New NAFTA Trade Deal: USMCA

Canada Agrees to Terms Late Sunday, Keeping Intact Three-Way Trade Flow in North America

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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The U.S. and Canada reached a deal late Sunday, keeping Canada as part of the new North American free trade agreement. (DTN graphic)

OMAHA (DTN) -- The U.S. and Canada reached a deal late Sunday, keeping Canada as part of the new North American free trade agreement, along with Mexico, which had come to terms with the U.S. last month.

The trade deal keeps intact two of the three largest export markets for U.S. agricultural products.

Following constant criticism from President Donald Trump over the past year, Canadian officials agreed in the new deal to provide more access to its dairy market. A report from the Toronto Star said the U.S. would be given access equal to 3.6% of the Canadian dairy market, slightly higher than access the U.S. would have gained under the Trans-Pacific Partnership, which is 3.25% for TPP suppliers.

A senior Trump administration official declined to provide specifics, but said the U.S. dairy farmers' access to Canada "is a better deal than what the prior administration negotiated in TPP."

The deal regarding dairy also requires Canada to drop its Class 7 pricing system that put U.S. dairies in a significant disadvantage selling into Canada.

Dairy ended up being one of the last hang-ups in the talks. "We had stakeholders who were very concerned about having more access to the dairy market from the United States," a senior administration official said.

The deal, which will be called the "United States Mexico Canada Agreement," was announced by the White House shortly after 10 p.m. Central Time in a call with reporters after a day of negotiations. In Canada, Prime Minister Justin Trudeau called his cabinet in for a late-night meeting, as well, to discuss the new deal that will replace the 25-year-old North American Free Trade Agreement.

President Trump tweeted early Monday, "Late last night, our deadline, we reached a wonderful new Trade Deal with Canada, to be added into the deal already reached with Mexico. The new name will be The United States Mexico Canada Agreement, or USMCA. It is a great deal for all three countries, solves the many......"

Then he added, ".....deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduce Trade Barriers to the U.S. and will bring all three Great Nations closer together in competition with the rest of the world. The USMCA is a historic transaction!"

Leaders of the three countries will sign the agreement in November, and the text of the trade deal will now be delivered to Congress before midterm elections. Congressional approval for the trade deal will come from the Congress in 2019.

Among the major changes in the deal is Canada also agreed to terms similar to Mexico on the origin of automobiles, requiring more auto parts to be built in North America. That will lead to more North American jobs, including adding "billions of dollars of production" to the U.S., a senior administration official said.

White House officials declined to say whether the deal with Canada would require the U.S. to drop the aluminum and steel tariffs the U.S. has placed on Canada. Instead, that issue would have to be addressed by the Commerce Department, a senior administration official said.

The trade deal was hailed early Monday by the National Pork Producers Council, which stated the ratification by Congress would be a "key vote" by the group to ensure lawmakers are informed about the impacts of the trade agreement.

North American trade between the three countries was valued at just under $1.2 trillion last year, though the U.S. ended with a $71 billion trade deficit with Mexico and a $17 billion trade deficit with Canada, according to the U.S. Trade Representative's Office. Canadian officials maintain the U.S. has a trade surplus with it.

Canada is the largest U.S. export market for agriculture, valued at $20.5 billion in exports in 2017. Mexico is the No. 3 overall U.S. market, valued at $18.6 billion last year.

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Chris Clayton