Trump Signs USMCA With Mexico, Canada At G20 summit

by Bamidele Ogunberu Posted on November 30th, 2018

Buenos Aires, Argentina : U.S. President Donald Trump, Canada Prime Minister Justin Trudeau and outgoing Mexican President Enrique Pena Nieto signed the revamped NAFTA in Buenos Aires on the sidelines of the high-profile G20 summit Friday. They met at a hotel where they formally signed the United States-Mexico-Canada Agreement, after much anticipation.

Trump spent more than a year pushing the leaders of Canada and Mexico into agreeing to a rewrite of North American trade rules.

Trump said on Friday that the trade pact was “model agreement that changes the trade landscape forever.”

Trump, standing in between his Canadian and Mexican counterparts, said the new deal was a model agreement that would stop auto jobs from going overseas, protect intellectual property rights and provide robust protections for digital trade and financial services.

U.S. tariffs on steel and aluminum remain in place, but a Canadian official said an advantage to signing onto the agreement now is an auto side letter exempting Canada of potential tariffs on exports of up to 2.6 million vehicles — well above current levels.

“The new agreement lifts the risk of serious economic uncertainty that lingers throughout the trade renegotiation process — uncertainty that would have only gotten worse and more damaging had we not reached a new NAFTA,” Trudeau said.

“There is much more work to do in lowering trade barriers and in fostering growth that benefits everyone, but reaching a new free trade agreement with the United States and Mexico is a major step for our economy.”

Friday marked an important deadline for the trade pact.

A new Mexican president takes over Saturday, who might not honour the tentative deal struck by his predecessor.

The deal — 32 chapters, 11 annexes and 12 side letters — sets new rules for the auto sector, including a higher threshold for North American content and rules requiring 40 per cent of car parts be made by workers paid at least $16 an hour.

It preserves a contentious dispute-resolution system the U.S. dearly wanted gone, extends patent protections for biologic drugs and allows U.S. farmers a 3.6-per-cent share of Canada’s famously guarded market for poultry, eggs and dairy products — a concession that dismayed Canadian dairy producers.

Despite the symbolism of Friday’s signing, Trump has no meetings with Trudeau scheduled while the two are in Argentina.

The signing of the trade agreement is largely ceremonial, because it will still need to be ratified by all three countries before it can formally take effect.

U.S. lawmakers have already indicated they don’t expect to tackle the USMCA until after the new Congress is sworn in early next year.

Legislators from the three countries must still approve the pact, officially known as the United States-Mexico-Canada Agreement (USMCA), before it goes into effect and replaces NAFTA.

But the U.S. landscape will shift significantly in January when Democrats take control of the House of Representatives, after winning midterm elections in November.

Presumptive incoming Speaker of the House Nancy Pelosi described the deal as a “work in progress” that lacks worker and environment protections.

“This is not something where we have a piece of paper we can say yes or no to,” she said at a news conference on Friday, noting that Mexico had yet to pass a law on wages and working conditions.

Other Democrats, backed by unions that oppose the pact, have called for stronger enforcement provisions for new labor and environmental standards, arguing that USMCA’s state-to-state dispute settlement mechanism is too weak.

“There is still a ways to go to gain support in the new Congress for this agreement,” said Representative Bill Pascrell, the top Democrat on the House Ways and Means trade subcommittee.

Still, Trump and U.S. Trade Representative Robert Lighthizer expressed confidence that the NAFTA replacement would pass Congress.

“It’s been so well reviewed I don’t expect to have very much of a problem,” Trump said.

Lighthizer said the pact was negotiated from the beginning to be a bipartisan agreement. “I think we’ll get the support of a lot of Democrats,” he told reporters.

Trump had forced Canada and Mexico to renegotiate the 24-year-old agreement because he said the existing pact encouraged U.S. companies to move jobs to low-wage Mexico.

U.S. objections to Canada’s protected internal market for dairy products was a major challenge facing negotiators during the talks, and Trump repeatedly demanded concessions and accused Canada of hurting U.S. farmers.

Matt Blunt, the head of the main lobbying group for GM, Ford (F.N) and Fiat-Chrysler (FCHA.MI), applauded the deal, saying it would keep north American automotive manufacturing competitive and included a first-ever provision to address currency manipulation.

“However, we remain concerned that the continued imposition of steel and aluminum tariffs on Canada and Mexico will undermine the benefits of the USMCA,” added Blunt, who heads the American Automotive Policy Council.

Foreign brand automakers have expressed concerns that the new rules of origin, which require more high-value content be produced in the United States or Canada, will be too burdensome.

