U.S. governors are wooed on NAFTA — by Canada and Mexico

Providence, R.I. — President Donald Trump has vowed he’ll pull out of the North American Free Trade Agreement if he doesn’t get the changes he wants. So Canada and Mexico have found a workaround: reach out directly to U.S. governors, local lawmakers and industry leaders in a bid to save NAFTA.

Canadian Cabinet and Parliament officials have held more than 170 meetings with senior U.S. officials in 23 states between Inauguration Day and the end of last month. They’re focusing on big cities, coastal states, and Rust Belt towns throughout Michigan, Ohio and Pennsylvania with economies that rely on cross-border trade.

And in Mexico, an extensive private-sector effort has been underway pairing up major U.S. industry groups such as the Chamber of Commerce and the National Association of Manufacturers with their Mexican counterparts to ensure that organizations in both countries are on the same page.

The goal is to box in the U.S. president with pressure from governors, mayors and business leaders to show how valuable NAFTA has been — state by state, district by district. The hope is that they can build groundswell of local support in the United States to pressure the Trump administration not to do anything radical to the 23-year-old trade agreement.

The Office of the U.S. Trade Representative plans to reveal the Trump administration’s NAFTA negotiating targets on Monday. With talks expected to begin 30 days after that, the preemptive efforts to line up American allies and spokespeople will aid in any defense against potential new barriers that the U.S. proposes.

“Canada has done a good job on the charm offensive," while Mexico has been involved in its own "active engagement strategy," said international trade lawyer Dan Ujczo, who focuses on U.S.-Canada bilateral relations.

"If all politics is local, all trade is personal," he added.

Trade observers and experts on both sides of the border described an elaborate, targeted engagement effort that has involved sending various government officials and corporate executives to key congressional districts to highlight how many jobs NAFTA has created in the district, or what percentage of exports were sent to either Canada or Mexico.

By collecting that data and making it readily available to governors and other regional or local representatives, Canada and Mexico are hoping to illustrate the various effects of any potential changes to NAFTA. For instance, they will be able to use the information to pinpoint which U.S. states or companies would be hit the hardest by, say, heightened tariffs or tighter rules of origin.

“Their working premise is that members of Congress are going to have strong opinions about NAFTA,” said Scotty Greenwood, a senior adviser for the Canadian-American Business Council. “So the government of Canada wants to make sure that, as members are forming their opinions, they have an appreciation for how integrated their economy is with Canada.”

The effort continued into the National Governors Association’s annual summer meeting in Providence, R.I., this week, where Canadian Prime Minister Justin Trudeau gave an impassioned keynote address on Friday, emphasizing the need to preserve a trade deal and a bilateral trade and investment relationship that supports millions of North American jobs.

"The relationship between our countries is historic. It is a model to the world," Trudeau told the governors. "It is of critical importance for people on both sides of the border that we maintain and indeed improve it."

"We must get this right," he added.

Canadian Foreign Minister Chrystia Freeland also attended the event, during which Trudeau sat down to talk trade one-on-one with a series of governors over the course of a single afternoon, including Iowa’s Gov. Kim Reynolds, a Republican, and Colorado’s Gov. John Hickenlooper, a Democrat.

Across the hall, state- and provincial-level groups from both Canada and Mexico gathered with their U.S. counterparts to present a trilateral, united front ahead of the start of the talks. The joint appearance is aimed in part to present a united front: that they want to preserve a robust trade relationship regardless of conflicting messages coming out of the White House.

The Rhode Island visit, plus ongoing state-level outreach from Ottawa, comes on top of continued discussions between the prime minister’s office and the White House. Trudeau and Vice President Mike Pence sat for a bilateral meeting in Providence on Friday, which the Canadian leader described as "a great discussion about our shared interests."

"One of the things that I’ve highlighted from the very beginning is that we understand that engaging in multiple layers and on multiple levels with the various elements of American government and the economy is extremely important," he added.

The all-out charm offensive has been many months in the making. Trudeau has created “war room” inside the prime minister’s office dedicated to bilateral issues. At the helm of that office is Brian Clow, who previously worked as chief of staff to Freeland when she served as Canada’s trade minister.

“They’re kind of adapting their staffing structure to be nimble enough to deal with a big NAFTA conversation,” Greenwood said.

Various Canadian premiers have also made visits to Washington — or, if they can’t come themselves, have hired “K Street-type people” to mind their interests and keep a close eye on the United States’ evolving position on NAFTA, Ujczo said. “Everybody’s trying to read the tea leaves of the administration,” he added.

The other challenge for Canada and Mexico has been preparing their own set of offensive interests for renegotiation, which they have not revealed themselves.

Moises Kalach, a Mexico City-based businessman who leads private-sector engagement with Mexico’s government on trade issues, said his team had prepared by mapping out all potential objectives the U.S. might pursue by dividing policy areas into three buckets.

Those include areas currently covered under NAFTA, those that had been negotiated in the Trans-Pacific Partnership, and those that administration officials have mentioned in passing but which do not fall into either category, such as ways to reduce the trade deficit. A team of analysts has then analyzed each bucket and prepared data and negotiating points to help them respond to potential U.S. proposals.

“With this matrix, basically you have most issues covered,” Kalach said, estimating that at least 90 percent of whatever the U.S. might lay out in its negotiating objectives has already been analyzed by his team. “Maybe some issues are not as in depth as I think they’re going to be, but we’re ready for the negotiations.”

The preparation on both sides of the border comes as the embattled U.S. administration continues to navigate internal differences of opinion to sort out its own objectives.

A document outlining the U.S.’s negotiating positions expected on Monday — mandated under trade legislation to be released at least 30 days before talks can begin — should give the most detailed indication yet of what the administration wants to see in NAFTA 2.0. But there has so far been disagreement over how narrow Trump might want the objectives to be.

“People in the administration are very nervous about the notion that he’ll want them to put on the table U.S. negotiating objectives that are going to be impossible for Canada and Mexico to agree to,” one Washington trade association source told POLITICO.

“There are going to be certain favorite ideas that the [Peter] Navarros and [Steve] Bannons of the world have that they want to use NAFTA for, and it’s everything from going after value-added tax to what’s an acceptable trade deficit,” the source said, referring to two of Trump’s more nationalistic advisers on trade. “But those would be completely and totally non-starters.”

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