaving China without a breakthrough. Trade Minister Francois-Philippe Champagne spent two extra days in Beijing to pursue talks about the eventual framework of the agreement with Chinese Commerce Minister Zhong Shan and other officials, a Canadian government spokesman said.

Mr Champagne was expected to head back to Ottawa with Mr Trudeau on Thursday evening, as the Liberal government regroups on its next trade move.

"We believe a free trade deal will benefit both Canada and China," Gao Feng, a spokesman for the Chinese Commerce Ministry, told reporters on Thursday in Beijing.

"China will keep working with the Canadian side in practical and open attitude to promote the China-Canada free-trade zone, creating conditions to begin the trade talks as early as possible."

BLOOMBERG