After a long night of phone calls and much bromance, President Donald Trump and Canadian Prime Minister Justin Trudeau sealed the deal on a preliminary modernized North American Trade Agreement that includes Mexico.
Afterwards, Trump called it the “the most important trade deal we’ve ever made by far” and proclaimed that the “incredibly new” deal will transform North America “back into a manufacturing powerhouse.”
Trudeau said simply, “It’s a good day for Canada.”
Both said it will create jobs, pull up the middle classes, and grow North American competitiveness. Their announcement came just before midnight on the allotted Sept. 30 deadline and the eve before elections in Quebec, the land of dairy. Dairy was one of the concessions that had delayed fruitful negotiations week after week.
Compromise won in the end. The new preliminary agreement, now called the United States Mexico Canada Agreement or USMCA, preserves and modernizes a 25-year-old three-way trade pact between the countries.
It came after a year of heated negotiation with taunts flying back and forth. Trump called NAFTA the “worst trade agreement ever.”
Mexico jumped on board early, intent on getting an agreement in place before its newly elected officials and President Andrés Manuel López Obrador step into office. Canada remained on the fence for weeks, leaving businesses in suspense wondering if free trade routes and a delicate international supply chain would be preserved.
Many expressed relief that the first, major step is complete.
“Now Mexico, Canada and the United States are the three amigos again. They are literally standing and saying, ‘This is what we want to do,’” said Glenn Williamson, honorary consul of Canada in Arizona and president and CEO of the Canada Arizona Business Council and Epcor Water USA.
“That’s a pretty powerful statement. They had to do it and they did it.”
The process is not quite complete. Now, it goes to the top legislative bodies in each country for final approval. A level of uncertainty remains, especially if it becomes a political football before the November elections. “It still remains in the balance and to use football terms since we’re in football season, it’s still not over the goal line for a touchdown,” said Marco Lopez, former mayor of Nogales, Arizona, and the president and CEO of International Business Solutions, Inc. that serves as a senior advisor to groups like The Carlos Slim Foundation. “We’re one step closer to resolution.”
Throughout the upheaval over the past year, most businesses in Arizona survived with minimal impact.
“When we started this almost 18 months ago, there was thinking that this would be a revolutionary shift or change,” Lopez said. “I think it’s a modest improvement and it allows us to stabilize some of the North American uncertainty, especially as the new president in Mexico goes in on Dec. 1.”
Arizona farmers took the announcement as “good news” as Mexico and Canada are major trading partners for agriculture here, said Julie Murphree, director of outreach for the Arizona Farm Bureau.
“We still have to review all the details of the new treaty but the elimination of Canada’s Class 7 dairy pricing program should be good for all dairy farmers across the United States including Arizona,” Murphree said.
The most positive outcome will be the updating of the pact to reword it to add digital trade and protections for intellectual property and technology advances, experts said. These protections could spur even more trade between California, Arizona and Mexico.
Steven Zylstra, President and CEO of the Arizona Technology Council that has 800 members and lobbies on behalf of the technology industry in the state, said that he is “elated” over the modernization of the agreement.
“We are especially ecstatic to know issues related to intellectual property and cross-border data flows — both critical for the technology industry — have been resolved,” Zylstra said. “We will be working hard to encourage our congressional delegation to support the agreement.”
Arizona Chamber of Commerce and Industry President and CEO Glenn Hamer said he was “incredibly pleased” that the three trading partners reached agreement to preserve the trade agreement.
“As a border state, this is particularly good news for Arizona,” Hamer said. “Mexico and Canada are our number 1 and 2 export destinations, respectively, and the ties between us are incredibly strong.”
Highlights of the refurbished deal include agreement on dairy imports, dispute resolution, online shopping, and auto tariffs by the U.S. Here is a rundown of some of the terms:
Technology – The 25-year old agreement is to be updated to include digital trade that didn’t exist at the time, and includes new protections for intellectual property and technology advancements
Dairy – Canada agreed to open up more of its domestic market to American producers
Internet commerce – Duties on certain American goods purchased online will not be levied unless they cost $150 Canadian dollars in place of the current $20 threshold
Steel – U.S. tariffs on foreign steel will remain in place and are subject to further negotiation between the three countries
Vehicles – Requires that 75 percent of a vehicle’s value would have to be produced in North America instead of the current 62.5 percent
Auto workers– Requires that 45 percent of vehicles are made by workers who earn at least $16 an hour
If approved, the refurbished trade agreement is to be reviewed by all three countries every six years and can be adjusted.
As the pact moves to the final step, Hamer said the Chamber will continue visiting with Arizona’s congressional delegation to “discuss why an updated trade agreement is such a priority for the state’s job creators.”
“For nearly 25 years, the North American Free Trade Agreement has ensured North America’s place as the world’s most economically competitive region,” he said. “A new trilateral agreement means North America will maintain that distinction in the years to come.”