NAFTA reinvented as USMCA deal is agreed upon

September 30th, 2018  |  Canadian Business

After weeks of bargaining Canada and the U.S. have finally agreed on a new trade deal with Mexico.

The new deal specifically focuses on the Canadian dairy market, giving wider access to American farmers, however is also preserves the dispute-resolution system the U.S. wanted to end, while Canada hoped would stay. The new agreement is to be renamed as USMCA- United States Mexico Canada Agreement-as President Donald Trump claimed NAFTA had “bad connotations”.

"​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," Foreign Affairs Minister Chrystia Freeland and U.S. Trade Representative Robert Lighthizer said in a joint statement released late Sunday. "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. "We look forward to further deepening our close economic ties when this new agreement enters into force."

After 14 months of negotiations, which at time were rocky, the final decision came just minutes before the midnight deadlines set in place by the U.S.

Canada agreed to America's key demand, made repeatedly by Trump, for extra access to duty free dairy exports. Although the increased access to the Canadian dairy market is a “big win for American farmers” according to a U.S. official, Canada scooped its own victory too.

Not only has America agreed to keep the chapter-19 mechanism for resolving disputes over anti-dumping and anti-subsidy duties, they have also agreed to provide “accommodation” to protect Canada’s auto industry in the case the States decided to impose tariffs on auto imports.

It seems that Canada’s auto industry has avoided many of the threats Trump has been throwing their way, somehow managing to escape Section 232 regarding national security tariffs. Had it been imposed, Canada's auto industry would have seen 20% to 25% duties on cars and parts imported into The States. This is a welcome relief to Ontario, who would be hit the hardest were measures put in place, with the majority of Canada’s auto industry jobs residing in the province.

The question of how to deal with the hefty tariffs that Trump imposed on Canadian steel and aluminum earlier this year is still being discussed, according to Canadian and American officials.