Mary Ng, who vaulted to cabinet-level last week to take on an existing small business portfolio as well as a new one on export promotion, said she wants to help companies take advantage of new trade deals with the European Union and Pacific nations that have specific provisions to welcome small business trade.

Prime Minister Justin Trudeau’s cabinet shuffle put trade diversification front and center amid rising tensions with the U.S., Canada’s largest trading partner, with Ng and new Trade Minister Jim Carr tasked with finding new markets for Canadian goods.

Threats by the Trump administration to end the North American Free Trade Agreement (NAFTA) have shaken Canadian exporters. Canada sends 75 per cent of its goods exports to the U.S., which imposed tariffs on Canadian steel and aluminum at the end of May and is now mulling punitive measures against autos.

Ng, the MP for the Toronto-area riding of Markham-Thornhill, says Canada has other options.

“Right now Canada has preferential market access to 14 trade agreements and 51 countries. This is a real opportunity for us. The U.S. continues to be an important export market to us, but I also think there is a great opportunity to enable our small business to access these other markets as well,” Ng said in an interview with Reuters.

Ng said both the new 11-nation Trans-Pacific trade deal and the EU-Canada Comprehensive Economic and Trade Agreement have chapters devoted to increasing access for small business.

She said the new cabinet ministry can “provide them with resources” to access the new markets beyond the U.S., but gave no specifics on funding or programs that will drive the export diversification.

Carr said last week that “an awful lot of affection for Canada” will help the government’s push to diversify exports away from the U.S.

Still, Sean Speer, a senior fellow for fiscal policy at the Macdonald-Laurier Institute, a non-partisan think tank, said the integration of U.S-Canadian supply chains as well as the shared language and culture between the two countries make it hard to change the reliance on the American market.

“It’s not that I’m opposed to trade diversification or the idea we should engage new markets… I’m just skeptical of the idea it’s going to lead to a fundamental re-organization of trade patterns,” Speer said.

— Andrea Hopkins is Reuters’ Ottawa bureau chief.

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While the European Union immediately drew up a list of U.S. products from bourbon to blue jeans to hit if Trump follows through on a plan to impose global duties on aluminum and steel, Canada has gone with equivocation.

“We’re making sure we take all discussions around trade with the United States in a measured way,” Finance Minister Bill Morneau said Tuesday.

“From our perspective the way to deal with a partner, to deal with our neighbour, is to be constructive. We’re going to continue to be strong allies of the United States, we’re going to continue to be neighbours, and we’re taking that as our frame to negotiate for a better outcome.”

From the outset, Prime Minister Justin Trudeau has taken a decidedly sunny approach to the unpredictable president, launching an outreach campaign to save NAFTA one encounter at a time with as many U.S. lawmakers, governors and administration officials as possible.

The Liberal government’s approach is largely backed across the political and business spectrum but pressure is building to abandon the measured tone.

“Trump has already treated China and Russia with more kid gloves than us. Why is that?” said John Weekes, Canada’s chief negotiator for the original NAFTA deal.

Weekes said Canada should draw up a long list of possible targets for retaliation, and publish it for public comment in a bid to ramp up U.S. concern about the pain of a trade war.

“I’d be the first to agree that retaliation is a mug’s game, but how do we help our allies in the United States make the case to change the course of policy?” he said.

Labour, too, is demanding more action.

Jerry Dias, president of Canadian private-sector union Unifor, said the government’s keep-calm approach had been the right one up until Trump’s planned steel tariffs. Canada should walk away from the NAFTA table if it is not exempted from the tariffs, he said, and put tariffs on U.S. steel exports in kind.

“There comes a time where you have to say ‘enough is enough’ because the U.S. does not want to deal, that is crystal clear,” he said.

A source familiar with Canadian government thinking said retaliatory measures were “a live conversation going on at this moment” and would be deployed if the tariffs are implemented. Trump has linked the tariffs with ongoing NAFTA negotiations.

Beyond the divide-and-conquer strategy of the outreach tour in the U.S., those close to the trade file say that dealing with Trump brings its own imperatives.

