Published: Sun, October 07, 2018
Business | By Eloise Houston

USMCA: A trade deal that does no harm, but breaks no ground

USMCA: A trade deal that does no harm, but breaks no ground

Canada's automakers appear to be the big winners from a renegotiated trade pact between Canada, the US and Mexico, while steel and aluminum makers and dairy producers have less to celebrate.

President Donald Trump is hailing his revamped North American trade agreement with Canada and Mexico as a breakthrough for USA workers, vowing to sign it by late November while investors breathed a sigh of relief that the key pillars of NAFTA had survived his hardball strategy to reshape global commerce. "This is not going to just be words on paper".

"This a victory for Canada because that amount is actually well above what we now send south of the border". Those are the two chapters that ended up in the new deal.

Perhaps the biggest cost of securing commercial peace with President Donald Trump was sacrificing Canada's commitment to freer trade, a pillar of this country's economic policy for at least three decades, albeit one championed hypocritically on occasion.

Trump said the tariffs he has imposed - or threatened to levy - may be a key reason he landed an agreement after months of agonizing talks.

"Without tariffs we wouldn't be talking about a deal", Mr Trump said.

"We had to make compromises, and some were more hard than others", Trudeau said, promising full compensation to dairy farmers who might suffer.

The fact that the tariffs still remain is an issue for Mike Day, President of the United Steelworkers Local 5890.

"Moving forward on eliminating the tariffs on steel and aluminum remains a priority for us, for Mexico, and is something the Americans have indicated they are more than willing to work on", Trudeau told a news conference. This deal also allows added access to the Canadian dairy market, allowing the sell $560 million worth of product to our neighbors in the north.

Other trading partners had been tough on the USA, he said, including the European Union, which introduced retaliatory tariffs on USA goods in June. "There's no doubt about that".

On the flip side of Canada's more open dairy market, the country's own farmers may be negatively affected.

Foreign Minister Chrystia Freeland, Canada's chief negotiator, called it a victory because it maintains tariff-free access to the USA for most of the country's exports.

He said the deal has a "good ring to it", repeating U-S-M-C-A several times.

One promise of President Trump's campaign checklist?

"The clause achieves a key policy imperative for the US; namely, shutting China's backdoor to North America through Canada and Mexico", Ujczo said.

The 25 percent steel and 10 percent aluminum tariffs were implemented in March.

"At a minimum we haven't lost any ground". Just six days ago he said he didn't think Canada was negotiating fairly.

"The markets are reacting positively and with relief but they're certainly not euphoric by any means".

The new trade pact is significantly better than an all-out trade war, but won't be a game changer for Canadian growth, said CIBC chief economist Avery Shenfeld.

The most significant difference between NAFTA and the USMCA may be as simple as the rebranding exercise itself, which some observers said would hand Trump political capital, regardless of its substance.

Those remarks set the stage for a bitter struggle over trade, with Trump threatening to drop Canada from the regional trade pact altogether if it didn't yield to key United States demands.

The lifted uncertainty could be enough to prompt more business investment, said RBC senior economist Nathan Janzen in a note.

Mr. Trudeau and Ms. Freeland pointed to several provisions in the new accord they say were positive for Canada, most notably the preservation of the so-called Chapter 19 dispute resolution panel in NAFTA that the USA had demanded be scrapped.

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