Canadian Dairy Farmers Aren't Happy With U.S. Trade Deal. Here's Why

Sunday, 07 Oct, 2018

Canada, the United States' No. 2 trading partner, was left out when the U.S. and Mexico reached an agreement last month to revamp the Nafta.

U.S. President Donald Trump vowed to make Canada pay after Prime Minister Justin Trudeau said he wouldn't be bullied in trade talks.

After a year of often heated talks, a new trade agreement has been reached between Canada, the USA and Mexico.

Mr. Trump told reporters on Monday the tariffs on Canada and Mexico will remain "until such time as we can do something like quotas so our industry is protected".

In the USA, the ratification process will go through Congress. Trump likely has the votes in both chambers to get the deal through, and it appears that Minority Leader Chuck Schumer, D-N.Y., is on board.

"It's a matter of principle, and our idea is to work on it over the next two months to put a solution on the table and eliminate them", said Guajardo.

Ford and General Motors shares both climbed more than 1 percent after the announcement.

Matt Blunt, president of the American Automotive Policy Council, called the deal "a workable agreement" achieved through a close relationship between the automakers and United States negotiators.

However, the deal is expected to contain key provisions on Canada's dairy industry and auto exports to the US.

And while the two agreements are quite similar, two of the most notable changes include Canada agreeing to grant U.S. farmers greater access to its dairy market and limit its automotive exports to the US.

Likewise, outgoing Mexican President Enrique Pena Nieto said via Twitter that the deal negotiated over the past 13 months "achieves what we proposed at the beginning: a win-win-win agreement".

The trilateral agreement covers US$1-trillion in trade, including agricultural products, intellectual property and online-consumer purchases. "We think every country in the world should be able to decide as a democratic society what their rules are going to be with respect to medicine", she said.

Once in a new market, companies should benefit from a chapter that mandates more transparency in the setting of reimbursement rates.

After the announcement, the Canadian dollar gained around 0.5 percent to its highest rate against the USA dollar since May.

The Trump administration had imposed a midnight Sunday deadline for Trudeau's government to reach agreement on an updated NAFTA or face exclusion from the treaty.

The head of the International Monetary Fund, Christine Lagarde, issued a new warning on Monday that rising tariffs were dimming the global growth outlook. US Trade Representative Robert Lighthizer did clarify that talks on the tariffs were ongoing.

USMCA includes a provision calling for Canada and the United States to recognize Mexico's "direct, inalienable and imprescriptible ownership of hydrocarbons" within its territory, including the continental shelf.

The second moment when she knew a deal was likely, Freeland said, came in August when she went back to Washington "and it was clear that the vehicle deal had been concluded by the Mexicans and also that the Americans really wanted us to be a part of it".

If Canada insists on negotiating an agreement with China, the United States will have the last word on whether it can proceed, Jiang warns.

"In the long term, as long as the supply chains are shifting towards North America, it will be harder for countries elsewhere to break into the North American market", said Henry Gao, a professor of trade policy at Singapore Management University.

"Everyone is trying to entrench themselves in their region to compete with other regions", Guajardo told Mexican radio.

"So instead of it being the USA, it would be high-wage labour, which of course includes Canada, and suddenly the US and Canadian interests were aligned and this was a deal that Canada could do" Freeland said.

In the weeks leading up to Sunday's deal, it became increasingly clear that Canada's dairy farmers would be the ones taking a hit from the renegotiated trade deal.

A year ago, Freeland specifically touted the labour and environmental chapters as necessary to ensure not just a free trade deal, but a "fair trade deal" for Canadians.

Both Trudeau and Mexican Foreign Minister Luis Videgaray said the tariffs needed to be removed before the new trade deal is signed on November 30.