“We have to keep calm. It’s pointless talking in public about the ways you might retaliate until you have to act,” said a second source familiar with the issue who spoke on the condition of anonymity.

“As for people who stomp around and say ‘We will strike back’ — why would you do that? It just irritates the president.”

— Andrea Hopkins is Reuters’ bureau chief in Ottawa; additional reporting by Leah Schnurr in Ottawa and David Ljunggren in Mexico City.

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Foreign Minister Chrystia Freeland, giving the most substantive outline yet of Canada’s goals, said she was “very optimistic” the negotiations would be a success.

North American Free Trade Agreement members Canada, Mexico and the U.S. hold their first session in Washington on Wednesday.

Canada, heavily reliant on exports to the U.S., opposes Washington’s push to scrap the so-called Chapter 19 dispute settlement mechanism, under which binational panels made binding decisions on complaints about illegal subsidies and dumping. The U.S. has frequently lost such cases.

“Canada will uphold and preserve the elements in NAFTA that Canadians deem key to our national interest — including a process to ensure anti-dumping and countervailing duties are only applied fairly when truly warranted,” Freeland said in a speech at the University of Ottawa.

Noting that Canada had withdrawn its chief negotiator from 1987 talks on a bilateral trade treaty with the U.S. over the same issue, Freeland said “our government will be equally resolute.”

Freeland later sidestepped reporters’ questions about whether maintaining Chapter 19 was a make-or-break issue for Canada, saying she would let her U.S. counterparts know how important the matter was to Ottawa.

Trade among the three nations has quadrupled since NAFTA came into effect in 1994, surpassing US$1 trillion in 2015. But U.S. President Donald Trump regularly calls the treaty a disaster and has threatened to walk away from it unless major changes are made, citing U.S. job losses and a trade deficit with Mexico.

Toronto trade lawyer Mark Warner said there few surprises in Freeland’s announcement, given Ottawa had already signaled its stance on major issues.

“It’s the beginning of a negotiation. Everybody expects posturing,” he said by phone, noting Washington had reacted calmly to previous Canadian statements about the importance of dispute settlement.

Freeland, who predicted there would be moments of drama during the talks, said Canada wanted a progressive trade deal featuring stricter environmental and labour standards as well as a focus on climate change, a concept Trump has little time for.

“One needs to be ambitious and put everything on the table… what do we have to lose? Nothing,” said Patrick Leblond, a University of Ottawa professor who is a foreign policy specialist.

Outreach campaign

Canada, like Mexico, sends the majority of its exports to the U.S. and would be hurt by U.S. protectionist moves.

The U.S. runs a slight surplus in trade of goods and services with Canada, which has mounted a major outreach campaign to persuade U.S. business leaders and politicians that NAFTA is a success.

“American partners have been listening,” Freeland said. “They understand… our relationship, the greatest economic partnership in the world, is balanced and mutually beneficial.”

Freeland stressed that Canada would protect tariffs and quotas that keep domestic dairy prices high and imports low. U.S. dairy farmers strongly dislike the system.

A modernized NAFTA should take into account technological advances and make it easier for professionals to move from one member nation to another, she added.

Mexico’s goals include prioritizing free access for goods and services and greater labor market integration, according to a document seen by Reuters.

— Reporting for Reuters by Andrea Hopkins and David Ljunggren in Ottawa.

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Trump had warm words for Canadian trade following a meeting with Prime Minister Justin Trudeau on Monday, but his call for major changes to the North American Free Trade Agreement to target Mexico stymied experts.

“I can’t see how it’s possible at all. It would be very complicated to do and I don’t think Mexico would… ever go along with it,” said Mark Warner, a trade lawyer and principal at MAAW Law in Toronto.

Canada and Mexico send the bulk of their exports to the United States under NAFTA.

One senior Canadian government official, asked how the agreement could be tweaked for one partner and changed in a major way for another, admitted frankly, “I don’t know.”

