ACB News Australia-China Financial Online October 3 After months of intense negotiations, U.S. President Donald Trump announced at the White House on October 1st that the United States had reached a new trade agreement with Canada and Mexico, the U.S.-Mexico-Canada Agreement (USMCA), to replace the original North American Free Trade Agreement (NAFTA).
Mr. Trump said the new trade deal, which involves nearly $1.2 trillion in trade, would create more than 100,000 U.S. jobs. The White House is pleased with this achievement.
U.S. officials say the U.S.-Mexico-Canada agreement could be a model for future U.S. trade deals with other countries.
According to the text of the new trade agreement released by the Office of the United States Trade Representative on the evening of September 30, the United States-Mexico-Canada Agreement contains more than 30 chapters on market access, rules of origin, agriculture, trade remedies, investment, digital trade, dispute resolution, intellectual property rights, and additional bilateral agreements on some issues.
Under the framework of the U.S.-Mexico-Canada Agreement, U.S. workers would receive higher wages, more job rights, and better protection of U.S. intellectual property rights.
But what is the main difference between this new trade deal and the much-maligned North American Free Trade Agreement( NAFTA) that Mr. Trump has snubbed?
Rules of origin
The new agreement places higher demands on rules of origin for car manufacturing, requiring 75 per cent of home-made cars sold in the trading zone, up from 62.5 per cent previously set.
This is an issue highlighted by the Trump administration. The new agreement, which plans to shift some industrial production from Mexico to the United States and Canada, requires 40 to 45 percent of auto production to be done by workers with a minimum wage of $16 an hour, and that factories can only receive tax breaks if they pay the minimum wage.
3. Dairy products
Mr. Trump has been concerned about the dairy trade between the United States and Canada, arguing that Canadian milk and cheese producers are given special protection by the Canadian government, which not only imposes quotas on dairy imports, but also imposes high import tariffs.
Under the new agreement, Canada will open its dairy market to the United States by 3.5 percent. However, the deal was immediately criticised by Mr Ramplon, president of the Canadian Dairy Farmers Association, who said it was bad for 220,000 Canadian dairy farmers.
Robert Lighthizer, the US trade negotiator, is particularly unhappy with Chapter 19 of the North American Free Trade Agreement. The content of the chapter allows exporters to appeal to a special committee challenging the emergency anti-dumping and countervailing duties imposed on their exports. Canadian timber companies often use this provision to lift restrictions on access to the U.S. market. However, at Canada's insistence, the Special Committee was retained.
The new agreement agrees that the U.S. can continue to impose emergency tariffs of up to 25 percent on cars and auto parts, citing national security when needed. But under certain conditions, Canada and Mexico are exempt from tariffs (no more than 2.6m cars are exported to the US each year), meaning their car industries are unlikely to be affected (they currently export only about 2m cars a year to the US).
The speed with which new trade agreements between the United States, Canada and Mexico have surprised many analysts and investors.
"This is another example of President Trump's willingness to make concessions in exchange for a modest victory," said Andrew Hunter, macro analyst at Capita. ”
But at a news conference on Tuesday, Mr. Trump reiterated that it was still "too early" to engage in dialogue with China, even though it was "very keen to restart it."
On the other hand, John Kerry, the former Democratic secretary of state, has urged the Trump administration to force China to change its current attitude, including through alliances with Europe.
"There is no doubt that China needs a firm attitude, which is right and absolutely no problem," Kerry said in an interview with CNBC. ”
Greg Valliere, Horizon's chief global strategist, believes that sooner or later China and the US will reach an agreement on trade.
"Trump has portrayed the new trade agreement as a great victory that will put new pressure on China. China's manufacturing sector is now experiencing a marked recession," Mr. Waleed said. There are signs that the Chinese market is now open to some of America's major economic sectors, such as financial services. ”
Tags: U.S.-Canada-Mexico trade agreement USMCA China pressure