US, Canada agree on trade deal to save Nafta, announcement expected soon

Sean Reid
October 1, 2018

OTTAWA - An 11th-hour NAFTA deal has been reached that allows Canada to rejoin the trilateral trade pact, sources tells The Canadian Press.

Canada and the US reached a tentative NAFTA deal Sunday that one source briefed on talks said would give American farmers major new access to the dairy market here, but preserve the dispute-resolution system the United States wanted to scrap.

A senior Trump administration official said Sunday night that the new deal will be renamed the USMCA: the US-Canada-Mexico Agreement.

But it came at a cost, with Canada agreeing to provide U.S. dairy farmers with access to about 3.5% of its $16bn annual domestic dairy market, according to Canadian sources - and Canadian farmers hurt by the deal set to receive compensation.

Trump's primary objective in reworking NAFTA was to bring down USA trade deficits, a goal he has also pursued with China, by imposing hundreds of billions of dollars in tariffs on imported goods from the Asian giant.

A USA official said a few minutes earlier that the United States and Canada were "very close" to a deal.

In the United States, Congress needed the text of the deal by the late-Sunday deadline if a 60-day review period is to be respected. However, the deal is expected to contain key provisions on Canada's dairy industry and vehicle exports to the US. He said he didn't know if a deal would be reached Sunday.

"Everybody's negotiating in good faith right now as we speak", Navarro said on Fox News just before 11 a.m.

The executives include two former Canadian ambassadors to the US who now work for banks: Michael Wilson, chairman of Barclays Capital Canada Inc., and TD chairman Frank McKenna.

The new agreement will be called the United-States-Mexico-Canada Agreement (USMC). The pact underpins some $1.2 trillion in annual trade.

"Though markets were already anticipating an agreement, one source of worry will be swept away if a deal is made", Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo, said. One Ottawa source directly familiar with the talks said the two sides were very close, while another said: "We are close, but not there yet".

The two deals will pave the way for a full overhaul of the 25-year-old NAFTA deal.

The dairy issue was a longtime target for Trump, who insisted that the high protective barriers for USA dairy farmers trying to export to Canada were unfair.

"There's just a lot going on, and not a lot of time to do it the end of the day, US negotiators are agreeing, but it still has to be the president that signs off, and who knows where he is on things".

A revised Nafta would be a landmark for Trump, who has called the current deal a "disaster" and vowed to reduce America's yawning trade deficit and revive manufacturing jobs.

Earlier in the evening, President Donald Trump was briefed on the almost finalized negotiations by U.S. Ambassador Robert Lighthizer and White House adviser Jared Kushner.

Reaching a deal would remove a key irritant in the trading relationship between the USA and Canada, its top export market.

"It would be a monumental mistake to do this without Canada", US Senator Ron Wyden of OR, the top Democrat on the Senate committee that oversees trade, said Friday, before the text was delivered. The new deal likely won't be voted on by the U.S. Congress until 2019.

Canada also appears ready to accept assurances that steel and aluminium tariffs that Trump has imposed will be lifted, though it remains unclear whether the taxes would be replaced by quotas that limit metal imports.

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