Canada's finance minister touts USMCA but says dairy, steel sectors need help

Canada's finance minister touts USMCA but says dairy, steel sectors need help

The United States "finally came to their senses" and created an environment conducive to reaching an agreement with Canada, said Jerry Dias, head of the major Canadian union Unifor, a key player in the negotiation drama.

Some likeminded business groups agree that Trump's in-your-face style, a far more confrontational stance than his predecessors deployed, deserves credit.

The new agreement, he said, is "a great deal for all three countries" because it "solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the US and will bring all three Great Nations together in competition with the rest of the world".

NAFTA, which is 24 years old, tore down trade barriers among the three countries.

Critics, though, contend that Trump's apparent breakthroughs appear much more impressive than they actually are.

"Where she would not back down and be more aggressive, he would not back down but be the more soft-spoken of the two - that's my impression of the dynamic", said Monique Smith, a former Liberal member of the Ontario legislature who later became the province's first USA envoy.

"You set a bunch of fires. you put them out and you call yourself a hero", said Philip Levy, senior fellow at the Chicago Council on Global Affairs and a White House economist under President George W. Bush.

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A deal seemed imminent, worrying those within the USTR who were convinced they weren't yet done, said the source.

Trump's aggressive tearing up of long-standing U.S. trade deals, with everyone from its two huge neighbors to China and the European Union, has rattled world leaders and sparked fears of economic turmoil. But the trade pact also encouraged American factories to move to Mexico to take advantage of low-wage labor. Four months later, he threatened to target foreign autos and auto parts — imports that amounted to $340 billion a year ago. Consequently, manufacturers with significant operations in Mexico might decide to simply pay the low US tariff rather than adjust their supply chains. Many trade analysts dismissed that rationale as preposterous. "A replacement for NAFTA, the USMCA will increase US access to Canadian markets and ensure greater centering of the vehicle industry in North America".

In the meantime, even if they can't meet the content level for a tariff exemption, passenger cars entering the US would just face the standard duty of 2.5 percent. Trump had threatened to freeze out Canada, which would have been hugely disruptive because automakers have developed an extensive North America-wide supply chain since NAFTA took effect in 1994.

Thanks to lobbying by the energy industry, the U.S. -Mexico-Canada Agreement allows oil and a few other industries to continue using a special dispute-resolution process from the original NAFTA agreement in their dealings with the Mexican government. Under the revamped version, Seoul submitted to quotas on its steel and aluminum exports to the United States and modestly opened South Korea's auto market to US automakers, among other things. "That's not the intent of worldwide trade deals nor anything we've sought in any USA trade agreement". Tokyo had resisted Trump's entreaties, preferring a broader trade pact, like the 12-country Trans-Pacific Partnership negotiated by the Obama administration.

Negotiations on NAFTA 2.0 began in August 2017 and inched ahead for months. Canada avoided auto tariffs and maintained access to the all-important American market. It reached a deal with the administration in August that was intended, among other things, to shift some manufacturing and investment away from low-priced Mexico to the United States. About 952,000 USA workers are employed in manufacturing automobiles and parts.

Aaron Padilla, senior adviser for global policy at the American Petroleum Institute lobbying group, said companies pushed for the arbitration clause because they are investing big sums over many years in offshore oil projects and want to be sure they have some protection from changing politics.

Trump said it was unfair and economically crippling to dairy farmers. But that concession wasn't much more than Ottawa had agreed to in the TPP.

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Farmers have been battered by Trump's trade policy.

Talking up the new accord, Trump declared it a "privilege" for foreign powers to do business with the United States. And, he suggested, any gains for the United States have come at a cost. Canada and Mexico were the top export markets for Minnesota products previous year, with Mexico just ahead of third-place China, according to the state Department of Employment and Economic Development. "It's been a bruising period". "Does it help the average worker in the U.S.?"

Daniel Ujczo, a trade attorney with the Dickinson Wright law firm, said Canada and Mexico also must give the USA notice before starting those trade discussions and updates of all proposals made during the negotiations.

"Negotiators on Mercosur just met and that market of roughly 275 million, including Brazil, is moving swiftly towards a comprehensive outcome", Pickerill said. Beijing has counterpunched with import taxes on $110 billion of American products.

The meat of the accord centered on changes that would benefit a handful of major US industries - oil companies, dairy farmers and pharmaceutical companies - possibly at the expense of consumers. Analysts say China won't likely give up policies meant to secure its long-term prosperity.

"The general course of the deal started to be more positive, the USTR became concerned there may be some procedural challenges to his deal with Mexico from the Hill, and I think the White House wanted to ramp up the pressure and started repeating its threats about auto tariffs".

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