Canada, the United States of America, and Mexico reached a consensus after a year of negotiations, replacing Nafta with a new free trade agreement called United States-Mexico-Canada (USMCA). The three countries updated the agreement on Monday October 1st, 2018. Canada has made concessions on dairy in exchange for Ottawa to keep Ch. 19 (the dispute resolution mechanism).  In this deal the U.S.A is able to sell their dairy products to the Canadian Market. Canadian dairy farmers will have their market share reduced because the US dairy farmers will be allowed to access Canadian market sector.  Steel and aluminum tariffs haven’t been negotiated yet. Canada was subjected to tariffs, but Canada came back with 16.6-billion-dollar counter tariffs. President Donald trump stated that tariffs will still be in place but will rarely be used now.

The battle between U.S.A and Canada drew gasps to both countries alike. Canada negotiated capped access in the auto sector in exchange for no tariffs. This means that 75% of a car must be built in North America and 40% of that car must be built by workers earning more than $16 per hour to qualify for tariff-free sales. The U.S.A has negotiated that the first 2.6 million Canadian cars imported by the US annually won’t be subjected to auto tariffs which means that there could be no newer car manufacturing plants built in Canada by US automakers as they must deal with cap on number of car units manufactured.  There was never any wage provision in NAFTA as there is in USMCA. ISDS (Investor-state Dispute Settlement) is non-existent in the new NAFTA deal. Decision-makers were often intimidated by US companies making multi-million dollar claims against Canada. ISDS was largely by Americans to sue Canada. Now that ISDS is removed, Canadian legislatures aren’t intimidated by legal and financial risks in decision-making. The USMCA agreement sets to expire in 16 years, when the three countries will have an option to extend this agreement for another 16 years. They must decide to agree to the extension within 6 years. If they don’t agree to extend this agreement within 6 years, they will have to meet every year to resolve issues, so they can agree to an extension. U.S.A has also secured a veto power provision, in which US can veto Canada’s trade pact with any other nation in case it goes contrary to U.S.A values. Canadian Dollar saw a short spike as investors’ confidence came back with news of establishment of an agreement between all three nations. United States of America has once again shown their authority in trade negotiations to prioritize US interests over other nations.

 

Bibliography:

-Dale, Daniel. “Here’s What’s New in the U.S.-Mexico-Canada Agreement.” Thestar.com, 1 Oct. 2018, www.thestar.com/news/world/2018/10/01/follow-on-nafta-deal-includes-changes-on-auto-manufacturing-pharmaceuticals-dairy-and-intellectual-property.html.

-Vomiero, Jessica. “Why Some Experts Say Scrapping Part of NAFTA’s Ch. 11 Is Canada’s Biggest Win with USMCA.” Global News, 5 Oct. 2018, globalnews.ca/news/4519161/usmca-chapter-11-investor-state-dispute-settlement/.

-Scheel, Elise von. “What We Know about the New USMCA Trade Deal | CBC News.” CBCnews, CBC/Radio Canada, 1 Oct. 2018, www.cbc.ca/news/politics/usmca-nafta-what-we-know-1.4845103.

-Blackwell, Tom, et al. “Auto Tariff Ultimatum by U.S. ‘Spooked’ Canada into Returning to Last-Ditch Trade Talks: Source.” Financial Post, 29 Sept. 2018, business.financialpost.com/news/economy/update-1-u-s-mexico-trade-deal-text-to-be-released-as-focus-remains-on-canada.