Trudeau, Freeland herald USMCA as trilateral victory
Published Monday, October 1, 2018 11:10AM EDT
Last Updated Monday, October 1, 2018 10:20PM EDT
OTTAWA – The federal government is heralding the historic new USMCA trade pact between Canada, the United States, and Mexico as a good deal for all three countries, describing the new agreement in principle as a preservation of many aspects of the original NAFTA, that also stabilizes and modernizes the trade relationship for the realities of the times.
Prime Minister Justin Trudeau was joined by Foreign Affairs Minister Chrystia Freeland, who led the Canadian team of negotiators throughout the often intense and sometimes dramatic talks, that ended with a varying degree of concessions and changes to the trade rules between the three countries.
“A year and a half ago with rising questions about the future of NAFTA, I was asked how we would respond. My answer was that we’d respond as Canadians always have in uncertain times. We’d be constructive, and reasonable, but we’d also be firm,” Trudeau said Monday. “We’d protect our interests and promote our values. We’d show determination, and also flexibility, and we would remain united… that’s exactly what we did.”
Down to the wire
The new deal, formally called the United States-Mexico-Canada Agreement, came together in the final hours before the deadline for Canada to come on board a renegotiated trilateral deal. Otherwise, Mexico and the U.S. were poised to push ahead without them on a bilateral agreement. It will replace the North American Free Trade Agreement once fully ratified.
In an interview with CTV National News, Freeland said the deal was “literally concluded last night, really very close to midnight,” and that they are now “carefully analyzing the full implications.”
Briefly, the deal includes:
- a maintained dispute resolution mechanism;
- concessions on access to Canada's supply-managed sectors;
- stronger rules of origin for autos;
- a slate of provisions related to the digital age;
- a 16-year “sunset” termination provision; and
- a side agreement that essentially exempts Canada from auto tariffs.
Referencing the list of trade agreements Canada is a part of, Trudeau said Canadians now benefit from free trade with 1.5 billion consumers around the world.
“This is a very good position to be in,” Trudeau said.
Premiers, cabinet consulted
Trudeau and Freeland spent the morning huddled inside the prime minister’s Centre Block office briefing Canada’s premiers about the details of the deal which are still emerging after the announcement late Sunday night. The new agreement will have an impact across industries and regions of the country.
On the call, Trudeau thanked the premiers for their advice and advocacy throughout the negotiation process. Intergovernmental Affairs Minister Dominic LeBlanc, Canada’s Ambassador to the United States David MacNaughton and Canada's Chief Negotiator Steve Verheul also participated in the call.
On Sunday, all three countries were heralding the agreement as a win-win-win, though reaction is pouring in from various industries and stakeholder groups, who have a mixed reaction to the news of a new agreement after nearly 14 months.
Trudeau touted it as a good deal for the Canadian economy, businesses, and families. Relatedly, Trudeau thanked Freeland’s family for their patience as these talks encompassed much of her time over the last year.
Reflecting on the last few days of intense talks and how he knew a deal was imminent, Trudeau said that once they knew Canada had secured an agreement on the dispute resolution mechanism, a deal could be made, though he said in general there was not a series of “ah-ha” moments, rather a series of small wins.
Freeland said the turning point for her was in March, when she said Canadian negotiators came up with a “creative” solution to the issue of rules of origin for autos that is now part of the deal-- essentially setting a labour value content requirement where a certain amount of high wage labour has to go into each car.
Freeland said that her confidence in the attainability of a deal stemmed in part from the “economic logic” behind the trilateral relationship would make it possible. “It’s easy to be overtaken by the dramatic moments, but we have not been… We always believed that we were going to get here,” Freeland said.
The prime minister held another cabinet meeting Monday afternoon, the second of its kind in less than 24 hours, after Sunday night’s 10 p.m. gathering of the federal ministers just before news began to break that there was a deal on the table.
“It is a deal that preserves some level of stability in the economy, and creates a smooth playing field for investment. So that’s all good, but it was a high-pressure negotiation and I think that there were some things that were given up in the end,” Sarah Goldfeder, a former adviser to two past U.S. ambassadors to Canada said on CTV’s Power Play.
Agriculture concessions ‘a great save’
Quickly emerging as one of the biggest points of contention in the new deal is the changes for the dairy sector. Throughout the talks there has been a sense that some concessions would have to be made, and there were.
American farmers will have increased access to the supply-managed Canadian dairy, egg, and poultry market.
In an interview on CTV’s Power Play, MacNaughton described the supply management concessions as: “Not necessarily what you could describe as a great win, but I think it's certainly a great save.”
This was the part of the deal most often raised by U.S. President Donald Trump as an example of how American farmers were treated unfairly by NAFTA.
As part of the new USMCA, Canada has increased the dairy market access to 3.59 per cent, and the federal government agreed to get rid of what was known as Class 7 pricing on some dairy ingredients. The Americans are viewing this as “a big win” for them. It’s a bigger concession than what Canada made in the Trans Pacific Partnership.
In a statement sent early Monday, Dairy Farmers of Canada President Pierre Lampron said his members “fail to see how this deal can be good for the 220,000 Canadian families that depend on dairy for their livelihood.”
Though, Freeland says supply-managed producers will be fully and fairly compensated, and will help from the federal government to strengthen their industry. They are forming a new working group to tackle this.
“Because that is the fair thing to do,” she said.
Trump trumpets fair deal
Trump, who triggered the NAFTA renegotiations, heralded the new USMCA as “a wonderful new trade deal.”
“Late last night, our deadline, we reached a wonderful new Trade Deal with Canada, to be added into the deal already reached with Mexico. The new name will be The United States Mexico Canada Agreement, or USMCA. It is a great deal for all three countries, solves the many deficiencies and mistakes in NAFTA,” Trump tweeted.
