Justin Trudeau and President Trump

Justin Tang/The Canadian Press via AP

Canada, U.S. Reach Free Trade Deal With Mexico

October 01, 2018 - 8:17 am
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TORONTO (WCBS 880/AP) — Canada was back in a revamped North American free trade deal with the United States and Mexico late Sunday after weeks of bitter, high-pressure negotiations that brushed up against a midnight deadline.

In a joint statement, U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland said the agreement "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."

The new deal, reached just before a midnight deadline imposed by the U.S., will be called the United States-Mexico-Canada Agreement, or USMCA. It replaces the 24-year-old North American Free Trade Agreement, which President Donald Trump had called a job-killing disaster.

Trump on Monday morning called it a "great deal," tweeting that it "solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world."

He added: "Congratulations to Mexico and Canada!"

Trump went on to call the pact the "most important deal we've ever made by far.” But he said he is "not at all confident" Congress will approve his revised North American trade deal.

Trump said Democrats will have the 2020 presidential race in mind and might not want to approve what he calls "one of the great deals" for the American people.

He said he hopes members of Congress will ratify the agreement if they think it's a fair deal for the United States.

But Trump said he can't predict what the members of Congress will do because they might want to reject it for political reasons just to oppose him. Trump said, "I can't tell you whether they will" approve it.

Trump credited his protectionist trade policies for bringing about a revised trade agreement with Mexico and Canada.

He spoke in the Rose Garden on Monday to promote the new agreement, saying, "Without tariffs we wouldn't be talking about a deal."

Trump called critics of his tariff policies, including some lawmakers in Congress, "babies." He adds it is those moves that have brought American trading partners to the negotiating table.

Trudeau said his country is in a more stable place now that it has completed the renegotiation.

He said the deal needed to be fair and level the playing field given that one trading partner is 10 times larger. He says Canada did not accept "any deal."

Canadian Foreign Minister Chrystia Freeland said the deal is a victory for Canadians.

Freeland was Canada's chief negotiator in the talks. She said the deal maintains tariff free access to the majority of Canadian exports to the American market.

Freeland said the Canadian dairy industry will be compensated for the additional U.S. access to the Canadian market.

Mexico's future foreign relations secretary said the new agreement "provides certainty for financial markets, investment and job creation."

Marcelo Ebrard also acknowledged Monday "some of the new regulations, like the changes in the content rules, may pose some challenges for companies to adapt to."

Outgoing President Enrique Peña Nieto said via Twitter on Monday the deal negotiated over the last 13 months "achieves what we proposed at the beginning: a win-win-win agreement."

Peña Nieto leaves office Dec. 1. He'll be replaced by President-elect Andrés Manuel López Obrador, who tapped Ebrard to be his foreign relations secretary.

The agreement reached Sunday gives U.S. farmers greater access to the Canadian dairy market. But it keeps a NAFTA dispute-resolution process that the U.S. wanted to jettison and offers Canada protection if Trump goes ahead with plans to impose tariffs on cars, trucks and auto parts imported into the United States.

"It's a good day for Canada," Prime Minister Justin Trudeau said as he left his office. Trudeau said he would have more to say Monday.

"We celebrate a trilateral deal. The door closes on trade fragmentation in the region," Jesus Seade, trade negotiator for Mexico's incoming president, said via Twitter.

Representatives for the government of Mexican president-elect Andres Manuel Lopez Obrador have called a press conference to discuss details of the trade deal on Monday.

Canada, the United States' No. 2 trading partner, was left out when the U.S. and Mexico reached an agreement last month to revamp the North American Free Trade Agreement.

Bloomberg Reporter Andrew Mayeda said the deal involves some changes in production sectors in each county involved.

“There are some changes to rules for how cars have to be made in North America. The U.S., Canada, and Mexico have agreed to tighten the rules so that more of the cars and the car parts have to be made inside the trade zone,” he said. “There’s also some changes to, you know, the U.S. is getting more access to Canada’s protected dairy sector, and you know, there are a few tweaks to the dispute settlement process as well.”

Mayeda told WCBS 880’s Joe Avellar and Michael Wallace that Canada and Mexico have good reason to be happy with the deal.

