US, Canada reach an agreement on NAFTA rewrite, paving the way for an overhaul of the massive trade deal

US President Donald Trump and Canadian Prime Minister Justin Trudeau. Picture: Getty Images

  • The US and Canada reportedly came to an agreement to tweak key pieces of the North American Free Trade Agreement, known as NAFTA, on Sunday.
  • The US-Canada deal follows a separate deal between the US and Mexico that was reached in August.
  • The two deals will pave the way for a full overhaul of the 25-year-old NAFTA deal.
  • President Donald Trump long promised to renegotiate or rip up NAFTA.

Trade negotiators for the US and Canada are putting the finishing touches on a deal to reshape the 25-year-old North American Free Trade Agreement, known as NAFTA, according to multiple reports Sunday evening. The agreement would seal the largest trade-deal rewrite of President Donald Trump’s tenure.

The agreement, which should come just hours before a deadline set by the Trump administration, will pave the way for a vote in Congress to approve the deal after more than a year of negotiations among the US, Canada, and Mexico over the trilateral agreement.

Negotiators for the US and Canada were able to overcome major sticking points between the two countries, including Canada’s protection of its dairy market and a system for settling trade disputes.

The dairy issue was a longtime target for Trump, who insisted that the high protective barriers for US dairy farmers trying to export to Canada were unfair.

On the other hand, Canada wanted to maintain Chapter 19, a key element of NAFTA that allowed countries to bring a grievance against another NAFTA member regarding unfair trade practices or tariffs. The procedure was essentially a fast-track version of the World Trade Organisation’s dispute settlements but only applied to the three NAFTA members.

The agreement also comes after the US and Mexico came to a separate handshake deal that strengthened rules around auto production in August. The Trump administration repeatedly threatened to move forward with the bilateral deal, excluding Canada.


(Read more: Here are all the details of the US-Mexico trade agreement»)

The new NAFTA deal also came on the last day before a Trump-imposed deadline to reach an agreement. Trump is renegotiating NAFTA under what is known as Trade Promotion Authority. While TPA gives Trump the ability to send a deal to Congress for a simple majority vote, it also includes a statutory 60 day notification period.

The timeline of the notification period has provided urgency to spearhead a NAFTA deal through Congress and onto the desk of Mexican President Enrique Peña Nieto before President-Elect Andrés Manuel López Obrador takes over in December. While López Obrador did have representatives present during the US-Mexico talks, there was concern about possible political upheaval around the changeover that could force more talks.

In addition to opening the door for a NAFTA rewrite, the deal could also ease trade tensions between the US and Canada over Trump’s steel and aluminium tariffs.

Trump announced that the US would impose a 25% tariff on imports of Canadian steel and a 10% tariff on aluminium in June, which in turn prompted Canada to respond with retaliatory tariffs on a slew of US products in July.

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