Trump hails trade pact with Canada, Mexico as win for U.S. workers

By Steve Holland

 

FILE PHOTO: Flags of the U.S., Canada and Mexico fly next to each other in Detroit, Michigan, U.S. August 29, 2018. REUTERS/Rebecca Cook/File Photo

 

WASHINGTON (Reuters) - President Donald Trump on Monday touted a new free trade deal with Canada and Mexico as a win for U.S. workers while investors breathed a sigh of relief that the key pillars of NAFTA had survived his hardball strategy to reshape global commerce.

 

Washington and Ottawa reached an agreement on Sunday after weeks of tense bilateral talks to update the 1994 North American Free Trade Agreement. The United States forged a separate trade deal with Mexico, the third member of NAFTA, in August.

 

The new agreement, called the United States-Mexico-Canada Agreement (USMCA), is aimed at bringing more jobs into the United States, with Canada and Mexico accepting more restrictive commerce with the United States, their main export partner.

 

"These measures will support many - hundreds of thousands - American jobs," Trump said at the White House, describing the trade deal as "the most important" the United States had ever made.

 

"It means far more American jobs, and these are high-quality jobs." Trump has repeatedly described NAFTA as a terrible deal for the United States.

 

Any U.S. job gains are likely years away, but the deal provides Trump with a victory that he can tout at campaign rallies over the next month on behalf of fellow Republicans running in the Nov. 6 congressional elections.

 

Speaking in Ottawa, Canadian Prime Minister Justin Trudeau said the pact removed uncertainty though he conceded Canada had made some difficult compromises. Canada's dairy industry criticized him for giving more market access to U.S. imports.

 

"We had to make compromises, and some were more difficult than others," Trudeau said in a press conference. "We never believed that it would be easy, and it wasn't, but today is a good day for Canada."

 

Initial U.S. reaction was effusive, with auto workers, dairy farmers and wheat producers saying the deal would likely create job opportunities and open up agricultural markets.

 

A NAFTA collapse could have caused U.S. farmers to lose access to agricultural markets in Canada and Mexico at the same time China has effectively halted purchases of U.S. soybeans and other commodities, helping to shore up a key Trump constituency.

 

In Mexico, negotiators took to Twitter and radio to celebrate having preserved a single North American trading zone as part of a trilateral pact. NAFTA underpinned $1.2 trillion in trade between the three countries.

 

U.S., Canadian and Mexican stocks jumped early on Monday before paring gains later in the trading session.

 

The Canadian dollar <CAD=D4> strengthened to a four-month high against the U.S. dollar, while the Mexican peso <MXN=D3> rose to near a two-month high against the greenback.

 

EYES ON CHINA

The deal also ends a major source of trade irritation as the Trump administration pivots to a much bigger trade fight with China, where U.S. tariffs now are active on $250 billion worth of Chinese goods and threatened on $267 billion more.

 

Trump's "America First" trade policies, particularly his escalating trade war with China, are aimed at boosting U.S. manufacturing, but they have spooked investors who worry that supply lines could be fractured and global growth derailed.

 

U.S. Trade Representative Robert Lighthizer has been working to recruit Japan and the European Union to help pressure China to change its trade, subsidy and intellectual property practices. With a deal that preserves U.S. market access, Canada and Mexico now are more likely to join that effort.

 

While changing provisions of NAFTA and bringing down U.S. trade deficits were key White House goals in the trade talks, the agreement largely leaves the broader deal intact.

 

"The most significant thing about this new deal is that they changed the name," said David Kelly, chief global strategist for JPMorgan Asset Management.

 

The deal effectively maintains the auto industry’s current footprint in North America, and spares Canada and Mexico from the prospect of U.S. national security tariffs on their vehicles.

 

Over time it will force auto companies to spend billions of dollars to produce more of their future products in the United States or Canada to meet new requirements that 40 percent to 45 percent of a vehicle’s value content come from high-wage areas.

 

Auto makers, particularly from Europe and Asia, may be pushed to move more of their supply chain into the region.

 

Mexican Economy Minister Ildefonso Guajardo, who led his country's trade negotiations, said the agreement was an attempt to make the region more competitive versus other parts of the world.

