Canada-US reached deal to replace NAFTA

Canada has agreed to join the United States and Mexico in a trade deal that will replace the North American Free Trade Agreement, U.S. and Canadian officials said Sunday night.

“Today, Canada and the United States reached an agreement, alongside Mexico, on a new, modernized trade agreement for the 21st Century: the United States-Mexico-Canada Agreement (USMCA),” said U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland in a joint statement. “USMCA will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region.”

The plan is for the leaders of the three North American countries to sign before the end of November, after which it would be submitted to Congress.

The new agreement comes just one month after the U.S. and Mexico announced that they had reached a new trade pact to replace NAFTA, which essentially eliminated tariffs on most goods traded among the U.S., Canada and Mexico, and made it easier for companies in those three countries to move goods and supplies across their borders

The deal will also modernize what was covered by NAFTA by adding provisions on digital trade and intellectual property, the administration official said.

Canada, America’s second-largest trading partner, was left out when the U.S. and Mexico reached a preliminary deal in late August to revamp NAFTA. Canada was expected to join the talks after that, and the two sides have sparred over dairy products.

U.S. Trade Representative Robert Lighthizer said he was prepared to move ahead with just Mexico, but some in Congress, which has to approve a deal, were against leaving Canada behind.

Canadian Prime Minister Justin Trudeau had earlier told reporters in New York during U.N. week that they will keep working on a “broad range of alternatives.”

It was not immediately clear what that accommodation would entail, but published reports suggested Canada could be exempt from the auto tariffs if it agrees to limit its auto exports to the U.S.

Other new provisions are changes to the so-called auto rules of origin which dictate that, to avoid tariffs, a certain percentage of an automobile must be built from parts that originated from countries within the NAFTA region.

Under the new rules, cars must be built with at least 75 percent of parts made in North America, up from 62.5 percent under NAFTA. Also, 40 to 45 percent of an auto will have to be made by workers earning at least $16 an hour.

The new trade deal also includes standards designed to protect intellectual property and trade secrets, tougher labor requirements for Mexico and environmental obligations designed to combat trafficking in wildlife, timber and fish.

The agreement will run for 16 years, but will be reviewed after six years and could then be extended for another 16.