Some Trump administration officials have talked about setting steel and aluminum quotas for Canada and Mexico, which MacNaughton said would translate into distorting trade. Under exclusions the U.S. has given already, China has more than 20 times the exclusions Canada was granted by the U.S.

"When the stated purpose of these tariffs was to curb overproduction by countries like China, I find it difficult to understand why it is being imposed on Canada," MacNaughton said.

For 15 straight years, the U.S. had a surplus with Canada on imports-exports of steel products. MacNaughton noted, with a little irony, that the U.S. trade surplus ended last year when U.S. exports to Canada fell by $800 million. "So my question is, how's that program working for you so far?"

In terms of aluminum, MacNaughton said, at peak capacity, the U.S. aluminum industry can only produce about 25% of its aluminum needs. The question then becomes where does the U.S. want to get its aluminum?

"If you put quotas on Canada, it necessitates that imports will come from other places like Russia, China, Kazakhstan, and how does that enhance U.S. national security?" the ambassador said. "So we think steel and aluminum quotas make no sense."

Canada is facing some time constraints on the USMCA, MacNaughton noted. The Canadian Parliament adjourns June 15 to campaign and will not reconvene until after elections in October. MacNaughton said it's not a good idea to go into the election with the USMCA hanging out there unratified because it would stir the political pot.

"If this is unresolved, if the 232 tariffs are still in place, then the discussion about our relationship with the United States of America will be a central part of the campaign, and it won't be a really positive discussion, I think," he said.

The ambassador added that it's important for the U.S. and Canada to maintain their geopolitical alliance because Russia is considering establishing military bases in the Arctic. China also continues to bring political pressure against Canada over the arrest of a Huawei executive by Canadian officials at the request of the U.S. China has arrested at least two Canadians as spies and also cut off imports of Canadian canola and petroleum. MacNaughton said it's important during the U.S.-China talks for U.S. officials to help Canada address these issues, especially the arrests of Canadian citizens.

"We face more challenges internationally today than I've ever seen in my life," MacNaughton said. "It's a time when the word 'ally' actually has substantial meaning."

While U.S. officials appear reluctant to deal with the tariffs, MacNaughton added U.S. officials are consistently seeking Canada's help with Venezuela as well.

"It is that kind of thing that is causing a real sort of irritation and befuddlement as to why?" MacNaughton said. "If our two countries can't get along, what does that say to the rest of the world?"

Approval of the USMCA in the U.S. Congress hinges partially on Mexico passing new labor laws that coincide with the trade deal. House Speaker Nancy Pelosi, D-Calif., raised that point last week. MacNaughton said it was part of the agreement that Mexico would update its labor laws.

"That was part of the negotiations, and I think an important part of it," he said.

Outside the tariff argument, critics of the USMCA deal don't think Canada opens up its dairy or poultry markets enough under the new deal. Without an agreement, Canada would keep the Class 6 and Class 7 pricing schemes for milk and maintain the current wheat-grading program that discounts U.S. wheat. Mexico would also maintain substantial wage advantages in automobile manufacturing compared to Canada and the U.S., MacNaughton said.

"I don't think there is any question whatsoever that it (USMCA) is an improvement over the status quo," he said.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

(AG/CZ)

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