U.S.-Canada Reach NAFTA Agreement Before Deadline, Branding New Pact the U.S.-Mexico-Canada-Agreement

Late Sunday night, just before the midnight deadline, the U.S. and Canada came to an agreement on a new trade pact, rebranding it the United States-Mexico-Canada Agreement (USMCA). The joint statement touts the new agreement as creating “freer,” “fairer” and more “robust economic growth in our region.”

The revised successor to the North American Free Trade Agreement (NAFTA) is once again officially a trilateral deal. Meeting the midnight deadline allows the countries to sign the deal with Mexico’s outgoing president, Enrique Peña Nieto, before he leaves office on December 1.

President Donald J. Trump said he plans to sign the agreement by the end of November and then will send it to Congress. However, Congress likely won’t vote on the agreement until next year, as it still has a number of procedural hurdles to clear under the Trade Promotion Authority (TPA).

In a Monday morning news conference from the Rose Garden, President Trump described the new U.S.-Mexico-Canada-Trade Agreement as being the most modern, up-to-date and balanced agreement, with the most advanced protections for workers ever developed.

President Trump mentioned that Mexico President-Elect Andrés Manuel López Obrador has worked closely on the new USMCA trade deal and that they have since established a good working relationship. President Trump also thanked Prime Minister of Canada Justin Trudeau for the work he has put into getting the deal done.

Updates to the Agreement

The revised NAFTA deal improves access to Canada’s dairy market for U.S. farmers, giving U.S. exporters an estimated additional 3.59% market share. It also provides for stronger intellectual property provisions, and tighter rules of origin for auto production according to two senior Trump administration officials.

The Chapter 19 dispute-settlement mechanism remains untouched, as Canada had fought for, although the investor-state dispute settlement (ISDS) will be phased out for Canada and restricted to four areas for Mexico.

Canada also agreed to raise the threshold for applying duties to cross-border purchases, which was a key demand from the United States The new de minimis level will be C$150 ($117) for customs duties, up from C$20.

Steel and aluminum tariffs imposed earlier this year will remain in effect and be dealt with separately. However, an agreement in the new pact increases by 800,000 the number of passenger vehicles that come across the border from Canada without being subject to a likely 25% duty.

CalChamber Input

The California Chamber of Commerce looks forward to learning more details of the new USMCA trade deal. The CalChamber urges Congress to approve the new USMCA agreement, following the objectives and procedures of the TPA.

Since 2017, the CalChamber has been communicating with the Trump administration to support the renegotiation of a modernized NAFTA. Numerous rounds of trilateral negotiations among the United States, Canada and Mexico finally resulted in agreement.

On June 12, 2017, the CalChamber originally submitted comments on “Negotiating Objectives Regarding Modernization of the North American Free Trade Agreement with Canada and Mexico” to the U.S. Trade Representative—with a copy to the California congressional delegation.

The recently agreed upon U.S.-Mexico deal was written to last for 16 years, but would allow the countries involved to revise or modernize aspects of the deal every six years. It is unclear whether this was taken into the trilateral deal under the new USMCA. If so, the pact would continue for another 16 years after it is revised. Originally, the CalChamber has opposed the proposed five-year sunset clause, as a forced re-examination of the pact on such a short time frame would cause uncertainty for all parties.

CalChamber Position

The CalChamber understands that the original NAFTA was negotiated more than 25 years ago, and, while our economy and businesses have changed considerably over that period, NAFTA has not. We agree with the premise that the United States should seek to support higher-paying jobs in the United States and to grow the U.S. economy by improving U.S. opportunities under a new  NAFTA.

The provisions of the NAFTA with Canada and Mexico have been beneficial for U.S. industries, agricultural enterprises, farmers, ranchers, energy companies and automakers.

The CalChamber originally actively supported the creation of the NAFTA among the United States, Canada and Mexico—now comprising 489.5 million people with combined annual trade with the United States being around $1.139 trillion in 2017. In 2017, goods exports exceeded $525.46 billion, while goods imports totaled nearly $614.02 billion.

The CalChamber’s longstanding support for NAFTA is based upon an assessment that it serves the employment, trading and environmental interests of California and the United States, as well as Canada and Mexico, and is beneficial to the business community and society as a whole. Since 1993, trade among the three NAFTA countries has nearly quadrupled.

Mexico and Canada are California’s largest and second largest export markets. A final approval of the USCMA will benefit the California economy and jobs.

Staff Contact: Susanne T. Stirling

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