Trump spoke after his first meeting with Trudeau, who is trying to sell the merits of NAFTA while opposing a border tariff, an idea circulating in U.S. political circles that could badly hit Canadian industries.

Warner said that if the U.S. government decided to impose the tariff, “the consequences of that could be described as a tweak but the significance of it would be major.”

Matthew Kronby, an international trade lawyer at Bennett Jones in Toronto, said “it is very hard to tease apart the elements of the deal that I suppose Trump might think are a disaster with Mexico while leaving it intact with Canada.”

Officials say that while Trump did not reveal any details about his intentions on NAFTA, Canada would suffer collateral damage, whatever the administration pushes for.

“We cannot be untouched or unscathed by this,” said one person familiar with the matter.

Separately, another official working on the bilateral trade file said that once talks started, the U.S. dairy industry was set to demand Canada dismantle its supply management system of tariffs and taxes that keep out most dairy imports, including those from the U.S.

“That could be a very unpleasant conversation,” said the official, who asked to remain anonymous because of the sensitivity of the situation.

Trudeau’s ability to make concessions is limited since all of Canada’s major political parties have vowed to protect supply management. Holding out too firmly though could irritate the American side, which might demand concessions elsewhere.

— David Ljunggren and Andrea Hopkins are Reuters’ political correspondent and bureau chief, respectively, in Ottawa.

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Trump has pledged to renegotiate the North American Free Trade Agreement (NAFTA) linking the economies of the U.S., Mexico and Canada to make the terms more favorable to Americans.

At a joint news conference with Trudeau after White House talks, Trump said his biggest concern with NAFTA was the U.S. trade relationship with Mexico, which he has frequently accused of stealing American jobs.

“We have a very outstanding trade relationship with Canada. We’ll be tweaking it,” Trump said.

“It’s a much less severe situation than what’s taking place on the southern border. On the southern border, for many, many years the transaction was not fair to the United States,” he said.

Trump said the U.S. and Canada were stronger when they joined forces in matters of international commerce, and both countries benefited from having more jobs and trade in North America.

“We should co-ordinate closely — and we will co-ordinate closely — to protect jobs in our hemisphere and keep wealth on our continent, and to keep everyone safe,” Trump said.

Trudeau carefully steered around questions about the Canadian trade relationship with the U.S. in what was his first meeting with the new president. He said he expected each country to always remain each other’s most essential partner.

“There have been times where we have differed in our approaches and that’s always been done firmly and respectfully. The last thing Canadians expect is for me to come down and lecture another country on how they choose to govern themselves,” Trudeau said.

Trump’s vow to renegotiate NAFTA has unnerved Canadian officials, even though he has singled out Mexico in his criticism of the free trade deal. Canada sends 75 per cent of its exports to the U.S.

Canadians have become more supportive of NAFTA since Trump’s election victory on Nov. 8, a poll from the Angus Reid Institute showed on Monday. Forty-four per cent of the 1,508 surveyed said NAFTA had benefited Canada, up from 25 per cent from a poll last June.

Trudeau, when asked about Canadian firms’ concerns about possible changes to NAFTA, said: “It is a real concern for many Canadians because we know our economy is very dependent on our relationship with the United States.

“Goods and services do cross the border each day…we have to allow this free flow of goods and services and we have to be aware of the integration of our economies.”

Trudeau had a strong rapport with former Democratic President Barack Obama, prompting pundits to describe their relationship as a “bromance.”

Soon after Trump put a hold on allowing refugees into the U.S. and temporarily banned travelers from seven Muslim-majority countries in an executive order on Jan. 27, citing the need to head off attacks by Islamist militants, the Canadian prime minister took to Twitter to say refugees were welcome in Canada.

‘Huge win’

Analysts said Trudeau, who has strong incentives to build a relationship with Trump given rising anti-trade sentiment, is bound to be happy with the first meeting.

“I thought it was a huge, huge win. The worst-case scenario is we wound up with an Australia moment, when a relationship that should be on solid ground takes a bad turn,” said Carlo Dade, director of the Centre for Trade and Investment Policy at the Canada West Foundation.

