MONTREAL—The sixth round of NAFTA talks began Tuesday with dramatic twists in the trade plot as Canada and Mexico signed a new 11-member transpacific trade pact without the U.S., and President Donald Trump took a hard swing at America’s commercial competitors.

Canada’s and Mexico’s courting of other trade partners culminated in a new Pacific Rim trade deal that surprised key industry stakeholders and became the backdrop to the formal start of a crucial negotiating round for the troubled North American free trade agreement.

What first appeared to be a negotiating success later looked like a potentially hollow victory as reality sank in: Canada has embraced a new deal that makes significant concessions and will allow more foreign competition for its auto industry and supply-managed agricultural sectors, such as dairy, eggs and poultry. Critics say it will hamstring negotiators here.

“In order to send Trump a message that we’re free traders, we just undermined everything that’s going on here,” fumed Unifor president Jerry Dias.

“NAFTA is 24 per cent of the world’s GDP. We’ve got much more skin in the game as it relates to our trading relationship with Mexico and the United States, and we just signed a deal that we will benefit very little from but severely undermine what it is we are trying to accomplish.”

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Prime Minister Justin Trudeau said it was “a great day for progressive trade around the world.”

But in Washington, U.S. President Donald Trump imposed stiff new tariffs on imports of washing machines and all solar products, saying the moves “uphold a principle of fair trade and demonstrate to the world that the United States will not be taken advantage of anymore.”

Tariffs as high as 30 per cent on solar panels will affect both Canada and Mexico, though the biggest impact will be on Chinese manufacturers, Bloomberg reported.

Trump repeated his warning about NAFTA.

“NAFTA’s moving along pretty well,” he said. “I happen to be of the opinion that if it doesn’t work out, we’ll terminate it … we’ll see how it works out.”

Canada’s chief negotiator, Steve Verheul, declined to comment on Trump’s remarks as he met reporters in the hallway of the downtown Hotel Bonaventure, where multiple teams of negotiators are meeting.

“We have high hopes for making progress this week, but of course it depends on the other partners as well,” he said.

Verheul and Mexico’s chief negotiator, Kenneth Smith Ramos, said the new Trans-Pacific Partnership (TPP) agreement shows both countries are serious about “modernizing” trade deals, including NAFTA.

“What it does is send a signal that we can work together with Canada in the context of international trade negotiations and we are working very closely with Canada in this negotiation, as well as within NAFTA” said Smith Ramos.

Yet despite declarations by Canadian officials that Ottawa is open to compromise on at least three of five areas it has dubbed American “poison pill” proposals, Verheul made clear that Canada has no intention of bringing forward a formal counterproposal to rebuff U.S. demands for greater protections for its domestic auto industry.

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Current rules require that in order for auto vehicles to trade tariff-free within the NAFTA zone, they must be made of 62.5-per-cent North American content. Auto parts must be 60 per cent made in North-America. The current pact does not specify how much must be made in any of the three NAFTA partner countries.

The U.S. wants much higher North American “rules of origin.” It is seeking a guarantee that autos would contain at least 85 per cent North American content, and that 50 per cent of autos and auto parts would be manufactured in the U.S.

Canada says that is a non-starter, despite its agreement in the Pacific trade deal to a provision for just 45-per-cent TPP content for autos, and 35-per-cent TPP content for auto parts in order to move freely within the new trading zone.

A Canadian official, speaking on condition of anonymity, said there have never been country-specific rules of origin requirements in any free trade agreement. “It’s not about ideology or politics,” said the official.

Verheul and Smith Ramos said the TPP negotiation is entirely separate from NAFTA and its terms won’t dictate what happens at the table here.

“It depends on the overall balance of the negotiations. If we’re getting concessions of interest to us either being withdrawn or not provided in this negotiation, we’re hardly going to show flexibility in many of our sensitive areas,” said Verheul.

Yet many stakeholders are skeptical.

“We’re a highly integrated industry in North America. NAFTA was hugely responsible for integrating our industry,” said Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association, in an interview. “They’re linked, and we’ve always said we shouldn’t proceed with TPP as it relates to autos before we have some sightline on NAFTA.”

Canadian officials say Ottawa is open to U.S. demands for a periodic review of the deal — but not a five-year kill or “sunset” clause — and is open to changes to the dispute resolution process to settle corporate trade challenges under NAFTA’s chapter 11. Canada remains staunchly opposed to U.S. demands on agriculture. One official said the U.S. goal was aimed at dismantling Canada’s supply management system for products such as dairy, poultry and eggs.

However, that too may now be more complicated with TPP concessions to allow tariff-free imports of up to 3.25 per cent of the Canadian market.

“It simply means that there’s no more room to manoeuvre,” said Jacques Lefebvre, head of the Dairy Farmers of Canada.

“How much more is the government intending to carve out? Because I can tell you from the dairy sector, the answer is zero. No more.”

With files from Daniel Dale and Bruce Campion-Smith

White House Press Secretary Sarah Sanders comments on the state of NAFTA negotiations and the priorities of U.S. President Trump. Sanders made the comments on January 23. (YouTube/The White House)

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