BDI, Germany’s main industry association, said in a statement that the autos rules of origin were “a retrograde step compared with NAFTA.”

EARLIER : Trump, Trudeau Herald USMCA As Trilateral Victory

Washington D.C., USA : U.S. President Donald Trump, who triggered the NAFTA renegotiations, heralded the new USMCA as “a wonderful new trade deal.”

“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 deficiencies and mistakes in NAFTA,” Trump tweeted.

Speaking with reporters at the White House Rose Garden on Monday, Trump touted the benefits of the new agreement, as several high-profile members of his administration, including U.S. Ambassador to Canada Kelly Craft and U.S. Trade Representative Robert Lighthizer, clapped behind him.

Trump also referenced the drama that was laced throughout the negotiations, including what he called the “difficulty” between himself and Trudeau. At one point in the talks Trump called Trudeau “very dishonest and weak,” though now Trump seems hopeful the relationship is on the mend.

“The only problem with Justin is he loves his people and you know he’s fighting hard for his people,” Trump said. “This is good for everybody.”

The U.S. president called it the most important trade deal his administration has signed, and expressed satisfaction that the pact is a fair one. He also stated that if Canada did not open up its dairy market, it would have been a “deal breaker.”

Lighthizer also spoke, and thanked by name Freeland, as well as other senior officials including Trudeau’s top two aides: Gerald Butts and Katie Telford.

On Monday morning, Trudeau spoke with both Trump and Mexican President Pena Nieto.

In both talks — according to the PMO readouts — Trudeau and his North American counterparts welcomed the deal, and stressed how the deal will bring the countries closer together and enhance North American competitiveness.

Trudeau described the call with Trump as “very positive.”

The leaders of all three countries are expected to convene before the end of November to sign the deal, which will allow the outgoing Nieto to sign the new agreement before his successor Andres Manuel Lopez Obrado takes office in December. It will then begin its winding journey through each country’s legislative body.

“There is still a road to travel before this agreement, this modernized agreement is ratified and enters into force. We are going to use that time really thoughtfully and carefully,” Freeland said.

Canada Prime Minister Justin Trudeau is heralding the historic new USMCA trade pact between Canada, the United States, and Mexico as a good deal for all three countries, describing the new agreement in principle as a preservation of many aspects of the original NAFTA, that also stabilizes and modernizes the trade relationship for the realities of the times.

Trudeau was joined by Foreign Affairs Minister Chrystia Freeland, who led the Canadian team of negotiators throughout the often intense and sometimes dramatic talks, that ended with a varying degree of concessions and changes to the trade rules between the three countries.

“A year and a half ago with rising questions about the future of NAFTA, I was asked how we would respond. My answer was that we’d respond as Canadians always have in uncertain times. We’d be constructive, and reasonable, but we’d also be firm,” Trudeau said Monday. “We’d protect our interests and promote our values. We’d show determination, and also flexibility, and we would remain united… that’s exactly what we did.

The new deal, formally called the United States-Mexico-Canada Agreement, came together in the final hours before the deadline for Canada to come on board a renegotiated trilateral deal. Otherwise, Mexico and the U.S. were poised to push ahead without them on a bilateral agreement. It will replace the North American Free Trade Agreement once fully ratified.

The pair spent the morning briefing Canada’s premiers about the details of the deal which are still emerging after the announcement late Sunday night. The new agreement will have an impact across industries and regions of the country.

Briefly, the deal includes:

a maintained dispute resolution mechanism;
concessions on access to Canada’s supply-managed sectors;
stronger rules of origin for autos;
a slate of provisions related to the digital age;
a 16-year “sunset” termination provision; and
a side agreement that essentially exempts Canada from auto tariffs.

“We just had a very, I think a very productive call with premiers. The prime minster and Chrystia Freeland went in to some considerable detail in terms of why the deal is good for the Canadian economy and Canadian workers,” said Intergovernmental Affairs Minister Dominic LeBlanc as he left the morning meeting in the Prime Minister’s Centre Block office.

On the call, Trudeau thanked the premiers for their advice and advocacy throughout the negotiation process. Canada’s Ambassador to the United States David MacNaughton and Canada’s Chief Negotiator Steve Verheul also participated in the call.

On Sunday, all three countries were heralding the agreement as a win-win-win, though reaction is pouring in from various industries and stakeholder groups, who have a mixed reaction to the news of a new agreement after nearly 14 months.