 

"Everyone is trying to entrench themselves in their region to compete with other regions. Japan is highly integrated in Southeast Asia. The Europeans in Eastern Europe, and in some way the trend is towards regional competition," Guajardo told Mexican radio.

 

Unifor, Canada's biggest private sector union, said the deal was likely positive for auto workers, as it requires a much higher percentage of parts to be made in North America, with a significant proportion produced in areas paying at least $16 per hour.

 

STEEL TARIFFS

The deal does not include any changes to separate U.S. tariffs on steel and aluminum levied earlier this year on Canada, Mexico, China, the European Union and others.

 

Trump said the import tariffs - 25 percent on steel and 10 percent on aluminum - would remain in place for Canada and Mexico until they "can do something different like quotas, perhaps."

 

"We are not going to allow our steel industry to disappear," Trump said, adding that Sunday's deal would not have happened without the tariffs.

 

Mexican Foreign Minister Luis Videgaray said earlier that he hoped concerns over the U.S. metals tariffs could be resolved before the new trilateral deal is signed.

 

U.S. officials intend to sign it by Nov. 30, Peter Navarro, the White House trade adviser, told Fox News. "NAFTA is dead. We have USMCA."

It would then be submitted for approval by the U.S. Congress, currently controlled by Republicans.

 

Even if Democrats win back the House of Representatives, the pact’s provisions on autos, labor rights, environmental rules, dairy and currency manipulation are likely to appeal to many in the party who have opposed traditional Republican trade deals that have been more favorable to businesses than workers.

 

U.S. Senator Joni Ernst of Iowa, a top farming state, praised the agreement in a tweet on Monday: "Our farmers need stability and access to markets."

 

Democratic U.S. Senator Amy Klobuchar of Minnesota, which borders Canada, also said she would review the terms and was glad her state's "number one trading partner" was "back in the mix."

 

Mexico's Guajardo on Monday said the new accord could be signed by the three countries' leaders when they meet at a G20 summit in Buenos Aires in late November.

 

There were times last week when it looked as if Mexico and the United States would strike out on their own with a bilateral agreement that Canada could join later.

 

The breakthrough seemed to come on Thursday when Washington asked Ottawa for its final negotiating "red lines" and with the intervention of Canadian and Mexican advisers in direct contact with White House adviser Jared Kushner.

 

With the Sept. 30 deadline looming, Trudeau's chief of staff Katie Telford, Videgaray and Kushner were in frequent phone contact over the weekend to "facilitate" Sunday's agreement, a senior source close to the talks said.

 

Advisers to Mexico's incoming government, Marcelo Ebrard and Jesus Seade, were consulted "permanently" and "in real time," the source said.

 

The result included the face-saving preservation of a key trade dispute settlement mechanism sought by Canada.

 

(Reporting by Susan Heavey, Lisa Lambert and Steve Holland in Washington, Frank Jack Daniel in Mexico City and David Ljunggren in Ottawa; Editing by Franklin Paul and Paul Simao)

 

-- © Copyright Reuters 2018-10-02

It is good news for all three parties that an agreement has been reached; all three parties have benefited from it.

 

I'll look forward to seeing the fine print, but below is a link to an editorial written by one of Canada's trade negotiators from the original deal (30 years ago). The long and short of it is he says that nothing much has changed.

 

Well, there is a new name...

 

https://www.theglobeandmail.com/opinion/article-nafta-gets-a-new-name-but-little-else-has-changed/

 

 

NAFTA simply renamed.

And the wall?

USMCA is an acronym many will stumble over.  Why not CAMUS?  Then we could all celebrate the achievement of Sisyphus Trump in rolling his rock up to the top of the mountain.....

I sincerely hope it’s a good deal to ALL involved 

2 hours ago, car720 said:

Selfish I know but the older I get the less I seem to care.

Yes, I too have a tendency to shy away from popular politics the Older I get. In this instance I'm afraid I want America to balance their trade deficit as I depend on the American government for my Social Security and pension payments. It has to be better for me to keep money and jobs in the USA.

 

Ross Perot WAS right.

Edited October 2, 20187 yr by IAMHERE
Ross Perot reference.

