Monday, October 01, 2018

U.S. and Canada reach last-minute deal to replace NAFTA; would give U.S. limited access to Canada's dairy market

An hour before the midnight deadline imposed by the United States, the U.S. and Canada reached a deal last night to join the recent U.S.-Mexican agreement in a trilateral trade pact that will replace the North American Free Trade Agreement. The new agreement will be called the United States-Mexico-Canada Agreement and will boost American access to Canada's dairy market "and protect Canada from possible U.S. auto tariffs," according to sources with direct knowledge of the negotiations, Alan Rappeport reports for The New York Times.

The deal must still be approved by Congress. It would protect Canadian industries from U.S. anti-dumping tariffs, but in exchange, "Canada had agreed to provide U.S. dairy farmers access to about 3.5 percent of its approximately $16 billion annual domestic dairy market," the Times reports. U.S. dairy farmers have been struggling, and President Trump had called for opening up the Canadian market; Canada taxes imported milk at more than 200 percent, Marketplace reports.

"The new trade deal also includes standards designed to protect intellectual property and trade secrets, tougher labor requirements for Mexico and environmental obligations designed to combat trafficking in wildlife, timber and fish," Michael Collins reports for USA Today. "The agreement will run for 16 years but will be reviewed after six years and could then be extended for another 16."

The deal failed to resolve U.S. tariffs on Canadian steel and aluminum exports, but Canada and Mexico will receive partial exemption from any potential future American tariffs on automobiles. The proposed USMCA also requires that, in order to avoid tariffs, "cars must be built with at least 75 percent of parts made in North America, up from 62.5 percent under NAFTA," Collins reports. "Also, 40 to 45 percent of an auto will have to be made by workers earning at least $16 an hour," in an attempt to shift auto manufacturing jobs from Mexico to the U.S. and Canada.

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