Published: Mon, October 01, 2018
Business | By Pearl Harrison

USA and Canada reach deal on NAFTA

USA and Canada reach deal on NAFTA

With little time left ahead of a deadline to agree to a renewed NAFTA, Canadian and USA trade officials on Sunday tried to settle differences on tough issues such as protection against American tariffs.

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.

They suspected that Canada, which had said it wasn't bound by US deadlines, was delaying the talks until after provincial elections Monday in Quebec, where support for Canadian dairy tariffs runs high.

Multiple sources told The Canadian Press the cabinet would meet around 10 Justin Trudeau's office across the street from Parliament Hill.

But it came at a cost, with Canada agreeing to provide USA dairy farmers with access to about 3.5% of its $16bn annual domestic dairy market, according to Canadian sources - and Canadian farmers hurt by the deal set to receive compensation.

Amidst a trade war and rising rhetoric from the White House, there have been some doubts about whether Canada would be able to reach an agreement with the U.S., adding to earlier threats from President Donald Trump that he would cancel NAFTA if a deal highly favourable to the United States is not be reached. Companies and business groups, including the US Chamber of Commerce, have repeatedly called on Trump to ensure Canada remains part of the pact, which has become critical for industries across North America, including automakers, agriculture, and manufacturers. It replaces the 24-year-old North American Free Trade Agreement, which President Donald Trump had called a job-killing disaster.

Meantime, congratulations were being offered among key stakeholders who have been on the edge of their seats to see if Canada and the United States would find common ground.

The goal was to "modernize" the trade pact, with U.S., Mexican and Canadian.

A big worry now appears to be Trump's threat to impose a 25 per cent tariff on the Canadian automotive industry (that, significantly, could be imposed even if a NAFTA 2.0 deal were to be reached). Trump wanted Canada to open its dairy market to USA farmers, and Canada wanted to preserve a mechanism for resolving disputes.

A senior U.S. administration official said the final rewrite is a "fantastic agreement" and he called it "a big win for the United States, Mexico and Canada". And only vehicles that failed to meet the rules of origin for auto parts agreed to by the USA and Mexico would even potentially be subject to the proposed auto tariffs.

Prime Minister Justin Trudeau said it was a "good day for Canada".

In public, Canadian bank executives were staunchly hopeful that Canada, the US and Mexico would ultimately reach an agreement, but avoided weighing in on specifics.

President-elect Andrés Manuel López Obrador of Mexico said on Friday that Trudeau had appealed to him to help pave the way for a three-nation deal and that he would insist that a revised Nafta include Canada.

"It would be a monumental mistake to do this without Canada", US Senator Ron Wyden of OR, the top Democrat on the Senate committee that oversees trade, said Friday, before the text was delivered.

"The ideal is a trilateral deal, but we're prepared for the possible need of a bilateral", he told Bloomberg News.

According to senior Trump administration officials, Chapter 11 - which allows investors to bring disputes against other NAFTA member governments - will be phased out with Canada, a key goal for the US. The agreement also exempts tariffs on 2.6 million automobiles. "It's been very bad for the United States, it's been great for Canada, it's been great for Mexico - very bad for us".

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