August 31, 2018 11:07 am

What will happen if there is no Canada-NAFTA deal Friday

WATCH: Chrystia Freeland says still looking for 'win-win' with NAFTA.

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As U.S. President Donald Trump’s NAFTA deadline for Canada looms Friday, there is a possibility that no deal will be achieved for Canada.

READ MORE: NAFTA decision day: Canada, U.S. forge ahead with negotiations as Donald Trump’s deadline looms

Trudeau said on Friday that “no deal is better than a bad [NAFTA] deal.”

But if no deal is achieved Friday, it may not be the end of NAFTA for Canada.

Although Trump has used do-or-die rhetoric for the deadline, the burden to achieve a complete deal does not rest solely on Friday. The details can be worked out until the end of September, when the final draft of the U.S.’s agreement with Mexico is due, according to international trade and customs lawyer Dan Ujczo.

WATCH: Freeland says ‘not there yet’ on NAFTA deal


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“All we need by today is a high level agreement that a deal is possible. We can continue to use the next 30 days to work out [the details],” said Ujczo.

Trump expressed optimism that there will be a deal with Canada, during an interview with Bloomberg News Thursday.

“I think Canada’s going to make a deal at some point,” Trump said. “It may be by Friday, or it may be within a period of time. But ultimately they have no choice.”

READ MORE: U.S. says Canada has made no concessions on dairy access issue as NAFTA deadline lingers

Foreign affairs minister Chrystia Freeland spoke to reporters Friday about the negotiation, saying that Canada will only agree to a good deal for Canada and “we are not there yet.”

The sticking points for the deal include the dairy industry, for which the U.S. wants Canada to reduce tariffs on dairy products, as well as Chapter 19, a guideline for dispute resolutions. Canada is pushing for trade disputes to go to a tribunal, rather than to Congress or the president, in order to balance power.

If a deal can’t be reached with Canada, then Trump has Congress to contend with, who will likely push strongly for Canada to be included, according to Ujczo.

“For the foreseeable future, Congress wants Canada to be part of this deal,” Ujczo said. “If things fall apart, the fight will then move to U.S. stakeholders and Congress.”

READ MORE: Donald Trump’s take-it-or-leave-it NAFTA threat against Canada has experts questioning legality

Ujczo explained that U.S. trade associations provide significant funding to Congress and therefore hold a lot of sway. These trade associations want Canada to be a part of the deal.

The support of trade associations will weigh heavily on Congress members’ minds with the U.S. elections coming up.

Beyond September, Congress would then have to decide whether a good deal with Mexico is better than no deal with Canada, Ujczo said. The U.S. will want to get it sorted by December 1, when a new government is appointed in Mexico.

Although Ujczo strongly believes that a deal will be achieved, in a worst-case scenario that Canada is excluded, he warned it would mean economic downturn for Canada due to business uncertainty.

WATCH: Freeland and Lighthizer still working on details of NAFTA as Trump’s Friday deadline looms

“[No deal would] continue to add to an unstable investment climate for Canada,” he said.

Trump has threatened to slap auto tariffs on Canada if a deal is not achieved Friday. This would spell catastrophe for Ontario’s economy if the tariffs fell in the 25 per cent range, according to Carleton University international affairs professor Meredith Lilly. Estimates say job losses will be more than 100,000 in Ontario.

However, the effects of no NAFTA for Canada would take time to arise as the current agreement would have to be unwound, with supply chains that have been “baked in” in accord with the current agreement having to be rewritten.

“We wouldn’t see day-to-day implications on cost of goods and services [quickly], and hopefully by then cooler heads will prevail,” Lilly said.

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