Trump administration reaches agreement between NAFTA and Canada

UPDATE:

The US has reached a preliminary agreement with Canada on NAFTA, said three sources on the matter, bringing the deal closer to helping President Donald Trump to keep one of his promises. the country.

History continues below

Negotiations with Canada ended more than a month after the President announced that the United States had reached a preliminary agreement with Mexico. Discussions with Canada have been stalled in recent weeks as contentious issues such as market access for dairy products and the formulation of some dispute settlements remain unresolved.

The preliminary agreement, which now includes the three NAFTA countries, must overcome a number of procedural hurdles before it can be formally signed and put to the vote of the Congress.

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OTTAWA – President Donald Trump is about to end his biggest international trade deal, after months of public bullying that gave way to frenetic bargaining hours.

An update of NAFTA in three countries is at hand, just days after the president had publicly ridiculed Canadian negotiators at a press conference last week.

In Ottawa, Canadian Prime Minister Justin Trudeau spent the day working on telephones and summoning industry stakeholders in his country before a possible announcement.

In addition, Mexico has announced that it will publish a draft text Sunday night – with or without Canada.

It was a deadly negotiation. In recent months, the United States has launched unconventional demands that have shocked their neighbors. The insults launched at the G-7 meeting in June, as well as tariffs on Canadian goods this summer, have led some Canadians to call for a boycott of US travel.

After the G-7 meeting, Peter Navarro, White House advisor, suggested that Trudeau deserved eternal damnation for the sin of public criticism of the president's tariffs.

But countries are now close to a settlement. Conscious of the possibility of another hiccup, a senior Canadian official avoided being seen to declare an untimely victory. "There is a special place in hell for people who call for an agreement before it's over," he said Sunday.

People familiar with the outlines of a new North American Free Trade Agreement described notable changes in dairy products, wording used to resolve disputes between countries, online shopping, and the limits of the US threat. car pricing.

These advanced negotiations take place mainly by telephone. A public announcement of any new deal could take place on Sunday night, or perhaps Monday, according to informed sources on the talks.

Any agreement announced must still pass through a number of procedural hurdles before it can be sent to US lawmakers for a formal vote, which will not take place until the opening of a new session of Congress in 2019.

But reaching a new deal with two close trading partners would be a victory for the Trump government, which insisted that its hard and sloppy approach to negotiations would yield positive results. This would also give vulnerable Republicans, to re-election, a political feat to highlight on the runway before the mid-term elections.

The Trump administration reached an agreement with Mexico a few weeks ago to pressure the northern neighbor, frustrated by Canada's refusal to address several issues.

Informed sources of the discussions indicated that a number of important changes would be included in a new agreement, including:

– Dairy products: opening of the Canadian dairy market similar to or slightly higher than the level of liberalization introduced under the Trans-Pacific Partnership, which opened 3.25% of the Canadian dairy market to imports.

However, two people familiar with the problem said that it could be more important than the TPP, both in terms of percentage and application. Limits are also expected in the Canadian program for ultra-filtered dairy products. Canadian controls on milk protein byproducts are a source of tension for US farmers.

Any change in the dairy sector should be backtracked in Quebec, the first province producing dairy products. In this case, there is a provincial election on Monday.

– Automobiles: Two sources of stakeholders and a Canadian official expect a Canadian exemption from taxes on automobiles, in exchange for an import cap. But all three said that it would be a flexible quota, allowing significant growth in the Canadian industry. A person outside the government estimated that it was about 40% higher than current Canadian exports to the United States.

Two sources stated that the question is likely, but not certain, to be in a separate agreement and not in the main text of NAFTA. Canada was seeking an arrangement that took into account the threat of hypothetical section 232 tariffs, beyond Trump's mandate, which used aggressive national security tariffs.

– Online purchases: Canada is willing to accept an upper limit on duty-free imports. This so-called de minimis level is currently 20 Canadian dollars. Two sources close to the case said that they expected the final figure to match the $ 100 that Mexico has accepted, but that it remains well below the US $ 100 mark. $ 800 allowance in the United States.

However, one source added an important caveat: countries are arguing for specific details of the de minimis model, such as the extent to which it should include a tax exemption, in addition to an exemption from duties. . This source said that the final details could mean a dollar amount higher or lower.

An increase in the de minimis level would mean cheaper online shopping for Canadians. Critics argue, however, that this would hurt Canadian retailers, who must collect sales taxes. The Canadian government also fears a loss of tax revenue.

– Dispute Resolution: This was the major blocking point of the initial free trade negotiations between Canada and the United States in the 1980s, and it may have stayed that way this time. Canada has always insisted on an international panel of experts to determine whether the United States was improperly using rights as a commercial weapon.

Informed sources on the negotiations indicated that countries were discussing a way to preserve a version of the dispute settlement panels in Chapter 19 of NAFTA. However, any future dispute resolution system would have limitations, which could include an expiry clause.

On Friday, Trudeau called Canadian bank executives for their opinion. Senior officials were seen entering the Prime Minister's office wearing weekend gear, and Trudeau joined them late Sunday night.

White House advisor Navarro said an announcement on Canada's status would arrive Monday morning: "You will have news in one way or another that will be great and that may move, "Navarro told Fox Business Network. .

"Everyone is negotiating in good faith right now, when we're talking in. The deadline is midnight tonight."

He stated that several blocking points were being developed. A Canadian official involved in the talks echoed this over the weekend: "We are not here, but we are getting closer."

Some stakeholders seemed more emphatic.

"I understand that the parties have reached an agreement in principle on almost all major issues and are working on cleaning up and scheduling an announcement," said Dan Ujczo, Dickinson Wright's trade lawyer. three countries and stakeholders involved.