Nafta talks to resume amid US-Canada aircraft dispute

[WASHINGTON] A fourth round of talks to revamp a landmark North American trade pact was due to begin Wednesday amid inflamed tensions between Washington and Ottawa over a trade dispute involving Bombardier aircraft.

Canadian Prime Minister Justin Trudeau will meet US President Donald Trump at the White House on Wednesday afternoon, with negotiations on the North American Free Trade Agreement underway nearby in the Washington suburb of Arlington, Virginia.

Mr Trudeau's visit comes as US officials are seeking to impose retaliatory import duties on imports of certain Bombardier aircraft, claiming the Canadian government has unfairly subsidized them.

Ottawa in turn has threatened to cancel a multi-billion-dollar order of 18 Boeing F/A-18 Super Hornet fighter jets.

The United States takes in three quarters of Canadian exports. But trade relations have been strained since Trump's inauguration earlier this year.

The American president has repeatedly threatened to scrap Nafta, which established a free-trade zone between the Canada, the United States and Mexico in 1994.

With a nationalist economic agenda, Mr Trump has denounced the agreement as a job destroyer and a "disaster" for the United States, vowing to reverse off-shoring by renegotiating the treaty.

'POISON PILLS'

In an interview with Forbes magazine published Tuesday, Mr Trump said he preferred bilateral trade agreements.

"I happen to think that Nafta will have to be terminated if we're going to make it good," he told the magazine.

The talks to revise Nafta began in mid-August. Three previous rounds have taken place with no major breakthroughs announced.

Following the most recent round in Ottawa last month, negotiators said they had made progress on subjects such as telecommunications, competition policy, digital trade, regulation and customs and trade facilitation.

A major sticking point is the United States' US$64 billion trade deficit with Mexico, which Washington wants to reduce or eliminate.

"A shift toward protectionism would reduce trade and cross-border investment flows, harming global growth," the International Monetary Fund warned in a report on Tuesday.

IMF Economic Counsellor Maurice Obstfeld likewise warned on Tuesday that all three Nafta countries faced economic consequences if the outcome of the talks ended up disrupting trade relations.

Meanwhile, Thomas Donohue, president of the US Chamber of Commerce, said Tuesday that several issues under discussion could scotch the entire effort.

"There are several poison pill proposals still on the table that could doom the entire deal," he said in a speech delivered in Mexico, citing in particular a provision to allow the agreement to expire in five years unless all parties agreed to extend it.

"We all know that certainty and stability are crucial to successful trade relationships-and necessary to foster a pro-investment environment that drives economic growth and job creation. This clause would achieve the opposite effect."

Following his visit to Washington, Trudeau is due to travel to Mexico, where he will meet with President Enrique Pena Nieto.

AFP