Five things to know about Trump’s new NAFTA

President Trump has hailed the new trade agreement his administration negotiated with Canada and Mexico as a “historic” event that represents a fulfilled promise from his campaign. 

The deal will replace the North American Free Trade Agreement (NAFTA), which Trump has repeatedly criticized, and follows years of Trump being critical of past trade deals as being poorly negotiated. 

Here are five things about the new deal.

It’s a win for Trump

Along with immigration, trade was candidate Trump’s signature issue. 

He insisted that if he were elected, he’d renegotiate trade deals to help U.S. workers and manufacturers. 

{mosads}The message was a winner for the president, who became the first GOP presidential candidate in more than a generation to win the states of Michigan, Wisconsin and Pennsylvania.

The new NAFTA deal is the first thing Trump can point to in terms of a concrete change from his trade policy. 

The new deal imposes requirements that cars and trucks imported from Mexico and Canada, to quality for duty-free access, be manufactured with 75 percent components from the three countries. It also requires that a significant amount of work be done by $16 per hour labor, something intended to force Mexican companies to raise wages.

Trump also won new concessions for Canada on dairy, something he will point to in states such as Wisconsin where it is an important issue for some. 

The president has come under criticism for a trade policy that has imposed steep tariffs on imports from U.S. allies as a way to try to drive them to the bargaining table. 

Trump will use the new deal to argue that his tough approach is leading to results. 

“Without tariffs, we wouldn’t be talking about a deal,” he said Monday.

Canada was negotiating from a corner 

During the summer, the U.S. took a divide-and-conquer mentality, moving on from talks with Canada and putting the focus on reaching a deal with Mexico. 

By the end of August, outgoing Mexican president Enrique Peña Nieto reached an agreement with the U.S., which Trump touted by making a call to Peña Nieto from the Oval Office in front of TV cameras. 

At the time, Trump said he would have no problem leaving Canada behind and hitting them with a 25 percent tariff on their auto exports if they weren’t willing to make a deal by the U.S.-imposed Sept. 30 deadline. 

All of this put Ottawa in a difficult position, given its need to stay in the trade deal. At the same time, Canadian Prime Minister Justin Trudeau did not want to be seen as knuckling under to Trump. 

Canada’s Minister of Foreign Affairs Chrystia Freeland spent most of September shuttling back and forth between Ottawa and Washington trying to reach a deal. 

After an agreement was reached, Canada argued that the fact the agreement’s dispute settlement system remains intact was a significant victory.

US gets better access to dairy market

The deal will provide dairy farmers, especially those along the border like Wisconsin, more market access to the Canadian dairy industry. 

Senior administration officials touted that they got a better deal than the Obama administration secured in the Trans-Pacific Partnership negotiations. 

The new deal provides an additional 3.59 percent share of the market up from the 3.25 secured in the TPP, according to Canadian reports.

“Any time we can improve our market access, and gain new market access with a new agreement, that’s what we need to be doing for our dairy industry,” said Michael Dykes, president and CEO of the International Dairy Foods Association, which represents milk, cheese and ice cream producers. 

“We’re pleased to see President Trump follow through on his commitments to dairy.”

The deal also eliminates a milk ingredient pricing policy that affected U.S. exports of so-called ultrafiltered milk, a moneymaker for farmers in Wisconsin and New York and a product that wasn’t subject to tariffs under the old agreement. 

Jim Mulhern, president and CEO of the National Milk Producer Federation, said the agreement “should give us additional marketing opportunities that will allow us to provide high-quality American dairy products to Canada,” calling it “incremental progress.”

Steel and aluminum tariffs stay in place

Under the deal, Trump does not have to remove the 25 percent tariffs on steel and 10 percent tariffs on aluminum from Canada and Mexico.

U.S. Trade Representative Robert Lighthizer said the steel and aluminum tariffs and the new trade agreement are two separate issues and “we’re engaging in talks now in an effort to preserve the effect of our program and still take care of their needs. Hopefully we’ll be able to work that out.” 

The new U.S.-Mexico-Canada Agreement (USMCA) has a side agreement that outlines discussions about reaching a metals agreement. A deal could be done by the time the countries sign the pact at the end of November. 

Both countries have insisted that they are not national security threats to the United States and should be exempted from the tariffs. 

Congress still has to approve the new deal

Trump said on Monday he had no idea whether lawmakers on Capitol Hill would pass the agreement next year. 

If the Democrats win back the House majority, they are likely to want to put it up for a thorough examination.

Over the past two decades, Democrats have been more reflexively anti-trade than Republicans in Congress, but that has been changing in the Trump era.

Trump has scrambled the politics of trade, and his saber-rattling has made many in his own party uncomfortable. 

Whether a Democratic House gives the OK to his new NAFTA will be something to watch if the GOP loses its majority. 

If Republicans hold on to majorities in the House and Senate, passage of the new trade deal still won’t be easy, but it could be easier for the Trump White House.

Tags Canada Donald Trump Mexico Nafta Robert Lighthizer Trade

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