Canada Joins Trade Accord to Replace NAFTA

Brian German Agri-Business, Trade

Canada has agreed to join the trade accord between the U.S. and Mexico, effectively replacing the North American Free Trade Agreement (NAFTA).  The announcement comes after Mexico and the U.S. reached a deal in late August.  The new United States-Mexico-Canada Agreement (USMCA) will allow better access to Canada for American dairy products and also provides for more imports of Canadian cars.  The new agreement contains 34 chapters which will govern more than $1 trillion in trade.

Trade Accord US Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland said a joint statement that the new trade accord “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.”

Two of the most significant points of the USMCA are related to the dairy and automobile industries.  American dairy farmers will now be provided with access to 3.5 percent of Canada’s dairy market, valued as approximate $16 billion annually.  Canada will eliminate Class 6 and Class 7 milk categories, along with associated pricing schedules for multiple milk products, shortly after the trade deal goes into effect.

Some of the other provisions in the new trade deal include changes to online shopping duties and taxes, raising the threshold from $20 to $40.  The dispute settlement system between governments that was part of NAFTA will remain the same, which was one of the major points of discussion for Canada.  The trade agreement will require 40 percent of car parts that are produced in the three countries be made in areas paying $16 an hour in wages.  Vehicles must also have 75 percent of its components manufactured in one of the USMCA countries in order to qualify for zero-tariffs.

The agreement was reached late Sunday, just in time to meet the September 30 deadline that the Trump administration was working toward.  The USMCA is expected to last 16 years and is intended to be reviewed every six years.  The trade deal will be sent to Congress for any suggested changes during the 60-day review period before President Trump can sign it into law.

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Brian German

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Ag News Director, AgNet West