Washington, DC – We have a tentative new trade deal with a new name, NAFTA is gone, to be replaced by the USMCA or United States-Mexico-Canada Agreement.
To get this new deal, it appears Canada has given away the farm! America has a chronic problem of over production of its milk products and our supply management system restricted Americans from dumping their surplus here. Under the deal American dairy farmers will be granted greater access to Canada’s dairy industry – worth some 3.6 per cent of Canada’s current dairy market. So now America has a place to dump its excess. Then there’s the content problem, American milk contains growth hormones, Canadian milk does not but there is no provision to provide labels on the milk products to warn consumers of milk content. All Canadian agriculture sectors took a hit. The Canadian egg industry is most notable – 10 million dozen additional imports will allowed the first year USMCA kicks in. Starting in year two, the market access for American eggs will increase one per cent each year for the next ten years. Canada will allow duty-free turkey to enter from the U.S. at a level equivalent to 3.5 per cent of the previous year’s Canadian turkey production. The market access granted for broiler hatching eggs and chicks is 21.1 per cent of the Canadian domestic production for that year.
What did we get for these concessions? U.S. President Trump has agreed that no hard limit will be placed on Canadian auto exports to the U.S. Trump had been threatening to use – Section 232 national security tariffs, which would slap a 20-25 per cent duty on cars imported into the U.S., if Canada didn’t bend on dairy concessions. What Ottawa did was avoid economic hardship for Ontario auto manufacturing by negotiating an exemption, which allows Canada to still be able to export cars and parts tariff-free up to a certain amount, well above what Canada currently sends across the border.
Another area Canada claims as a win is in regards to the Dispute Resolution. Canada would not bend in its demand for Chapter 19. One of the main reasons is according to Prime Minister Trudeau, Trump doesn’t always follow the rules. U.S. negotiator Robert Lighthizer personally detested Chapter 19 of NAFTA. This provisions allows companies to request arbitration if they feel their products have been unfairly hit with anti-dumping or countervailing duties. Bombardier successfully used this when the U.S. Commerce Department levelled a 300 per cent tariff on the Bombardier C Series airliner following a complaint by Boeing. Bombardier won the argument. Under USMCA there has been no significant change.
While Trudeau and his Foreign Affairs Minister Chrystia Freeland claim this is a great deal for Canada, tariffs on Canadian steel and aluminum exports remain intact. That apparently is another battle still to be won.