Canada, US deal saves NAFTA as trilateral pact

Eileen GuzmanOct 05, 2018

The new USMCA trade deal between the U.S., Canada, and Mexico prevents any of these nations from establishing a free trade pact with China.

Trump finalised the United States-Mexico-Canada Agreement (USMCA) on Sunday after threatening to exit its precursor, NAFTA, saying he wanted to shrink US trade deficits, claw back lost factory jobs, and better protect intellectual property.

Canada is one of the most trade-dependent countries in the world and Trump's talk of ripping up that deal and imposing a 25 percent tariff on the auto sector posed a serious economic threat. No trade war should be taken lightly, but if America is to fight one, it is better to not fight US allies at the same time.

"We were definitely over the barrel in this negotiation", said Peter MacKay, a former Canadian foreign minister.

The North American trade agreement hammered out late Sunday between the United States and Canada, following an earlier US-Mexico deal, shakes up but likely won't revolutionise the way businesses operate within the three-country trade bloc.

USA administration officials said the deal provides increased access to Canada's dairy market for US producers and limits the American impact of Canada's controversial supply management system for dairy and poultry products. This will let him turn his sights away from steadfast US allies and towards significant rule-breakers like China.

It was also "the biggest trade deal in the United States history", he told a press conference. The same could be true of another provision, requiring at least 40 per cent of a car's content to be built where workers earn $16 an hour.

Provisions aimed at ensuring more cars and auto parts are made in North America - especially the US - will force some manufacturers to change their pattern of manufacturing, which could prove costly.

The USDA would also gain some limited access to Canadian dairy markets they had previously not been able to access, Ryan added. So, from an Iowa farmer perspective, Secretary Naig and our entire department were really focused on making sure that we've got zero tariff barriers both in Mexico and in Canada.

The new agreement, subject to ratification, is called the United States, Mexico and Canada Agreement, otherwise referred to as the USMCA.

If repeated in other USA negotiations with the European Union and Japan, it could help isolate Beijing in the global trading system.

However, the new agreement mandates that the deal be reviewed in six years.

One promise of President Trump's campaign checklist?

"This deadline was real", according to a senior US official.

USA officials, in recent weeks, had been adamant that the text for a new deal - whether it would only be with Mexico or also include Canada - to be released by September 30 to meet congressional notification requirements and to allow outgoing Mexican President Pena Nieto to be able to sign the deal before he is succeeded by Andres Manuel Lopez Obrador, a left-wing populist. But Trump and other critics said it encouraged manufacturers to move south of the border to take advantage of low-wage Mexican wages, costing American jobs. "We never believed that it would be easy, and it wasn't, but today is a good day for Canada". "It would fit in with my general sense that China's approach to what's going on at the moment has very much been damage limitation", Carnell said.

US National Economic Council director Larry Kudlow made the point directly in an interview with Fox News on Tuesday, saying the USMCA, along with ongoing US trade talks with the European Union and Japan, would give Washington "pretty much a united front among the major allies" in dealing with China.

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