Canada agrees to new trilateral trade deal with U.S. and Mexico
Published Sunday, September 30, 2018 8:17PM EDT
Last Updated Tuesday, October 2, 2018 4:19PM EDT
OTTAWA – Canada has reached a new trilateral trade agreement with the United States and Mexico, after nearly 14 months of NAFTA renegotiations.
The new deal is called the United States-Mexico-Canada Agreement, or USMCA for short, according to a joint statement from Foreign Affairs Minister Chrystia Freeland and U.S. Trade Representative Robert Lighthizer that was issued late Sunday night.
“USMCA will give our workers, farmers, ranchers, and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region. It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home,” the statement said.
According to one high-level American source, the text of the deal was finalized around 9:30 p.m. Sunday, but there may still be some ironing out to be done.
It will take time to sort through the text, and to evaluate the details to assess the winners or losers, though all three countries were celebrating the deal Sunday night as a win-win-win.
A senior Canadian official close to the talks tells CTV News that as things stand, the Chapter 19 dispute resolution mechanism remains intact; Canada will have a full cultural exemption; and Canada will be making what the source described as “modest” concessions on access to Canada's supply-managed dairy sector, comparable to what was agreed to as part of the CPTPP trade deal.
Though, one of the senior U.S. administration officials who briefed reporters on background Sunday night described Canada’s concessions on dairy as “a big win” for American farmers, which includes Canada eliminating what’s known as the Class 7 milk pricing system.
These U.S. officials also said the deal includes stronger rules of origin for autos, an “ambitious” slate of other provisions related to the digital age, and a termination provision aimed at preventing the deal from becoming outdated.
The termination provision states that the deal is good for 16 years after it comes into force, but within the first six years a mandatory “joint review” will be conducted to determine whether all three countries want to extend the agreement for another 16 years. It maintains the six month opt-out of the deal notice that existed in NAFTA.
The Americans made the text of the agreement public Sunday night, with the leaders of all three countries likely to convene before the end of November to sign the deal. It includes 34 chapters, and eight bilateral side-letters.
“In short, we think this is a fantastic agreement for the United States but also for Canada and Mexico. It’s a great win for the president and a validation of his strategy in the area of international trade,” said one senior U.S. official.
Talks over the weekend included looking at ways to protect against the Section 232 auto tariffs that U.S. President Donald Trump threatened again last week. American officials told reporters that the two sides had “reached an accommodation” on the issue.
One of the side-letters spells out an exemption from the tariffs for a percentage of eligible auto exports. The U.S. and Mexico have a similar agreement for vehicles which have a certain percentage of components manufactured in the United States.
Dan Ujczo, an international trade lawyer with U.S. law firm Dickinson Wright, said the tariffs would only apply to vehicles which do not meet country-of-origin rules.
“The practical consequences are limited, if any,” he told The Canadian Press.
In the spring the U.S. announced the imposition of steel and aluminum tariffs on Canada, citing national security as a justification, and shortly after Canada announced its own dollar-for-dollar retaliatory tariffs on American-made steel, aluminum, and other goods.
The deal on the table is subject to the approval of the federal cabinet, which convened in Ottawa late Sunday night. Prime Minister Justin Trudeau called the cabinet meeting inside his office across the street from Parliament Hill, where high-level staff and Freeland had been working over the weekend to secure a NAFTA deal.
This gave cabinet members the opportunity to understand what is on the table and how it could impact their portfolios, or regions. It was an intense last-minute push from Canadian officials to get a trilateral deal before the midnight Sunday deadline.
The U.S. officials wouldn’t comment on whether having the deadline helped seal the deal.
“Regardless of the role it played, we ended up in a good place that ultimately we think is a good deal for all three countries,” one U.S. official said.
Trudeau departed shortly after 11 p.m., saying that it was “a good day for Canada” and he would have more to say on Monday.
Trudeau and Freeland were scheduled to speak to premiers at 11 a.m. Monday, followed by a press conference at noon.
With files from CTV News' Richard Madan, Joyce Napier, Glen McGregor, Michel Boyer, Annie Bergeron-Oliver, and Mackenzie Gray, and The Canadian Press
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