Trudeau touted it as a good deal for the Canadian economy, businesses, and families. Relatedly, Trudeau thanked Freeland’s family for their patience as these talks encompassed much of her time over the last year.

Reflecting on the last few days of intense talks and how he knew a deal was imminent, Trudeau said that once they knew Canada had secured an agreement on the dispute resolution mechanism, a deal could be made, though he said in general there was not a series of “ah-ha” moments, rather a series of small wins.

Freeland said that her confidence in the attainability of a deal stemmed in part from the “economic logic” behind the trilateral relationship would make it possible. “It’s easy to be overtaken by the dramatic moments, but we have not been… We always believed that we were going to get here,” Freeland said.

The prime minister is set to hold another cabinet meeting this afternoon. This will be the second cabinet meeting in less than 24 hours after Sunday night’s 10 p.m. gathering of the federal ministers when news began to break of a new deal on the table.

Mexican President-elect Andres Manuel Lopez Obrador said that U.S. President Donald Trump had an “open” and “tolerant” attitude during talks to renegotiate the North American Free Trade Agreement.

“The agreement gives peace of mind, gives confidence. It is creating conditions for investments to mature and for new investment in the automotive industry and the national economy,” Lopez Obrador told reporters during a visit to the state of Guanajuato.

Agriculture sector to be compensated

Quickly emerging as one of the biggest points of contention in the new deal is the changes for the dairy sector. Throughout the talks there has been a sense that some concessions would have to be made, and there were.

American farmers will have increased access to the supply-managed Canadian dairy and poultry market.

As part of this, Canada has increased the dairy market access to 3.59 per cent, and the federal government agreed to get rid of what was known as Class 7 pricing on some dairy ingredients. The Americans are viewing this as “a big win” for them. It’s a bigger concession than what Canada made in the Trans Pacific Partnership.

In a statement sent early Monday, Dairy Farmers of Canada President Pierre Lampron said his members “fail to see how this deal can be good for the 220,000 Canadian families that depend on dairy for their livelihood.”

Though, Freeland says supply-managed producers will be fully and fairly compensated, and will help from the federal government to strengthen their industry. They are forming a new working group to tackle this.

“Because that is the fair thing to do,” she said.

The key points of the new USMCA:

  • The Chapter 19 dispute resolution mechanism remains intact, though, it has been renumbered in the new 34-chapter agreement. This part of the deal allows for independent panels to resolve trade disputes that arise out of the deal. It was a red line for Canada, which feared not having an objective arbiter, despite the U.S.’s push for changes.
  • American farmers will have increased access to the supply-managed Canadian dairy market. Specifically, Canada has increased the market access to 3.59 per cent, and the federal government agreed to get rid of what was known as Class 7 pricing on some dairy ingredients. The Americans are viewing this as “a big win” for them. It’s a bigger concession than what Canada made in the Trans Pacific Partnership.
  • Canada maintained the original NAFTA text related to an exemption for cultural industries, which is aimed at protecting such things as Canadian media and bilingual content.
  • Under the USMCA trade deal, online cross-border shipments to Canada worth less than $150 will no longer be subject to duties. The deal raises the raises the minimum purchase price that qualifies for duties and taxes, known as the de minimis threshold, up from $20 to $40.
  • The deal includes 12 side letters on issues including wine, water, and cheese names. Eight were posted with the first full text of the deal Sunday night, and four others were published later, regarding the national security provision, aka Section 232.
  • The new deal also has new measures the government says will help Canada’s natural resources sector; as well as a new environment chapter with measures related to air quality and marine pollution.
  • The deal includes stronger rules of origin for autos, and an “ambitious” slate of other provisions related to the digital age.
  • It includes a termination provision aimed at preventing the deal from becoming outdated. It states that the deal is good for 16 years after it comes into force, but within the first six years a mandatory “joint review” will be conducted to determine whether all three countries want to extend the agreement for another 16 years. It maintains the six month opt-out of the deal notice that existed in NAFTA.
  • The investor-state dispute settlement process (ISDS) is also being phased out between Canada and the United States, which Freeland said has cost Canadians millions in legal fees.
  • The U.S. has given Canada assurance that an exemption — should Trump follow through on a 25 per cent tariff on autos — would be granted for 2.6 million vehicles and US$32.4 billion worth of auto parts.
  • The exchange of steel and aluminum tariffs between Canada and the U.S. remain in place for now, though the federal government is indicating that with the new deal momentum, they’re hopeful that the tariffs could be lifted before the deal is signed.

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Bamidele Ogunberu

Bamidele Ogunberu

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