Speaking with reporters at the White House Rose Garden on Monday, Trump touted the benefits of the new agreement, as several high-profile members of his administration, including U.S. Ambassador to Canada Kelly Craft and U.S. Trade Representative Robert Lighthizer, clapped behind him.
Trump also referenced the drama that was laced throughout the negotiations, including what he called the “difficulty” between himself and Trudeau. At one point in the talks Trump called Trudeau “very dishonest and weak,” though now Trump seems hopeful the relationship is on the mend.
“The only problem with Justin is he loves his people and you know he’s fighting hard for his people,” Trump said. “This is good for everybody.”
The U.S. president called it the most important trade deal his administration has signed, and expressed satisfaction that the pact is a fair one. He also stated that if Canada did not open up its dairy market, it would have been a “deal breaker.”
Lighthizer also spoke, and thanked by name Freeland, as well as other senior officials including Trudeau’s top two aides: Gerald Butts and Katie Telford.
On Monday morning, Trudeau spoke with both Trump and Mexican President Pena Nieto.
In both phone calls — according to the PMO readouts — Trudeau and his North American counterparts welcomed the deal, and stressed how the deal will bring the countries closer together and enhance North American competitiveness.
Trudeau described the call with Trump as “very positive.”
The leaders of all three countries are expected to convene before the end of November to sign the deal, which will allow the outgoing Nieto to sign the new agreement before his successor Andres Manuel Lopez Obrado takes office in December. It will then begin its winding journey through each country’s legislative body.
“There is still a road to travel before this agreement, this modernized agreement is ratified and enters into force. We are going to use that time really thoughtfully and carefully,” Freeland said.
Tories assert Liberal capitulation
The major new development on the trade file was the focus of question period in the House of Commons, with both Trudeau and Freeland having to defend the deal they signed in the face of criticism from both the NDP and Conservatives.
“When the Prime Minister offered to renegotiate NAFTA, there were no sunset clauses, steel tariffs, or auto quotas, and we already had a dispute resolution mechanism, so these are not new gains in this deal. We had hoped that the government might negotiate gains for Canada,” said Conservative Leader Andrew Scheer, who elaborated on his reaction to the new trade pact later in the day, saying the Liberals are trying to take credit for aspects of the deal that were already worked in to NAFTA.
NDP Leader Jagmeet Singh said that many Canadians were concerned about getting a deal, but they are now worried about the deal that has been agreed to. He also questioned what happened to the progressive chapters that Canada entered into the talks pushing for, on issues like gender, and Indigenous rights.
“Where did those measures go? In what we’ve seen thus far, none of those measures made their way in to this agreement,” Singh said. There is some language in the deal on these issues, though not as robust as some had anticipated.
Facing repeated assertions from the Tories that Canada “backed down” and “capitulated” to Trump, the Liberal benches heckled, then rose to applaud Freeland who stated: “The Conservatives seem to have discovered a lot of Monday morning courage, having counselled throughout this negotiation that Canada take a softer line.”
Speaking with reporters in the House foyer after question period, Green Party Leader Elizabeth May congratulated the Canadian negotiating team for their work securing a deal with the “very difficult… unpredictable and erratic” Trump presidency.
Ardent opponent of supply management, People’s Party Leader Maxime Bernier, also emerged from the Commons to say he was happy that supply management was put on the table, but wondered if the remaining softwood, steel and aluminum tariffs could have been lifted if more market access was offered up.
In a statement, Brian Mulroney, the former Canadian prime minister who signed the original NAFTA deal 25 years ago, said the agreement was “a highly significant achievement for Canada.”
Mulroney said that, while he has not yet had an opportunity to read the details, “Canada appears to have achieved most if not all of its important objectives in this lengthy and challenging set of negotiations.”
The key points of the new USMCA:
- The Chapter 19 dispute resolution mechanism remains intact, though, it has been renumbered in the new 34-chapter agreement. This part of the deal allows for independent panels to resolve trade disputes that arise out of the deal. It was a red line for Canada, which feared not having an objective arbiter, despite the U.S.’s push for changes.
- American farmers will have increased access to the supply-managed Canadian dairy market. Specifically, Canada has increased the market access to 3.59 per cent, and the federal government agreed to get rid of what was known as Class 7 pricing on some dairy ingredients. The Americans are viewing this as “a big win” for them. It’s a bigger concession than what Canada made in the Trans Pacific Partnership.
- Canada maintained the original NAFTA text related to an exemption for cultural industries, which is aimed at protecting such things as Canadian media and bilingual content.
- Under the USMCA trade deal, online cross-border shipments to Canada worth less than $150 will no longer be subject to duties. The deal raises the raises the minimum purchase price that qualifies for duties and taxes, known as the de minimis threshold, up from $20 to $40.
- The deal includes 12 side letters on issues including wine, water, and cheese names. Eight were posted with the first full text of the deal Sunday night, and four others were published later, regarding the national security provision, aka Section 232.
- The new deal also has new measures the government says will help Canada’s natural resources sector; as well as a new environment chapter with measures related to air quality and marine pollution.
- The deal includes stronger rules of origin for autos, and an “ambitious” slate of other provisions related to the digital age.
- It includes a termination provision aimed at preventing the deal from becoming outdated. It 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 investor-state dispute settlement process (ISDS) is also being phased out between Canada and the United States, which Freeland said has cost Canadians millions in legal fees.
- The U.S. has given Canada assurance that an exemption — should Trump follow through on a 25 per cent tariff on autos — would be granted for 2.6 million vehicles and US$32.4 billion worth of auto parts.
- The exchange of steel and aluminum tariffs between Canada and the U.S. remain in place for now, though the federal government is indicating that with the new deal momentum, they’re hopeful that the tariffs could be lifted before the deal is signed.
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