U.S. and Canada reach NAFTA deal

By guest authors Jacob M. Schlesinger, Kim Mackrael and Vivian Salama from Wall Street Journal

Accord allows Canada to join revised “NAFTA”, after Mexico and U.S. reached agreement in August

The U.S. and Canada reached a dramatic, last-minute deal late Sunday night on revising the North American Free Trade Agreement, lifting a cloud of uncertainty over the quarter-century-old continental commercial bloc.

The pending agreement will allow Canada to join an accord reached in late August between the U.S. and Mexico and diminishes the prospects for President Trump to follow through on his threats either to kill NAFTA outright or to break the trilateral pact into separate pieces.

The surprising Washington-Ottawa accord came just four days after Mr. Trump’s trade representative told Congress that the gaps between the two countries appeared too great to bridge in time to meet the U.S.-imposed Sunday deadline and that the administration was prepared to keep moving down the path of a Mexico-only agreement.

The accord restores—for now, at least—harmony with two neighbours that Mr. Trump has repeatedly criticized in public, paving the way for him to hold a late-November signing ceremony with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto.

“This is a big win for the United States, for Mexico and for Canada,” a senior Trump administration official told reporters in announcing the pact, adding that it “fulfils one of the president’s most important campaign promises.”

“It’s a good day for Canada,” Mr. Trudeau told reporters as he left a special Sunday-night cabinet meeting at his offices to go over the framework of the agreement.

NAFTA 2.0—to be officially called the U.S.-Mexico-Canada Agreement, or USMCA—makes significant changes to the rulebook that has governed continental commerce since 1994. The biggest impact is expected to be on the region’s largest industry, autos, requiring a greater portion of vehicles to be made in North America and with high-wage labor in the U.S. and Canada.

The new deal for the first time sets rules for financial-services and digital businesses that have emerged since the bloc was created, aimed at pleasing sectors from drugmakers to Wall Street.

One of Canada’s last-minute concessions made to finalize the broader agreement was a pledge to curb protection for its dairy industry, a policy Mr. Trump has frequently criticized as unfairly restricting American exports.

The U.S. in turn compromised by dropping its demands to scrap the original treaty’s Chapter 19 provisions, or the special NAFTA courts allowing member states to challenge trade restrictions imposed by the others.

Trump officials argued such courts infringed American sovereignty, but Canada sees the panels as vital to protecting its industry against what officials consider frequent improper tariffs imposed by the U.S.—concerns heightened by the Trump administration’s aggressive moves to block a range of Canadian exports from lumber to aircraft.