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Canada, U.S. reach new trade deal to replace NAFTA

The agreement provides increased access to Canada’s dairy market for U.S. producers, limits the number of cars and the value of automobile parts that Canada can ship to the U.S. without paying higher duties, and preserves key dispute-resolution provisions.


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October 1, 2018 by Canadian Plastics

With just hours to spare before an end-of-weekend deadline, Canadian and U.S. negotiators reached a deal to revise the North American Free Trade Agreement.

The two countries will now join Mexico in updating the 1994 NAFTA accord.

Details of the revised trade deal – known as the United States-Mexico-Canada Agreement – remain sparse, but it facilitates greater access to the Canadian dairy market for American farmers and establishes more stringent rules of origin for automakers.

From left: United States Trade Representative Robert Lighthizer, Mexico’s Secretary of Economy Ildefonso Guajardo Villarreal, and Canadian Foreign Affairs Minister Chrystia Freeland. Photo Credit: USTR/Twitter

Canada has agreed to provide U.S. dairy farmers access to about 3.5 per cent of its approximately $16 billion annual domestic dairy market. Canada will eliminate its so-called Class 7 milk pricing system.

On the automotive side, the deal will limit the number of cars and the value of automobile parts that Canada can ship to the U.S. without paying higher duties. Canada and Mexico each agreed to a quota of 2.6 million passenger vehicles exported to the U.S., meaning that neither country will be affected by any auto tariffs unless exports top 2.6 million units annually. As expected, the deal also calls for cars to have 75 per cent of their content originate in the U.S. and Mexico, up from the current 62.5 per cent, and for 40 per cent of a car to come from workers whose pay averages more than $16 per hour.

The new deal will also provide new protections for U.S. intellectual property; for example copyrights will extend 70 years after an author’s death.

“[This deal] will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home,” said U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland in a joint statement.

The deal also appears to preserve the key dispute-resolution provisions – Chapter 19 – which allow for independent panels to resolve disputes involving companies and governments, as well as Chapter 20, the government-to-government dispute settlement mechanism. Canada fought hard to retain Chapter 19, which is a holdover from NAFTA. According to the new deal, the U.S. guarantees that no tariff could be imposed against Canada or Mexico for at least 60 days. During that period, “the United States and Canada shall seek to negotiate an appropriate outcome based on industry dynamics and historical trading patterns,” the countries agreed.