“Instead, we actually got an endorsement of North American jobs, of Canada-U.S. jobs, working together, no “America First” — just the opposite,” he added.

Details about a tense telephone call late last month between Trump and Australian Prime Minister Malcolm Turnbull had created wariness. The Washington Post, citing unidentified senior U.S. officials, said Trump abruptly ended a phone call with Turnbull, even though Australia has long been a staunch U.S. ally.

David Wilkins, former U.S. ambassador to Canada, said the priority of the meeting was to set a positive tone, and that was accomplished.

“The president’s comment on the economy and creating jobs together was a very positive sign for Canadians, especially those that had been concerned about the trading relationship,” said Wilkins. “I think it was a win-win for both countries.”

— Andrea Hopkins is the Ottawa bureau chief for Reuters. Additional reporting for Reuters by Steve Holland in Washington and David Ljunggren in Ottawa.

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Amid warnings from the Bank of Canada on Wednesday that protectionist policies brought in by Trump could drive companies to invest in the U.S. rather than Canada, executives said their search for options has already begun.

Canadian exporters are not alone, with global business leaders talking up the benefits of local production to shield themselves from criticism from Trump, who will be sworn in as president on Friday.

“We’re a Canadian company, we like to build things in Canada and export them… but you can’t sell stuff and not make money,” said Jim Rakievich, chief executive of Edmonton-based McCoy Global, which makes oil and gas industry equipment.

“We could move our production down into the U.S. fairly quickly, we could absorb that production (in our U.S. plants) if we had to.”

National Bank Financial estimated a 10 per cent border tax could cause Canada’s total goods exports to the U.S. to drop by about nine per cent, with non-petroleum goods sinking almost 11 per cent.

Exports are expected to drive about a third of Canada’s economic growth in 2017, behind only consumption and government spending, according to the Bank of Canada’s forecast this week. The U.S. is Canada’s largest export market with about 74 per cent of all goods heading south.

Canadian companies with U.S. affiliates may be best placed to weather a shift in tariffs, if they can shift production or investment to their U.S. plants to avoid an import tax.

Foreign affiliate sales to the U.S. rose to $298.4 billion in 2014, the latest year for which data is available, from $285.8 billion in 2013, according to Export Development Canada.

Some exporters without U.S. subsidiaries have already begun to search for new investments.

One such company is Mehadrin Group, which includes Canada’s biggest kosher meat processor.

Mehadrin had planned to sell Canadian-certified kosher meat in the U.S. but is now moving quickly to find U.S. sources of kosher meat as well as wholesale space in New York and Massachusetts to warehouse it, rather than try to import it from Canada and then raise prices to cover the cost of a tariff.

Now, the company is “looking at a couple of places,” including a slaughterhouse in California, “that can produce some volume for us,” according to Vladimir Budker, a financing consultant for Mehadrin Group.

“Plan B is to look at a couple of local (U.S.) producers — we’ve looked but didn’t approach them yet — to see if there is any change in policy, in NAFTA or taxes. We’d be looking at this avenue pretty fast,” Budker said.

For others, their cross-border business is far too integrated and specialized to easily separate U.S.-bound goods to avoid a tax.

Veso Sobot, director of corporate affairs at plastic pipe maker IPEX Inc., said products can cross the border between IPEX’s 18 plants in Canada and seven in the U.S. before they are even ready for market, making a shift in production to make products in the United States for U.S. customers impossible.

Instead, he’s hoping Trump will come to see that Canada is not a low-cost competitor that needs to be targeted.

“We feel very hopeful that… we will have an exemption to Trump’s Buy American policy. We believe Canada is not America’s problem.”

— Reporting for Reuters by Andrea Hopkins in Ottawa.

CORRECTION from Reuters, Jan. 25, 2017 — An earlier version of this article incorrectly identified Vladimir Budker as the CEO for Mehadrin Group.

