Canadians will likely enter a fall election with the new North American free trade deal hanging in the balance, as Prime Minister Justin Trudeau said Monday he’s not rushing to ratify the pact in the face of U.S. political differences.

The Democrat-controlled U.S. House of Representatives began its five-week summer break on Monday July 29th, without introducing a ratification bill — a scenario Trump and his cabinet worked hard to avoid. The Democrats want changes to the United States-Mexico-Canada Agreement, or USMCA. They want to change provisions on labour, the environment, patent protection for drugs and enforcement, and have by all accounts been working hard with Trump’s trade czar Robert Lighthizer to move forward.

Ever-ticking political clocks in both countries mean U.S. lawmakers won’t be in a position to take even the most tentative steps forward on the deal before the start of Canada’s federal election campaign, which is set to begin by mid-September at the latest. A delay isn’t necessarily a bad thing, said Meredith Lilly, a Carleton University trade expert.

“The existing NAFTA, which remains in effect, is a better deal for Canada than the USMCA. So, the current situation is not a bad one for Canada, bearing in mind that ongoing uncertainty is generally negative for investment here.”

Trade experts in Canada and the U.S. are divided on whether the delays may raise the odds of Trump invoking the six-month notice period to withdraw from NAFTA — a threat he repeatedly made during the tense renegotiation of the pact that he pushed on Canada and Mexico.

Cyndee Todgham Cherniak, a Toronto-based international trade lawyer, said the Democrats are likely to want substantive changes that could leave the deal in limbo for many months. In the meantime, the Democrats will be sharpening their talking points on USMCA to use against Trump in the 2020 U.S. election. And that could set Trump off, she said.

“He might say that Prime Minister Trudeau was not effective in getting Congress to pass the USMCA prior to now. And if they don’t come back until September, and if the Democrats want to use this as a talking point in connection with the U.S. election, he might lash out at the Trudeau government.”

Lawrence Herman, a Toronto international trade specialist, said it is unlikely Trump would pull the plug on the new NAFTA so close to his own election campaign because it would sow economic uncertainty that wouldn’t benefit him politically.

“As well, if as many experts believe, the U.S. is heading into a period of economic sluggishness, the threat of NAFTA withdrawal and the uncertainty that would unleash in the period leading up to the 2020 election would probably be a disincentive to Trump embarking on such a move,” said Dan Ujczo, the Ohio-based trade specialist with the firm Dickinson Wright. Ujczo added that it is unlikely Trump would serve notice to withdraw, but even if he did, Congress or the courts could step in to delay that.

“The NAFTA will be in place through 2019. It is unlikely that companies will face a scenario where neither the NAFTA nor USMCA is in place during 2020,” he said.

“The question remains how much disruption will occur along the way. The president seems increasingly unwilling to threaten his greatest success — the economy — and that weighs in favour of no NAFTA withdrawal.”

Source: The Toronto Star