Canada capitulates to Trump on trade with renegotiated NAFTA

Minnie Murray
October 2, 2018

The president said the United States-Mexico-Canada Agreement (USMCA), which replaces Nafta, would bring thousands of jobs back to North America.

And on the matter of Section 232 tariffs, Trump's trade weapon of choice, USA officials say the new deal doesn't address them directly, since they are a matter for the Department of Commerce.

Trump's tariffs, imposed under national security concerns via Section 232 of the Trade Expansion Act, have been met with retaliatory tariffs from Mexico and Canada, which will likely remain in place on select American industries such as agriculture, until the situation changes.

Access for other agricultural goods: Canada will give the USA more access to its chicken, turkey, and egg markets, and British Columbia will allow the sale of U.S. wines at its state-owned liquor stores.

The new trade deal bears a lot of similarities to NAFTA, but there are major differences as well.

Maxwell said if the new USMCA agreement is signed by Congress, U.S. dairy farmers will benefit.

The U.S. agreement with Ottawa will boost American access to Canada's dairy market - with some concessions on its heavily protected supply management system - while shielding the Canadians from possible U.S. auto tariffs. The investor-state dispute-settlement system, which allows investors to bring grievances against member-country governments, will be phased out for the USA and Canada, while certain industries such as energy will be able to bring cases against Mexico.

The new trade pact is significantly better than an all-out trade war, but won't be a game changer for Canadian growth, said CIBC chief economist Avery Shenfeld.

The new deal must now go to Congress for approval, with a vote not expected until next year, after midterm elections.

Mulroney, who negotiated the original NAFTA, said he had not yet studied the full text.

Canada did make a real concession in opening our dairy industry a bit more to USA producers. Trump said he spoke to Trudeau by phone and told reporters that their recent tensions didn't affect the deal-making.

Dairy Farmers of Canada issued a terse statement saying the deal would grant an expanded 3.6-per-cent market access to the domestic market and eliminate competitive dairy classes, which the group says will shrink the Canadian industry.

The United States and Mexico had already reached an agreement on a new Nafta in late August, and since then negotiators from Ottawa had been in Washington for continuous talks, but as of late last week officials warned time was running out. "That's dealing with China, dealing with European Union, with everybody, Japan, Mexico, Canada, everybody", he said.

On Monday, Trump tweeted a congratulatory message to Mexico and Canada. Some of these provisions might be hard to enforce, but the Trump administration says it is committed to ensuring these happen - a reason United States labour unions and some Democrats are cheering the new rules.

Canada had previously offered the USA a 3.25-per-cent market share under the old Trans-Pacific Partnership agreement, which Trump also derided - and pulled the US from - after he took office in 2017. Over the years, Canada has successfully used Chapter 19 to challenge the United States on its softwood lumber restrictions. Canada is by far the No. 1 destination for US exports, and the USA market accounts for 75 percent of what Canada sells overseas. "Versus a very unpredictable and protectionist US administration, I think Canada did as well as it could".

Vancouver Island dairy farmers are dismayed that Canada is giving up a chunk of its dairy-market share to American competitors.

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