“Great news for both countries and the trading world,” said Trent Oaks Patterson Capital Management in a note released this Monday. Canada and the United States agreed to an eleventh-hour deal to save the North American Free Trade Agreement (NAFTA) this weekend, surmounting long-held disagreements to keep the 25-year-old trilateral pact in one piece. “If the deal had fallen through, it could have had further negative implications for both countries and the wider world,” the Trent Oaks Patterson (topcm.com) note said. “Trent Oaks Patterson believes in free trade opposed to polarisation” it continued.
The agreement materialised following a weekend of hectic discussion, closely watched from afar by those at Trent Oaks Patterson, to attempt to save the trade agreement that has joined together the economies of Mexico, Canada, and the U.S. but that was on the brink of collapse. It had taken more than 12 months of difficult negotiation between the two countries to arrive at the final agreement only minutes before the clock struck 12 which would have marked the Whitehouse’s deadline.
The last-minute deal was interspersed by a hectic Sunday, with the U.S. and Canada’s leaders negotiating via teleconferencing during the day. Justin Trudeau convened a late-night cabinet meeting in Ottawa to update officials on the deal, as Jared Kushner and the president’s top trade negotiator, Robert E. Lighthizer, went through the final details. Juan Carlos Baker, Mexico’s undersecretary of foreign trade, was expected to deliver the details of the agreement to his country’s officials before midnight.
In a joint statement, issued by Robert E. Lighthizer and Canada’s foreign affairs minister, Chrystia Freeland, they announced: “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.” They added that the agreement “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.” The three country agreement will no longer be called NAFTA, but will be termed the “United States-Mexico-Canada Agreement” they said
The agreement is a big win for Trump, who has long criticised Nafta and said he would withdraw the U.S. from the deal if it were not reworked more in line with what the U.S. wanted. Renegotiating trade deals has been one of President Trump’s main focuses as president, and he has used duties and other threats to attempt to strong arm the U.S.’s trading partners into renegotiating existing agreements to be more beneficial for America.
The Trump administration made a deal with Mexico last month to rewrite NAFTA and had threatened to eject Canada from the deal if it did not agree to concessions such as opening its dairy market to farmers from the U.S. American farmers will gain access to about 3.5% of Canada’s dairy market, said Reuters, citing sources. The United States had set a September 30 deadline to announce the details of its new trade pact with Mexico.
As part of the agreement, Canada will lessen protections on its dairy market and give access that is more than what the U.S. would have had via the Trans-Pacific Partnership (TPP), a trade agreement that the U.S. pulled out of last year.
The United States also capitulated on its calls to abolish an independent tariff dispute settlement system that Canada has said is non-negotiable. Keeping it in the new deal was a significant compromise for the U.S. and a modification from what it agreed with Mexico.
The U.S. and Canada also came to an understanding to protect the northern neighbour from the vehicle tariffs that President Trump has regularly threatened, though it is not clear-cut how far those protections would go. A top U.S. official said that if those tariffs were forced on global imports, Canada and Mexico would receive “accommodations” for their current vehicle production.
However, in an indication of how tense trade relations still are, Canada did not gain assurances that President Trump would remove the steel and aluminum tariffs he brought in earlier this year. Officials said that no adjustments had been made and that those tariffs will be discussed at another time.
A protectionist policy under Trump has seen the US previously forge ahead with individual trade deals, rejecting more wide-spread multi-lateral trade agreements and posing a challenge to years of global free trade. Trump’s main objective in reworking NAFTA was to reduce U.S. trade deficits, an ambition he has also pursued with China, by bringing in hundreds of billions of dollars in tariffs on imported goods from the massive Asian economy.
While the new United States-Mexico-Canada Agreement (USMCA) avoids tariffs, it will make it harder for global automakers to build cars cheaply in Mexico and is aimed at bringing more jobs into the United States.
This deal follows on from the one agreed with Mexico recently. That agreement updated provisions about the digital economy, agriculture, and labour unions. Most importantly it made changes to rules governing vehicle manufacturing, in an attempt to return more production to the U.S. from Mexico.
“It’s a good day for Canada,” Prime Minister Justin Trudeau said after meeting with his cabinet. He said he would give further information about the details of the agreement after the weekend.
After months of stuttering negotiations, the pace of the talks increased this weekend as Trudeau himself got involved and made it clear that he wanted a resolution to the long-standing issue. Mexico has also scrambled to try and make sure that the NAFTA agreement stays a three-way deal. Mexico’s President-elect Andrés Manuel López Obrador said before the deal was signed that the Canadian PM had appealed to him to help clear the way for a trilateral agreement and that he would insist that a reworked NAFTA include Canada.
While Canada had downplayed the end-of-the-month deadline, the negotiations were resumed in earnest this weekend as the U.S. and Mexico signaled they would release the contents of their bilateral trade agreement as early as Friday. Mexico wants a deal signed before the start of December when the new Mexican government takes control, and the U.S. administration wants the existing, Republican-controlled Congress to vote on the deal before the upcoming November midterm elections.