It's NAFTA version 1.1.  Just some minor tweaks have been added.

43 minutes ago, IAMHERE said:

Yes, I too have a tendency to shy away from popular politics the Older I get. In this instance I'm afraid I want America to balance their trade deficit as I depend on the American government for my Social Security and pension payments. It has to be better for me to keep money and jobs in the USA.

 

Ross Perot WAS right.

I’m thinking the bigger immediate threat to our Social Security is from the majority party in Congress declaring that this and Medicare expenditures must be cut to help cover the new tax bills borrowing.

Troll post removed. 

1 hour ago, IAMHERE said:

Yes, I too have a tendency to shy away from popular politics the Older I get. In this instance I'm afraid I want America to balance their trade deficit as I depend on the American government for my Social Security and pension payments. It has to be better for me to keep money and jobs in the USA.

 

Ross Perot WAS right.

As long as America runs budget deficits it will be running trade deficits as virtually any economist left, right and center will tell you. Whether that's a bad thing is another matter.

It's funny. One of the provisions in the new agreement is to promote the right of workers to organize labor unions in Mexico. But in America, Trump is nominaing virulently anti-union, anti-workers justices to the courts. Including and especiallly the Supreme court.

Great job Trump for working hard to get  America a better deal but still being fair to others. MAGA!

15 minutes ago, vinegarbase said:

Great job Trump for working hard to get  America a better deal but still being fair to others. MAGA!

Fair like the continued tariffs on aluminium and steel? On the grounds of national defense? Really?

As for the rest, he mostly backed down against Canada despite railing against the loss of sovereignty imposed by the previous pact.

1 minute ago, bristolboy said:

Fair like the continued tariffs on aluminium and steel? On the grounds of national defense? Really?

As for the rest, he mostly backed down against Canada despite railing against the loss of sovereignty imposed by the previous pact.

Yes, fair like Canada with their dairy tariffs. It's not up to us anyways. If they are signing this deal then it seems all parties have reached what they consider to be a fair deal. This is good for North America to get back to normal relations and business dealings now that trade friction is not in the way. 

13 minutes ago, vinegarbase said:

Yes, fair like Canada with their dairy tariffs. It's not up to us anyways. If they are signing this deal then it seems all parties have reached what they consider to be a fair deal. This is good for North America to get back to normal relations and business dealings now that trade friction is not in the way. 

Especially because it doesn't change much. The access to the Canadian dairy market is extremely limited and Canada gets to keep its exclusionary system 95% intact. Only 1 category of dairy products is now accessible to the USA. And since you contend that Canada's dairy system is unfair, what about the US system of subsidies to dairy farmers. 2 different approaches to get the same result.

Let’s see if it was mostly vocabulary and termthat changed, or something more significant.  Apparently, the South Korean agreement was no game changer 

30 minutes ago, bristolboy said:

Especially because it doesn't change much. The access to the Canadian dairy market is extremely limited and Canada gets to keep its exclusionary system 95% intact. Only 1 category of dairy products is now accessible to the USA. And since you contend that Canada's dairy system is unfair, what about the US system of subsidies to dairy farmers. 2 different approaches to get the same result.

Who said it has to change much? As long there are some changes that work to make things more fair for all parties involved even if it isn't much it is still progress and better than before. Obviously something has been worked out that is amicable to all parties or it would not be signed. 

Call it NAFTA 2.0 and see Trump explode on Twitter!

What an ape!

18 minutes ago, bristolboy said:

Especially because it doesn't change much.

My comments based on https://edition.cnn.com/2018/10/01/politics/nafta-usmca-differences/index.html

Hard to say currently.

 

In return for limited access to Canada's dairy market set by quotas, the US will allow more Canadian dairy, peanuts and peanut products and a limited amount of sugar into the US. Previously export of Canadian dairy into the US occurred when there was surplus in the Canadian market that made dairy exports unpredictable. As I see it now Canadian dairies can plan on producing surplus for export to the US that should also help add greater financial stability to the Canadian dairy industry.

Ironically Canada made concessions to open its dairy market in the Trans-Pacific Partnership and a trade deal with the EU. Recall that the TPP was originally created by Obama but Trump pulled out of the TPP.