“If you flash back a year ago, the president was threatening to pull out of NAFTA entirely. You know, relations with Mexico were strained, certainly relations with Canada were strained, and you know, now they have a deal. It certainly has to go through Congress, but the president says he likes the deal he has and he’s going to sign it at the end of November,” he said.

As to American manufacturing, Mayeda said the deal would likely help in the margin, but it cannot reverse the effects of automation at facilities such as auto plants.

“There’s new rules for cars under which 40 percent of the work will have to be done by workers earning more than $60 an hour. That’s probably going to move a little bit more production to the U.S. from Mexico,” he said. “You know, but I think big picture, I think if you go to an auto plant these days, a lot of work is being done by robots, to be perfectly honest, so I’m not too sure how many jobs it’s going to create directly.”

As Greg David of Crain’s explained to WCBS 880’s Paul Murnane Monday, some upstate New York communities that neighbor Canada are likely exhaling in relief after the approval of the deal.

“Not only are they our neighbor to the north – they’re our most important trading partner. We export almost $13 billion worth of goods to Canada. We import about $18 billion worth of goods,” David said, “and I was talking to people on Plattsburgh, which is the northernmost city in New York, and they’ve built their whole economy around relationships with Canadian companies. There are six Canadian cities closer than the nearest U.S. city, which is Burlington, Vermont.”

Plattsburgh has attracted 50 companies in such industries as aerospace and transportation, and many of the companies are Canadian, David said.

“More than 15 percent of all the jobs in that area are from Canadian-based companies,” David said. “So that’s one example about how New York is deeply tied into Canada.”

While upstate New York as a whole was Trump country in 2016, Clinton County – where Plattsburgh is located – actually voted for Hillary Clinton, David said. Business executives there have not been happy with the situation during the Trump administration up to this point.

“The business executives in Plattsburgh I talked to say that nothing has been happening for six months,” David said. “While people didn’t lay people off or close plants, it just froze the economy because no one would make any investments given the uncertainty.”

But American consumers likely will not see much of a change, Mayeda said.

“I don’t think the American consumer is going to see much of an effect. I do think the American consumer looks like he or she has probably just escaped the possibility of trucks and cars, you know, costing thousands of dollars more,” he said.

The Trump administration officially notified Congress of the U.S.-Mexico trade agreement on Aug. 31. That started a 90-day clock that would let outgoing Mexican President Enrique Pena Nieto sign the new pact before he leaves office Dec. 1.

Trump threatened to go ahead with a revamped NAFTA — with or without Canada. It was unclear, however, whether Trump had authority from Congress to pursue a revamped NAFTA with only Mexico.

Some lawmakers immediately expressed relief that Canada had been reinstated in the regional trading bloc. "I am pleased that the Trump administration was able to strike a deal to modernize NAFTA with both Mexico and Canada," said Senate Finance Chairman Orrin Hatch, R-Utah. "NAFTA is a proven success."

NAFTA tore down most trade barriers between the United States, Canada and Mexico, leading to a surge in trade between the three countries. But Trump and other critics said it encouraged manufacturers to move south of the border to take advantage of low-wage Mexican wages, costing American jobs.

Trump campaigned on a promise to rewrite NAFTA — or get rid of it. Talks on a rewrite began more than a year ago. To placate Trump, Mexico agreed in August to provisions that would require 40 percent to 45 percent of a car be built in countries where auto workers earn at least $16 an hour to qualify for NAFTA's duty-free benefits.

It was surprising that the United States found it easier to cut a deal with Mexico than with Canada, a longtime ally with a high-wage economy similar to America's. "When this got started, Canada was the teacher's pet and Mexico was the problem child," said Michael Camunez, president of Monarch Global Strategies and former U.S. Commerce Department official.

But relations between Ottawa and Washington soured. In the aftermath of a disastrous G-7 summit in Quebec in June, Trump called Trudeau "weak" and "dishonest."

The two countries need each other economically. Canada is by far the No. 1 destination for U.S. exports, and the U.S. market accounts for 75 percent of what Canada sells abroad.

(© 2018 WCBS 880. The Associated Press contributed to this report.)