US-Canada trade talks fell apart over fine print, says envoy

OTTAWA – US-Canada trade talks collapsed over a range of issues on which the written text of a potential deal was at odds with what the Canadian side believed it had agreed to, said Canadian Prime Minister Mark Carney’s top US envoy.

Mark Wiseman, Canada’s Ambassador to the US, said in an interview on Aug 23 that there was no one issue that led talks to collapse late on Aug 21, a development that triggered new tariffs and a potentially escalating trade fight. 

Wiseman likened the negotiations to a handshake deal to buy a house – only for the prospective buyer to learn appliances were not included, the furnace had no warranty, and neither the garage nor the yard was on the same property, and ultimately walk away. 

“As we drilled down, what we discovered was that what our understanding of what had been agreed to was quite different from what was showing up in the documents,” he said.

“When that kind of happens once or twice, it’s kind of understandable, but when it happens consistently, and every interpretation is the most negative interpretation”, then it “got to a point” where they walked away.

Wiseman’s comments come as the countries grapple with the sudden, jarring collapse of trade talks on Aug 21.

The US proceeded to apply a 50 per cent tariff on about US$20 billion (S$25.4 billion) in Canadian goods, and Carney announced retaliation that will take effect on Sept 8. The US is pledging to escalate if he proceeds.

The Canadian dollar was quoted as much as 0.5 per cent weaker as currency markets reopened in Asia, underperforming major peers.

The move pared last week’s 0.8 per cent rally that stemmed from a weaker greenback and indications that the two sides were nearing a deal.

“News over the weekend is certainly CAD (Canadian dollar) negative, and I think we will see plenty of volatility in the currency, especially once North America comes in and we get further expected comments from both sides,” said Nick Twidale, chief market analyst at AT Global Markets. 

“However, moves won’t be too excessive as we’ve all seen this movie before over the last couple of years, so I’m expecting some sort of a deal or resumption of trade talks to be announced during the week,” he added.

It is not clear whether negotiations will take place between now and then, but Wiseman said the timeline is not about creating an overtime period for talks. “I don’t think it should be viewed that way,” he said. 

Talks were bogged down, in particular, by a dispute over tariff treatment of medium and heavy vehicles, on which the US was resisting cutting tariffs.

Wiseman said Canada “needed medium- and heavy-duty vehicles to be included” in tariff relief. The issue affects General Motors and Ford Motor, two US automakers operating in Canada, he said. 

“That’s just something we could not accept because we want to protect the existence of an automotive assembly industry in Canada for cars, light trucks, you know, medium trucks and heavy-duty trucks.”

But he added: “This is not why the deal fell apart. That is a very specific example of one of a number of things where, you know, as the interpretation of the details became clear, it became obvious that there wasn’t going to be a meeting of the minds.” 

US Trade Representative Jamieson Greer said the deal would have offered Canada tariff reductions on steel, aluminium, automobiles and lumber, but blamed Canada for walking away. Carney said he walked away when the US demands became too great. 

Greer told The New York Times on Aug 22 that the deal would have cut the “majority” of Canadian steel exports to a 25 per cent tariff up to a quota, with anything above that remaining at 50 per cent.

The US would have lowered the aluminium tariff to 25 per cent without a quota.

It would also have cut the tariff on passenger vehicles, suspended the since-enacted tariffs and eliminated a lumber tariff.

A1sked to confirm that, Wiseman declined to get into details but called it “broadly accurate”.

“We’re disappointed,” he said. “We worked hard, but at the end of the day, the terms that were put forward on a deadline – that was created by the United States – it didn’t work for us.”

Carney said the US demanded that Canada constrain its ability to do separate trade deals with other nations.

Wiseman declined to fully elaborate, saying that the matter was not with any one country, such as China, but was broader.

The US “has changed its view of economic partnership”, and “in the face of that, Canada, among other things, has said that we will look to diversify”, he said.

“So we have to ensure that any agreement we would come to with the United States does not constrain our ability to create trading relationships, open and free trading relationships with other jurisdictions. But to be clear, this was not an issue about China.”

Language issue

Carney also said the administration was looking to curtail the use of French, one of Canada’s two official languages and a political lightning rod. Wiseman said the dispute pertained to digital services and US-based streaming services and levels of French-language content. 

Wiseman cast the matter as a red line.

“It is non-negotiable, in terms of our ability to protect – and to not just protect, but to be able to enhance and grow the French language in Canada, in Quebec and in the rest of Canada,” he said.

“Those that want to do business in Canada, be it digital or anything else, must respect that fundamental reality.”

Carney also said the US administration was not united in its approach, signalling that Canadians were getting different and dizzying messages from Greer, who is US President Donald Trump’s top trade official, and Commerce Secretary Howard Lutnick, who oversees the so-called Section 232 sectoral tariffs that were a core part of talks. 

US-Canada ties have frayed substantially during Trump’s second term, with the President pressuring Canada to become the 51st state and applying tariffs that fly in the face of the trade deal he signed in his first term and related side letters that contained pledges he has since abandoned. 

The US leader said in a social media post early on Aug 23 that Canada “wants the benefits of being a state, without being one”, but has otherwise said nothing since the collapse of talks.

One of his Cabinet officials, Transportation Secretary Sean Duffy, said on Fox News that Canada is “foolish” to think it can win a trade war with the US, but Trump’s former vice-president Mike Pence criticised the measure. 

Pence critical

“American businesses and American consumers pay American tariffs,” Pence said on CNN’s State Of The Union. “The last thing we need right now, as our economy is getting back on its feet, is a trade war with Canada.”

Pence, who fell out with Trump after the Jan 6, 2021, riot by the President’s supporters at the US Capitol, said his advice would be: “Drive a hard bargain, but let’s pursue free trade with free nations, most especially our trading partners to the north.”

Wiseman declined to say whether Canada was open to restarting talks, but said communications with the administration continue and that the talks were cordial throughout.

Wiseman was hosting guests at the embassy in Washington on Aug 23 to watch the Freedom 250 Grand Prix race taking place along Pennsylvania Avenue.

“We’re just not willing, at the end of the day, to accept terms that were unfair, uneconomic and actually, you know, called into question the reliability of the deal,” he said.

“Because you know one of the things that you’d hate to see happen is you agree on something and then, after agreeing to it, it gets undermined.” BLOOMBERG