 

With regard to the car manufacturing deal, Trump claims victory for the American auto workers.

• In fact it was a victory for the North American auto workers. It increases by 12% points parts that must be made in Canada, Mexico or the US. As I see it, countries like China, Korea and Thailand that might be part of the supply chain collectively lose 12% points produced at much lower wages compared with Mexico and Canada getting higher wages. Of course there's "no free lunch" as higher wage costs for Mexico and Canada workers could result in higher auto retail prices in the US.

In the final analysis - it's too early and not final. For example:

• Some trade experts are skeptical that the deal will boost US auto sector employment. The new mandates may prompt American carmakers to shift production to Japan, Korea or other countries outside North America. They'll have to pay a 2.5% tariff, but they may find it more economical than adhering to the USMCA rules, said Robert Lawrence, a professor of international trade and investment at Harvard.

1 hour ago, vinegarbase said:

Yes, fair like Canada with their dairy tariffs. It's not up to us anyways. If they are signing this deal then it seems all parties have reached what they consider to be a fair deal. This is good for North America to get back to normal relations and business dealings now that trade friction is not in the way. 

Canada does not and did not "tariff" dairy products. The changes in dairy included in this agreement were already in the TPP agreement that 45 tanked. Canada gave very little. NAFTA 2.0

2 hours ago, MikeChm said:

Good news to America, but bad news for Hillary. China gets isolated again. Hahaha

Isolating China by working with allies was the main intent of the Trans-Pacific Partnership that Trump rejected.  Now, after finally figuring out the obvious--you can't fight a trade war with everyone at once--Trump is attempting to focus on China, but starting from scratch and after losing many allies.

2 hours ago, bristolboy said:

As long as America runs budget deficits it will be running trade deficits as virtually any economist left, right and center will tell you. Whether that's a bad thing is another matter.

Very true, but don't expect people on this forum to understand.  The fact that foreigners are using their trade surplus dollars to finance our federal deficit by buying US Treasuries is too difficult for some people to grasp.

Fortunate for Trudeau that Trump played fair. The little boy was out of his depths but the adults looked out for him.

16 minutes ago, canuckamuck said:

Fortunate for Trudeau that Trump played fair. The little boy was out of his depths but the adults looked out for him.

Keep telling yourself that and make sure to post in every thread relating to Canada.

 

Someone will hear you eventually.

21 minutes ago, canuckamuck said:

Fortunate for Trudeau that Trump played fair. The little boy was out of his depths but the adults looked out for him.

I don't particularly care for Justin, but he did a good thing in preserving an arrangement that has economically benefited the entire North American continent; Trump's vision for the pact was just plain stupid and unworkable.

 

Forgive me, but your comment (above) is the single most foolish thing I have ever seen on TVF.

 

 

16 minutes ago, mikebike said:

Keep telling yourself that and make sure to post in every thread relating to Canada.

 

Someone will hear you eventually.

 

Fortunately for Trudeau, his position is propped up by a relatively uninspiring range of opposition parties.  

13 minutes ago, Samui Bodoh said:

I don't particularly care for Justin, but he did a good thing in preserving an arrangement that has economically benefited the entire North American continent; Trump's vision for the pact was just plain stupid and unworkable.

 

Forgive me, but your comment (above) is the single most foolish thing I have ever seen on TVF.

 

 

 

Then you cannot have been reading either long or in depth!!!!

4 hours ago, bristolboy said:

As long as America runs budget deficits it will be running trade deficits as virtually any economist left, right and center will tell you. Whether that's a bad thing is another matter.

 

Im betting the tax man is going to tell me it’s a bad idea....bigly bad... for me, in the very near future.

Off topic posts and replies about China have been removed. 

3 hours ago, vinegarbase said:

Who said it has to change much? As long there are some changes that work to make things more fair for all parties involved even if it isn't much it is still progress and better than before. Obviously something has been worked out that is amicable to all parties or it would not be signed. 

"Who said it has to to change much? Really? I know of at least one person who said it had to change much. His name is Donald Trump

Donald Trump Says NAFTA Was the Worst Trade Deal the U.S. Ever Signed

http://fortune.com/2016/09/27/presidential-debate-nafta-agreement/