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Goodbye NAFTA, hello USMCA 

Ottawa/Washington, October 1

The United States and Canada forged a last-gasp deal on Sunday to salvage NAFTA as a trilateral pact with Mexico, rescuing a three-country, $1.2 trillion open-trade zone that had been about to collapse after nearly a quarter century.

In a big victory for his agenda to shake-up an era of global free trade that many associate with the signing of NAFTA in 1994, President Donald Trump coerced Canada and Mexico to accept more restrictive commerce with their main export partner.

Trump’s primary objective in reworking NAFTA was to bring down US trade deficits, a goal he has also pursued with China, by imposing hundreds of billions of dollars in tariffs on imported goods from the Asian giant. 

The new deal will be known as the United States-Mexico-Canada Agreement or “USMCA.” Trump, who had long disdained NAFTA, had suggested he might call it the “USMC,” in honour of the US Marine Corps, but in the end, USMCA won out.

The new pact is aimed at bringing more jobs into the US, with Canada and Mexico accepting more restrictive commerce with the US, their main export partner. While it avoids tariffs, it will make it harder for global auto makers to build cars cheaply in Mexico and is aimed at bringing more jobs into the US.

Since talks began more than a year ago, it was clear Canada and Mexico would have to make concessions in the face of Trump’s threats to tear up NAFTA and relief was palpable in both countries on Sunday that the deal was largely intact and had not fractured supply chains between weaker bilateral agreements.

“It’s a good day for Canada,” PM Justin Trudeau said after a late-night cabinet meeting to discuss the deal, which triggered a jump in global financial markets.

In a joint statement, Canada and the United States said it would “result in freer markets, fairer trade and robust economic growth in our region”.

Negotiators worked frantically ahead of a midnight US imposed deadline to settle differences, with both sides making concessions to seal the deal. The United States and Mexico had already clinched a bilateral agreement in August. “It’s a great win for the president and a validation for his strategy in the area of international trade,” a senior administration official told reporters.

Trump has approved the deal with Canada, a source familiar with the decision said. US officials intend to sign the agreement with Canada and Mexico at the end of November, after which it would be submitted to the US Congress for approval, a senior US official said.

The deal will preserve a trade dispute settlement mechanism that Canada fought hard to maintain to protect its lumber industry and other sectors from US anti-dumping tariffs, US and Canadian officials said.

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