By David Meyer
October 1, 2018

NAFTA is dead. Long live the United States-Mexico-Canada Agreement, or USMCA.

A little over a month after the U.S. and Mexico struck a preliminary agreement on NAFTA’s replacement, the U.S. and Canada did the same late Sunday, as hoped—the timing means outgoing Mexican President Enrique Peña Nieto gets to sign the USMCA into law just before leaving office.

“Today, Canada and the United States reached an agreement, alongside Mexico, on a new, modernized trade agreement for the 21st Century: the United States-Mexico-Canada Agreement (USMCA),” said U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland in a joint statement.

“USMCA will give our workers, farmers, ranchers and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region. It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home. We look forward to further deepening our close economic ties when this new agreement enters into force.”

As for what led the U.S.-Canadian negotiations to a successful finish, a U.S. official briefed reporters that the U.S. won greater access to the Canadian dairy market, in part via an increase in Canadian dairy import quotas.

Conversely, Canada won on its demand to maintain NAFTA’s “Chapter 19” dispute resolution mechanism—a demand that the U.S. opposed because it saw the mechanism as infringing on U.S. sovereignty.

Canada also got away without the imposition of hard limits on its auto exports to the U.S. However, according to CBC, the Canadians may still be subject to U.S. steel and aluminum tariffs, and are keen to settle that issue before ratifying the USMCA.

The new deal reportedly also includes new elements on digital trade and intellectual property.

The achievement of a trilateral trade deal makes it more likely that the USMCA will gain approval in Congress, which gets to scrutinize the pact once the leaders of all three countries have signed it by the end of November. If Congress—which may look very different after the looming midterms—fails to ratify the USMCA, it can’t enter into force.

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