Canada, US reach new NAFTA deal

Canada, US reach new NAFTA deal

A senior Canadian government official says the USA and Canada have reached the basis of a free trade deal.

The deal will preserve a trade dispute settlement mechanism that Canada fought hard to maintain to protect its lumber industry and other sectors from USA anti-dumping tariffs, US and Canadian officials said.

U.S. -Canada talks bogged down earlier this month, and most trade analysts expected the September 30 deadline to come and go without Canada being reinstated.

"It's a good day for Canada", Prime Minister Justin Trudeau told reporters after a late-night cabinet meeting to discuss the agreement, which triggered a jump in global financial markets.

The access to Canada's dairy market will closely mirror what was given under recently negotiated agreements between Canada and the European Union and a separate one with Pacific countries, the Canadian official said.

The US and Canada reached a deal late Sunday on reforming the North American Free Trade Agreement, according to reports.

A senior U.S. administration official said the final rewrite is a "fantastic agreement" and he called it "a big win for the United States, Mexico and Canada".

In force since 1994, Nafta eliminated tariffs on most goods and governs more than US$1 trillion in trade on the continent.

A source told Reuters that Mr Trump had approved the deal.

One of the toughest obstacles was Canada's demand for an exemption or other form of protection from the president's tariffs on imported steel and aluminum, which may potentially be extended to automobiles from Canadian factories. Trudeau said it made no sense to sign on to a new NAFTA only to be hit by new tariffs, and is seeking safeguards.

No substantial changes appear to have been made to the chapter 19 trade dispute settlement mechanism, nor the state-to-state dispute settlement.

Tempers flared this week on both sides as the end-of-month deadline approached.

According to industry experts, the rule would also allow the Trump administration the ability to impose higher tariffs on national security grounds if vehicles do not comply with the new thresholds. The new deal likely won't be voted on by the U.S. Congress until 2019. Canada also agreed to open up some of its dairy market to USA producers.

WTO-bound tariff rates would then apply.Under that scenario, Canadian exporters could face an additional U.S.$3.5-5 billion in customs duties, equivalent to the value of 1.25 to 1.8 per cent of current exports.

Last month, Trump announced his negotiators had reached a bilateral deal with Mexico.

USMCA doesn't trip off the tongue like NAFTA, but that didn't stop Justin Trudeau's cabinet signing the deal off shortly before midnight in Washington, to avoid trade relations with the U.S. being poisoned.

The government "is still having constructive discussions" with US counterparts, and "some" progress has been made, said one insider, speaking on condition of anonymity given the sensitive nature of the talks.

Foreign Affairs Minister Chrystia Freeland and U.S. Ambassador David MacNaughton had spent the day in Ottawa taking part in an aggressive, long-distance, last-minute push to get Canada into a trilateral free trade deal with the U.S. and Mexico on the eve of a key congressional deadline.

U.S. Trade Representative Robert Lighthizer and White House adviser Jared Kushner have been updating Trump throughout Sunday on the talks, a U.S. source familiar with the discussions said.

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