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Three-Way NAFTA Trade Deal Headed to Congress

U.S. would get greater access to Canada’s dairy market

U.S. Trade Representative Robert Lighthizer has announced a three-country “modernized” NAFTA agreement.  (Bill Clark/CQ Roll Call file photo)
U.S. Trade Representative Robert Lighthizer has announced a three-country “modernized” NAFTA agreement.  (Bill Clark/CQ Roll Call file photo)

U.S. Trade Representative Robert Lighthizer announced a three-country ″modernized″ NAFTA agreement, clearing away one potential objection from key lawmakers who appeared ready to challenge a trade pact without Canada.

Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland announced the agreement late Sunday night after frenzied negotiations over the weekend to resolve outstanding issues. If the preliminary accord is approved by Congress it will be renamed the United States-Mexico-Canada Agreement (USMCA). The United States and Mexico reached an agreement in late August.

“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 joint announcement said. “It 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.”

President Donald Trump and his Mexican and Canadian counterparts are expected to sign the updated agreement by Dec. 1, administration officials said Sunday night.

As part of the deal, the United States will get greater access to Canada’s heavily protected dairy market while Canada succeeded in keeping a dispute resolution process that American negotiators were against. Like with the Mexico deal, the agreement will last 16 years.

A senior administration official told reporters in a background briefing that side letters to the trade pact for Canada and Mexico contain “accommodations” that would soften the blow of potential U.S. tariffs on imported autos and auto parts.

The Commerce Department is reviewing auto imports to determine if they pose an economic threat to U.S. car makers and a national security threat to U.S. industrial capabilities. The department has not completed its review or made recommendations, but the president has threatened to slap tariffs on cars exports from Canada and the European Union as trade tensions have risen.

“I am pleased that the Trump administration was able to strike a deal to modernize NAFTA with both Mexico and Canada,” said Sen. Orrin G. Hatch, chairman of the Senate Finance Committee. “NAFTA is a proven success for the United States, supporting more than 2 million American manufacturing jobs and boosting agricultural exports to Canada and Mexico by 350 percent. Maintaining a trilateral North American deal is an important prerequisite to preserving and extending those gains and the Trump administration has achieved that goal.”

The deal comes just before the midnight deadline that United States had set for Canada to join the preliminary pact it reached with Mexico.

Lighthizer and the Mexican government postponed Friday’s planned release of the U.S.-Mexico agreement text with the hope that talks through Sunday would produce a revamped North American Free Trade Agreement.

House Ways and Means member Rep. Lloyd Doggett, D-Texas, said his staff would look closely at the language and that he would weigh the pluses and minuses. “Negotiators appear to have just barely made the midnight deadline before NAFTA was turned into a political pumpkin,” Doggett said in a statement. “Some progress and possibly some backsliding in the final text, but complete implementing language is also vital to my final evaluation and determination of what further adjustments may be needed.”

The Trump administration set Sept. 30 as the deadline for release of the U.S.-Mexico agreement text to meet requirements for public review under Trade Promotion Authority. It lays out negotiating principles, guidelines for the president to follow in submitting a trade pact to Congress and timetables for congressional actions. The administration triggered the timetable on Aug. 31 when it notified Congress that Trump and outgoing Mexican President Enrique Peña Nieto would sign the U.S.-Mexico agreement in late November.

As U.S-Canadian talks resumed Friday, Mexican President-elect Andrés Manuel López Obrador and some members of Congress held out hope that Canada could meet the Sunday deadline to be included in documents sent to Congress. López Obrador takes office Dec. 1.

The US-Mexico agreement calls for 75 percent of automobile content to be made in the United States and Mexico to be considered for duty-free entry. It also asks that 40-45 percent of auto content be made by workers earning at least $16 per hour, USTR said in a statement. Mexican officials have delivered the text to their legislative leaders.

In Sunday’s talks, the United States pressed Canada to change its dairy supply management system that uses quota limits and triple-digit tariffs to limit imports of milk, cheese and dairy components — a demand that Canada’s dairy farmers continue to oppose.

“U.S. milk crisis is because of American overproduction,” Dairy Farmers of Ontario, the promotional arm of Ontario’s dairy farms, tweeted Sunday morning. “Access to the Cdn market is not going to address the issue.”

The Trump administration also won a concession to end Canada’s Class 7 milk category, which the U.S. dairy industry argues is designed to keep Canadian skim milk powder prices artificially lower, giving domestic producers an edge in sales to Canadian cheese makers over U.S. high-protein ultrafiltered milk.

As part of Sunday’s deal , the United States dropped its demand to end NAFTA’s Chapter 19 that allows any of the three countries to challenge anti-dumping and subsidy penalties imposed on companies.

The deal does not provide relief from U.S. global steel tariffs of 25 percent on steel and 10 percent on aluminum. The Trump administration imposed the penalties earlier this year using Section 232 national security justifications under the Trade Expansion Act of 1962.

Lawmakers of both parties have asked that ending the Section 232 tariffs be part of NAFTA talks. The leaders of the House Aluminum Caucus, two Republicans and two Democrats, sent Lighthizer a letter last week calling for Canada to be included in a revamped NAFTA and that the aluminum tariff be addressed.

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