Nafta: US and Canada reach new trade deal

Arturo Kim
October 1, 2018

A senior Canadian government official says the US and Canada have reached the basis of a free trade deal.

A senior Trump administration official said Sunday night that the new deal will be renamed the USMCA: the US-Canada-Mexico Agreement.

Peter Navarro, an adviser to Trump on trade, told Fox News: "Everybody is negotiating in good faith right now as we speak".

The developments on NAFTA have prompted Prime Minister Justin Trudeau to hold a rare Sunday night cabinet meeting on Parliament Hill in Ottawa.

It was unclear whether Canada had secured an exemption from punishing 25-per-cent auto tariffs that U.S. President Donald Trump has threatened against Canadian auto imports, or merely won a limit on the number of autos that could be subject to tariffs once a certain quota of tariff-free vehicles was reached.

Trump continued, "Canada has treated us very badly, they've treated our farmers in Wisconsin and NY state, and a lot of other states - very badly".

The achievement of a trilateral trade deal makes it more likely that the USMCA will gain approval in Congress, which gets to scrutinize the pact once the leaders of all three countries have signed it by the end of November.

"There's just a lot going on, and not a lot of time to do it in....at the end of the day, USA negotiators are agreeing, but it still has to be the president that signs off, and who knows where he is on things".

Canada's The Globe and Mail cited four sources as saying an outline of a deal had been reached but Trump and Trudeau still needed to approve it.

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, the Canadian official said. One Ottawa source directly familiar with the talks said the two sides were very close, while another said: "We are close, but not there yet".

President Donald Trump has approved the developments and the expectation is that an agreement will be announced on Sunday night (Monday morning, Singapore time), according to the people, who spoke on the condition of anonymity.

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In exchange, U.S. negotiators have agreed to retain Chapter 19, the dispute resolution mechanism of NAFTA, and exemptions for Canadian creative industries.

The US-Canada deal appears to be a victory for both sides.

But it was a deal with its northern neighbours that proved tougher to reach for the US.

Canada's high tariffs on most US dairy products had become the main point of contention that had stalled the negotiations for months, making the prospect of Canada joining the US-Mexico deal, struck in August, increasingly feeble.

Daniel Ujczo, a trade attorney with the Dickinson Wright law firm who has followed the talks closely, said he expects the USA to get more access to the Canadian dairy market.

The agreement also exempts tariffs on 2.6 million cars.

Canada, the US and Mexico are all pushing for a trilateral NAFTA pact, a change of tone after the latter two countries had planned to release details on a renegotiated deal without Canada.

The official says the agreement preserves a NAFTA dispute-resolution process that the USA wanted to jettison.

"They're in the final strokes", said the person, based on information from US administration officials.

"It's a good day for Canada", said Prime Minister Justin Trudeau as the meeting wrapped up just over an hour after it started.

A central objective for the new agreement is restoring "North America as a manufacturing powerhouse" by encouraging US companies to use domestic suppliers rather than companies based elsewhere, Navarro said.

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