Trump Reaches New Trade Deal to Replace NAFTA

United States-Mexico-Canada Agreement (USMCA) updates the 1994 bargain that sought to create uniform North American rules

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President Donald Trump took a major step forward late Sunday in achieving his goal of reworking international trade deals that hurt the U.S. by reaching a new North American agreement with Canada and Mexico.

The United States-Mexico-Canada Agreement (USMCA) promises to be a modern update to the previous trade compact among the three countries, the North American Free Trade Agreement (NAFTA).

U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland said in a joint statement Monday that the deal will focus on helping workers and businesses.

“Canada and the United States reached an agreement, alongside Mexico, on a new, modernized trade agreement for the 21st century,” Lighthizer and Freeland said. “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 a billion people who call North America home.”

Related: Trump to Sign New Trade Deal with Mexico in 90 Days

The NAFTA agreement became the foundation of trade relations among the three countries in 1994. But Trump has been highly critical of the deal, arguing that it has hurt domestic workers by making it easier to outsource jobs. The USMCA would replace NAFTA if, as expected, the Senate and officials in Canada and Mexico approve it.

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“We look forward to further deepening our close economic ties when this new agreement enters into force,” the joint statement also said. “We would like to thank Mexican Economy Secretary Ildefonso Guajardo for his close collaboration over the past 13 months.”

The USMCA will cover numerous goals, including creating a standard legal framework, strengthening trade relationships, adding provisions to ensure small businesses benefit, and fostering worker and labor rights, the environment and standard regulatory practices. It will also have provisions specific to certain industries, such as farming and textiles.

“The United States benefits when all three countries are held to the high standards laid out in Trade Promotion Authority,” House Speaker Paul Ryan (R-Wis.) said in a statement. “That’s why I’m pleased that the Trump administration succeeded in bringing Canada into the fold to reach a trilateral agreement. I look forward to reviewing the text of the agreement, particularly the dairy provisions, and engaging with members and stakeholders on the details.”

Related: New NAFTA Needs Bipartisan Support, Trade Rep Says

The proposed trade deal promises to help boost manufacturing by establishing more specific rules of origin provisions. Rules of origin are used to determine in which country a product originated. The update is intended to provide greater incentives to source goods and materials in North America.

NAFTA helped boost trade relations among the partner countries by eliminating or reducing tariffs. The USMCA promises to go a step further by addressing nontariff barriers as part of a new commitment to increase market access. The nontariff barriers are specifically related to trade in remanufactured goods, import licensing, and export licensing.

America and Mexico looked close to leaving Canada out of a replacement trade deal when they reached a preliminary agreement in principle on August 31. Canada has been resistant to many of the demands put forth by the president. White House Council of Economic Advisers Chairman Kevin Hassett urged them at the time to consider joining.

The proposed trade deal is still subject to finalization and implementation among the three countries. That also means the legislators of each country have to approve the finalized agreement before it can be implemented. U.S. Trade Representative Robert Lighthizer said August 28 that a replacement trade deal will likely not come up for a vote in Congress before February 2019.

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