After months of deliberations by trade negotiators, the deal to replace NAFTA was agreed to on September 30 by the US, Canada, and Mexico. All three member countries had items they were fighting for, and the new United States-Mexico-Canada Agreement (USMCA) includes some wins, as well as some losses for each of them. Here we have rounded up who’s saying what about the impact of the deal, as well as some of the major ways in which it will affect Canadians.
Overview
President Trump would like to see the deal signed by the end of November.
The deal is currently sitting with Congress, who are waiting on a report from the US International Trade Commission outlining the impact of USMCA and will accept written comments through December 20.
A group of Republican law-makers in the US have written the President urging him to remove language written into USMCA which holds all three member countries to support policies protecting employees from sexual discrimination (pregnancy, sexual harassment, sexual orientation, and gender identity). Prime Minister Trudeau defends the provisions.
In wake of the US midterm elections, most analysts still expect the deal to pass. If Democrats (who have said the deal cannot pass as is, based on the need for more enforcement of its legislation in areas such as pro-labour and environmental aspects) show resistance, they may not have much leverage, as Trump could threaten to pull the US from USMCA altogether, which would be economically disastrous.
Oil & Gas
NAFTA’s Article 605, which mandated Canada could not decrease the volume of oil shipped to the US over a proportionate 36-month period, has been excluded, which means Canada should be able to expand its geographic reach and diversify its foreign markets.
USMCA will make it easier for exporters to ship duty-free to other member countries, specifically pertaining to diluent, a thinning agent, which used to be subject to tax under NAFTA. Duties will be waved on all oil shipments containing diluent, as long as diluent makes up less than 40% of the total shipment.
Alberta’s Minister of Economic Development, Deron Bilious, said that this would amount to $60 million in savings for energy sector producers.
Dairy & Poultry
Access to Canada’s dairy market will increase for US producers.
Until now, Canada’s dairy, poultry, and egg industries have long been protected from foreign competition by a managed system of tariffs, fixed prices, and production quotas.
The recent Comprehensive and Progressive Agreement for Trans-Pacific Partnership allowed 10 countries to have 3.25% of the Canadian dairy market; USMCA gives the US a slightly higher percentage.
Changes in USMCA considered a win for Trump and American producers and a loss for Canadian producers who now face more competition.
Canadian Farmers are fearful many jobs will be lost.
Auto Manufacturing
Separately, Canada and the US are attempting to negotiate an end to tariffs on steel and aluminum.
During USMCA negotiations, Canada and the US drafted a side letter which outlines details of an agreement intended to exempt a certain amount of Canadian vehicles and auto parts from American national security threats, should Trump decide to impose them.
This side letter is part of the reason Canada is willing to sign USMCA while steel and aluminum tariffs are still in place - guaranteeing no auto tariffs is more important.
Should Washington impose tariffs on cars, Canada will still be able to export 2.6 million vehicles to the US each year.
75% of North American auto content must now come from USMCA member countries, up from 62.5% under NAFTA.
40%-45% of auto content must be made by workers earning a wage of at least US$16 per hour.
Mexico may now be a less desirable destination for large auto makers under these new wage requirements.
Dispute Settlement
NAFTA’s Chapter 19, a dispute settlement agreement mechanism which called on a panel of representatives from each country involved in a dispute to agree to its resolution instead of settling the dispute through a country’s court system, has been retained in USMCA.
The inclusion of Chapter 19 is seen as a win for Trudeau and a loss for Trump, who felt the provision undermined the autonomy of US courts.
NAFTA’s Chapter 11 has been excluded from USMCA, which means Canadian and American corporations no longer have a mechanism in place to sue governments whose trade practices they think are unfair. Mexico will have some Chapter 11 abilities in limited form.
Cross-Border Shopping
Canadians can now import goods up to a value of $150 without paying duties, which is up from the current $20, and up to $40 without paying GST or PST.
The limit for Americans buying from Canada and Mexico will be greatly decreased from US$800 to US$100.
Large online retailers will likely benefit while small businesses may suffer having to collect sales taxes.
