US, Canada reach consensus for new NAFTA accord, renamed USMCA

The U.S. and Canada struck a last-minute deal Sunday evening to revise NAFTA, ending months of uncertainty over the future of bilateral trade relations between the two countries.

Celebrating the agreement as a campaign promise kept and a victory for American workers, President Trump said the building of the new commercial bloc was the “the most important trade deal we’ve ever made by far.”

“These measures will support many – hundreds of thousands – American jobs.  It means far more American jobs, and these are high-quality jobs,” Trump said in remarks at the White House.

Just prior to the imposed deadline for negotiations to conclude, Trump signaled his willingness to abandon talks with Canada and move forward with a Mexico-only agreement.

Alongside Trump celebrating the agreement, Prime Minister Justin Trudeau declared the renegotiated pact to be “a good day for Canada.”

Following news of the agreement being reached, the Dow Jones Industrial Average responded with surge of 250 points.

Under the terms of the new trade pact, now referred to as the United States-Mexico-Canada Agreement (USMCA), in a win for U.S. auto makers and labor unions, the three nations agreed to build a larger portion of autos in North America.

The agreement demands at least two-fifths of a vehicle made under duty-free trade be built by workers earning at least $16 per hour.

On the agricultural front, Canada agreed to remove tariffs on dairy products, and also reduce duties on pork, cheese, wheat and other foodstuffs.

Despite a new protocol, the steel and aluminum tariffs imposed earlier in 2018 will remain in place.  Mr. Trump and U.S. negotiators had long insisted the 25 percent steel and 10 percent aluminum tariffs be part of a separate trade deal.

Commenting on the absence of an agreement removing both steel and aluminum tariffs, Trump mentioned a future deal involving quotas.

Also included in the new protocol are terms for the exchange rate, including a mechanism to prevent any nation from taking steps to decrease exchange rates.  A step taken to gain an edge in trade, in a global first, negotiators included the provision with the ambition of setting the tone for future negotiations with separate trading partners.

Another key provision of the new deal is a 16-year sunset clause, which would end the treaty if all three partners do not renegotiate before 2032.  Mr. Trump had wanted a five-year sunset, but backed off due to businesses’ concerns with investment.

Lastly, both Mexico and Canada are now exempt from any U.S. declaration of tariffs imposed under a national-security clause.

Although congressional approval is required for the new USMCA, President Trump, Prime Minister Justin Trudeau, and Mexico President Enrique Peña Nieto are expected to formally conclude the pact at the G20 summit in Buenos Aires in late November.

 

[Reuters] [CNBC] [Photo courtesy Saul Loeb/AFP/Getty Images via CNN]

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