Canada to seek to join South America trade pact

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Canada will open trade talks next month with the four-nation Mercosur trading bloc in South America as part of an ongoing push to diversify its trade partnerships, a senior official said Friday.

It comes as its main trading relationship with the US – the North American Free Trade Agreement (NAFTA) – falters, and after Ottawa announced it would sign onto the Trans Pacific Partnership (TPP).

"We intend to open negotiations for a potential agreement with Mercosur in Paraguay the day after the signing of the TPP, which will take place in Chile on March 8," the official said.

In addition to Paraguay, the bloc includes Argentina, Brazil and Uruguay.

Canada currently trades about 6 billion US dollars annually with the Mercosur bloc, which is the second-largest in the hemisphere after the North American Free Trade Agreement (NAFTA).

This is dwarfed by bilateral Canada-US trade, which topped about 621 billion US dollars last year, with 70 percent of Canadian exports going to its southern neighbor, according to Canadian government figures.

But after six rounds of "slow" talks to revamp NAFTA, which Washington has threatened to dump, the future of Canada's preferential access to the US market is now in doubt, with the parties deadlocked over Washington's hardening protectionist stance.

Canada already has free trade deals with several South American nations including Mexico, Colombia, Peru and Chile.

Mercosur membership would give it greater access to eastern South America and its biggest economies, with a total of 260 million consumers.

Canada had initially balked at joining the TPP last year, acting as the main holdout in negotiations after US President Donald Trump decided in early 2017 to go it alone under his "America First" policy.

But it did an about-face in January as the prospects of a new NAFTA deal appeared to dim.

Among the sticking points in the NAFTA negotiations are Washington's demands for a "sunset clause" after five years, and for more US auto parts in vehicles sold in North America.

The Trump administration says the sunset clause, causing NAFTA to expire every five years unless all three countries agree it should continue, is to ensure the pact stays up to date.

But Mexico and Canada insist there is no point updating the pact with such a threat hanging over it, arguing the clause would stunt investment by sowing too much uncertainty about the future of the agreement.

Source(s): AFP ,Reuters