Canada's finance minister touts USMCA but says dairy, steel sectors need help


His chief trade negotiator, Robert Lighthizer, singled out the new auto rules, saying they are "really going to bring back jobs to America".

The agreement reached Sunday shows a give-and-take between the two countries: It gives USA farmers slightly greater access to the Canadian dairy market, but provides Canada protection if Trump goes ahead with plans to impose tariffs on cars and auto parts imported into the U.S.

Matthew Pottinger, the USA official spearheading China policy on the National Security Council, told an audience at the Chinese Embassy last week that the United States and China were undeniably engaged in competition.

Critics, though, contend that Trump's apparent breakthroughs appear much more impressive than they actually are.

Their work together, however, is far from over: Trump's victory-lap news conference Monday also drove home the point to all concerned that unpredictability remains the watchword in Canada-U.S. relations.

"It has been shocking and disappointing and upsetting", said Bruce Heyman, a former USA ambassador to Canada. Besides exporting cars and other industrial products to the U.S., South Korea and Japan rely on America's military protection.

Canada also weakened some mechanisms it uses to manage the supply of dairy products, said Steve Suppan, a policy analyst at the Institute for Agriculture and Trade Policy, a think tank in Minneapolis. USA officials were in contact with automakers as they negotiated the deal and the early reaction from the industry has been positive.

"In short, we think this is a fantastic agreement for the USA, but also for Canada and Mexico", said the American officials, who cheered the fact that USA dairy ranchers would soon have "substantial" expanded access to lucrative markets north of the border. "But I think these are marginal changes that might affect individual carmakers rather than the industry as a whole".

Burton Mills analysts say China could face isolation from global trade market due to U.S. trade deal provisions. The U.S. market absorbs 80 percent of Mexico's exports and 76 percent of Canada's.

By contrast, Republicans in Congress have generally supported NAFTA for the past two decades and are of the opinion that the agreement reduced most trade barriers in North America, leading to a surge in trade between the three countries.

Despite the fact that Ottawa had long pushed back hard against allowing the deal to be periodically revisited, officials in the USA briefing said the new language includes a provision that will indeed see the deal reviewed every six years.

Morneau says Canada is working to ensure producers are protected from potential diversion of steel and aluminum from other countries while also balancing the needs of users. But he said it was more of an American political statement aimed at China than a real effort to undermine Canada's sovereignty.

VW didn't immediately respond to a request for comment.

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However, we would caution against any premature celebration because the devil is in the details of what the North American Free Trade Agreement - 2.0 - contains.

The trade deal, which must be ratified by the legislatures of all three countries, also includes side agreements that would exempt up to 2.6 million passenger vehicle imports into the US a year apiece from Mexico and Canada if the USA imposes a new 25 percent global auto tariff on national security grounds, as Trump administration officials are considering.

China and the USA are trapped in an escalating trade war that has led to the imposition of progressively severe import tariffs on both sides. Given the 2.6-million-unit quota for both countries on potential auto tariffs, that could ultimately lead to more cars being produced in Canada because it has considerably more capacity under that limit.

Only 45 percent said they were very or somewhat satisfied, according to the DTN poll, and only 30 percent said Trump devotes enough attention to rural America. Nonetheless, she expects it will still affect decisions by automakers to stay within those requirements. A politician who does what he says he'll do: "Imagine that".

For Mexico, the more hard provision will be the new wage requirement for gaining tariff-free treatment - that 40 percent of the content of cars and 45 percent of trucks are made by workers earning at least $16 an hour.

Mexican Economy Secretary Ildefonso Guajardo has said that 70 percent of his nation's passenger vehicle exports could make that wage threshold "with some effort" by 2020.

"The appropriate measure, in our view, is whether USMCA (United States-Mexico-Canada) is better than NAFTA, which has transformed North America into one of the world's most competitive and successful trading blocs", the company said.

Trump justified the moves by arguing that the imports posed a threat to USA national security.

The calculation will be different on imports of pickup trucks and most sport utility and crossover vehicles, which the USA hits with a 25 percent tariff.

Robert Bothwell, a professor at the University of Toronto, also said the US just reduced their initial demands.

The major effect of that provision probably will be a slowdown in efforts by China to send auto parts to Mexico. "We've been able to come to an agreement that creates more stability and a greater level of confidence in the business community, confidence in making investments in Canada and as well investments in the other North American economies".

"Things started to change when the United States understood that we weren't moving on the dispute mechanism, Canada's cultural exemption needed to be in place, we weren't going to bend on the auto industry", he said today on Parliament Hill.