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The case of a Canadian man barred from U.S. travel because he admitted to having smoked pot recreationally has sparked a debate about U.S. border agents using a federal law against marijuana use, even though pot use is legal in several states and soon to be legal in Canada.

“We obviously need to intensify our discussions with our border authorities in the United States, including the Department of Homeland Security,” Public Safety Minister Ralph Goodale said in an interview with CBC late Thursday.

“This does seem to be a ludicrous situation,” he said, noting that marijuana is legal in Washington state as well as “three or four other jurisdictions in the United States.”

A spokesman said on Friday that while the Canadian government has been speaking with the U.S. government to ensure officials are aware of Canada’s plans to legalize marijuana, the controversy over Canadians being stopped at the border and banned from future travel has not been addressed.

“In terms of the practices of border guards in question, those only came to widespread attention recently and will be discussed in future bilateral discussions,” Scott Bardsley, spokesman for Goodale, said in an email.

Officials at the U.S. embassy in Ottawa, at the U.S. State Department and at U.S. Customs and Border Protection did not immediately respond to a request for comment.

According to local media reports, British Columbia resident Matthew Harvey was stopped at a U.S. border crossing in Washington state in 2014 and asked about recreational marijuana use. When Harvey, who had a permit to use medical marijuana, said he had smoked pot recreationally, he was denied entry and banned from future entry. While he can apply for a travel waiver to be admitted temporarily, it is costly and discretionary.

Liberal Prime Minister Justin Trudeau campaigned on a promise to legalize recreational marijuana and the government has said it would introduce legislation by the spring of 2017.

Twenty-five U.S. states have sanctioned some forms of marijuana use for medical purposes, while four allow recreational use. Nine other states have recreational or medical marijuana proposals headed for their ballots in the November election.

— Andrea Hopkins is the Ottawa bureau chief for Reuters.

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The World Cup finals for men and women, contested every four years, have always been played on natural grass. Players and coaches believe there is a higher risk of injury on artificial turf and that it causes more wear and tear on athletes’ bodies.

In a three-page letter dated July 28 to the Federation Internationale de Football Association (FIFA) and the Canadian Soccer Association, lawyers representing players from Germany, Brazil, Mexico, Spain, the U.S., New Zealand and Costa Rica, among other countries, said: “The proposal is discriminatory and violates Canadian law.”

“If your organizations will not engage in a meaningful dialogue on how to correct the discriminatory treatment of women players, we are prepared to pursue legal action which we are confident should succeed,” the letter said.

A FIFA spokesman confirmed the letter had been received, but declined to comment. The Canadian Soccer Association also declined to comment and referred enquiries to FIFA.

In the letter, the players, who include Abby Wambach of the U.S. and Germany’s Nadine Angerer — FIFA players of the year for 2012 and 2013 respectively — said they can suggest “several affordable ways” to host the tournament on grass.

The 2014 FIFA World Cup for men in Brazil was played on grass and there are no plans to shift future men’s tournaments to artificial turf. Some professional soccer leagues and some FIFA World Cup age-group matches are played on artificial turf.

The World Cup fields in Brazil were primarily bermuda grass, overseeded with perennial ryegrass for a uniform playing surface. Canadian seed firm DLF Pickseed provided the ryegrass seed mixture for all World Cup stadiums in Brazil, and for the fields in the previous tournament in South Africa in 2010.

Canada will host the Women’s World Cup in June and July 2015 in six cities — Vancouver, Edmonton, Winnipeg, Ottawa, Montreal and Moncton — where stadiums with artificial turf predominate.

One of the lawyers for the group of players, Hampton Dellinger of Boies, Schiller and Flexner in Washington, D.C., said that while all legal avenues will be pursued to convince the World Cup authorities to provide grass surfaces, a boycott is not on the table.

“Canada has very robust human rights statutes, both the provincial codes and the national charter, that ban discrimination based on gender, and I don’t think there can be any question but that this relegation of women to a second-class surface is based on gender,” Dellinger said.

— Andrea Hopkins is a Reuters correspondent based in Toronto. Includes files from AGCanada.com Network staff.

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