Andy Blatchford, the Canadian press
Published Thursday, November 22, 2018, 9:59 AM EST
Last Updated Thursday 22 November 2018 15:27 EST
OTTAWA – Canada was able to sign a new North American free trade department, even with striking US customs on Canadian goods still in force, Finance Minister Bill Morneau said Thursday, by just over a week to go before an important deadline for the deal.
Morneau commented on Thursday in a speech when he spoke of concerns he had heard from the business community about trade.
"Of course, the situation improved when we signed the new NAFTA – or when we will sign the new NAFTA, we hope next week," Morneau told the audience, referring to the new agreement between the United States of Mexico and Canada or the USMCA.
The three countries, in principle, reached agreement on the trade pact which, if ratified, would replace the North American Free Trade Agreement. They want the agreement signed before December 1 when a new president takes office in Mexico.
Following his speech to Canada's economic club in Ottawa, Morneau was asked if the government would still consider signing the new continental trade if the US retains its heavy import taxes on Canadian aluminum and steel.
Morneau said that Canada is still negotiating in an attempt to get the "unfair" US customs lifted – but insisted that they will be treated separately.
"Our approach has been to ensure that we have a stable and safe business sector to make investments and that means we have to sign the new NAFTA we received, which is a good deal for the future of our three economies," Morneau told reporters.
At the same time, he acknowledged that Canada has to deal with the "challenging" steel and aluminum tariffs and an ongoing dispute about how Canada manages its hardwood industry.
"They are ongoing and critically important issues that we work with Americans to resolve," said Morneau. "We will not make a set of negotiations depending on the other and most importantly we want the stability of a new NAFTA we have been able to deliver to Canadians."
Morneau also said there is work behind the scenes to ensure that the legal document that defines USMCA is exactly as agreed. He added that he has every reason to believe that the work is moving at a good pace.
Canadian officials have told USMCA, agreeing that after 13 months of negotiations, is scheduled for a low-key signing when the three countries gather next Friday at the G20 meetings in Buenos Aires this year.
Trade tensions that occurred during the talks have not yet fallen, largely because Canada and Mexico both continue to be covered by the Trumpad Administration tariffs. Canada and Mexico have responded with their own taxes on imports from the United States
Sources near the ongoing discussions have said that Canada and the United States are far from reaching any sort of agreement and expect US talks with Mexico to go down to management before the end of next week.
The liberal government has met pressure from the opposition not to sign while the duties remain.
Morneau's speech came one day after he released a fall financial statement packed with billions of dollars worth tax incentives for corporate Canada.
Ottawa's long-awaited plan to help the country to compete with the US for investment dollars comes as a result of major US tax and legislative reforms that many in the corporate community have warned Canada's edge as investment targets.
The biggest involvement of Morneau's tax changes would enable companies to immediately write off the total costs of certain types of machinery and equipment and allow companies of all sizes and in all sectors to pay a greater proportion of newly acquired assets.
A stronger economy has given Ottawa approximately $ 22 billion in additional tax space in the next few years, compared to what federal forecasts forecasted last February, thanks to a combination of higher revenue and lower costs.
But the new initiatives will take advantage of all this space and also contribute to something larger than expected annual deficiencies, which begin next year.
The new depreciation alone is expected to lower federal revenue by about $ 14 billion in the next half-year.
The business community had called on Morneau to slash corporate income taxes, as much as Trump has done in the United States. However, US tax cuts are expected to significantly increase US federal deficits.
However, some consider Ottawa's competitiveness plan to go far enough – an argument that Morneau addresses.
"Corporate executives compare what we did with what the United States did, creating a very significant US deficit and raising their debt," said Morneau on Thursday.
"We have taken a much more responsible approach, which guarantees continued investments while we are taxpayers."
The fiscal update does not contain a timetable to eliminate Liberal deficits, which is now expected to be over $ 18 billion in each of the next few years.
The government has drawn criticisms of conservatives and some economists almost daily to not provide a timeline to balance the budget, especially when the economy is close to full strength.
There are warnings that the government could face a very difficult financial situation when the next economic downturn arrives, costs rise and revenues slip.
Following the elections in 2015, the Liberal Government drew promises to run annual deficits of no more than $ 10 billion and balance the books by 2019. Instead, it has focused on reducing net debt / equity ratio – a measure of how hard the debt is – each year.
– with files from James McCarten in Washington