Canada-US reach deal to reform NAFTA

01 October, 2018, 11:40 | Author: Kevin Carter
  • Chip Somodevilla  Getty Images North America

WASHINGTON-The United States and Canada entered intense weekend negotiations as a last-ditch effort to save the North American Free Trade Agreement (NAFTA).

"Today, Canada and the United States reached an agreement, alongside Mexico, on a new, modernized trade agreement for the 21st Century: the United States-Mexico-Canada Agreement (USMCA)", the US and Canada said in a joint statement Sunday.

Canada had agreed to provide USA dairy farmers access to about 3.5 percent of its approximately $16 billion annual domestic dairy market, the sources said, adding that the Canadian government is prepared to offer compensation to dairy farmers hurt by the deal.

No substantial changes appear to have been made to the chapter 19 trade dispute settlement mechanism, nor the state-to-state dispute settlement.

Additionally, Mexico will get an auto parts quota of $108 billion annually, while Canada will get a parts quota of $32.4 billion annually in the event of US autos tariffs.

Nor was it clear what, if any, guarantee Canada would get that current 25-per-cent steel and 10-per-cent aluminum tariffs that have already dinged Canadian exports would be lifted.

A source told Reuters that Mr Trump had approved the deal.

"Everybody's negotiating in good faith right now as we speak".

Canada has remained resistant to some of the US demands including wider access to the Canadian dairy market and eliminating a dispute settlement mechanism.

Mexico and the U.S. have already agreed new terms, and only recently it looked as if Canada could be excluded in a final agreement.

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"It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the almost half billion people who call North America home", the two countries' joint statement said.

Officials pointed to a review provision as giving the USA a significant form of leverage to get people to meet the mark and keep obligations.

However, a frosty relationship between Trump and Trudeau has made things more complicated recently.

However, one of Donald Trump's senior advisers is repeating the American threat to move on without Canada, if it will not fall in line by midnight.

This will allow them to sign the agreement before Mexico's President Enrique Pena Nieto leaves office December 1, the date that was the cause of the last minute flurry of activity. And only vehicles that failed to meet the rules of origin for auto parts agreed to by the US and Mexico would even potentially be subject to the proposed auto tariffs. Congress will then have 60 days to review and approve the new deal.

Earlier in the day, MacNaughton indicated to reporters waiting outside the PM's office that a deal was around the corner.

Insiders got wind of a breakthrough after 14 months of tumultuous talks and just hours before USA and Mexican trade authorities were set to publish their own trade agreement without Canada as a signatory.

Trump blames NAFTA for the loss of USA manufacturing jobs and wants major changes to the pact, which underpins $1.2 trillion in annual trade.

As part of any agreement, Canada looks set to offer increased access to its highly protected dairy market, as it did in separate pacts with the European Union and Pacific nations.

Earlier this summer Lighthizer, the USA trade representative, took a different tack by negotiating separately with Mexico and ultimately forging a bilateral agreement, putting pressure on Ottawa to join or face the possibility of being left out.

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