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Canada could make some gains if NAFTA reopened: negotiators

[October 05, 2016] By Leah Schnurr

OTTAWA (Reuters) - Canada, fearful of talk by the U.S. presidential candidates to reopen the North American Free Trade Agreement, could use the opportunity to push for a better deal on worker mobility, dispute resolutions and other issues, Canadian negotiators of the original pact said.

Republican Donald Trump calls NAFTA the worst trade deal signed by the United States and Democrat Hillary Clinton has signaled a change of position on the 1994 pact she supported when it became law under her husband, former president Bill Clinton.

The agreement between the United States, Canada and Mexico is often used for political grist in U.S. election campaigns but altering it is a major concern for export-oriented Canada.

In 2008, Barack Obama campaigned on renegotiating the treaty with tougher labor and environmental standards, a pledge that fell to the wayside when he became president in January 2009.

But the idea has taken hold more strongly in 2016 and Mexico has said it is ready to update the treaty. Canada has said NAFTA is in the best interest of all three countries.

If Canada were forced to renegotiate, one issue it could target is the pact's investor-state dispute settlement provision.

The United States wanted it included in the original deal to protect U.S. investments in Mexico. It has since been used by American companies to sue Canadian federal and provincial governments. TransCanada Corp is using the provision to seek billions from the U.S. government for rejecting the Keystone XL pipeline.

That would probably be an area of mutual concern for Canada and the United States given those unintended consequences, said Derek Burney, Canada's former U.S. ambassador, who was involved in the original negotiations.

Labor mobility, a concern for Canadian technology companies, could be improved by updating the list of professions that allows workers to relocate between countries.

"We fell short in terms of what we wanted to achieve on labor mobility in the NAFTA," said John Weekes, Canada's chief negotiator, who added Canada should also push for improved access to the U.S. government procurement market.

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Production Associates inspect cars moving along assembly line at Honda manufacturing plant in Alliston, Ontario March 30, 2015. REUTERS/Fred Thornhill

Reopening NAFTA could give the Canadian government cover to phase out a domestic supply management system for the politically powerful dairy industry that has come under international criticism, negotiators said.

"I'd be secretly delighted if they came hard at us on supply management," said Burney. "Given the dairy industry and its weight in the United States, it's not easy to dismiss."

The system controls dairy prices and production, which critics say drives up consumers prices. The industry says it allows farmers to get stable prices, and noted Canada has preserved the system while negotiating several trade agreements.

Still, former negotiators warned Canada would not be working from a position of strength as it sought concessions.

"Ignoring everything else, yes, there could be an opportunity there," said Michael Hart, who advised on the original negotiations. "But in the real world, I'd be very cautious."

While Clinton has said she would rework the trade pact, Trump's threat to withdraw is a bigger concern in Canada.

"If we're in a situation where people are threatening they're going to walk out of trade agreements unless they can be renegotiated, then I think we're in a situation where it would be very difficult," said Weekes.

(Additional reporting by David Ljunggren; editing by Grant McCool)

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