US, Canada And Mexico Agree New Trilateral Trade Deal To Replace NAFTA

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Mexico's Foreign Minister Luis Videgaray (C), Mexico's Economy Minister Ildefonso Guajardo (3rdR), White House chief economic adviser Larry Kudlow (3rdR-standing) and Jesus Seade (R), Mexico's President-elect Obrador's representative in trade negotiations look on as U.S. President Donald Trump (L) announces a deal to replace the North American Free Trade Agreement (NAFTA) at the White House in Washington, Aug. 27, 2018.

Insiders got wind of a breakthrough after 14 months of tumultuous talks and just hours before US and Mexican trade authorities were set to publish their own trade agreement without Canada.

Trump, who has already imposed tariffs on Canadian steel and aluminum, has also repeatedly threatened to impose even more crippling levies on auto imports if a deal can't get done.

Lawmakers from both parties have urged the White House to include Canada in any revised Nafta, warning that excluding Canada, which is America's largest export market, could disrupt supply chains, cost jobs, and slow the USA economy.

On dairy the official said Canada essentially gave the USA the same access it offered in the Trans Pacific Partnership trade agreement that President Donald Trump rejected.

Late Sunday, Canadian Prime Minister Justin Trudeau called a Cabinet meeting for 10 p.m. Ottawa time to discuss the trade agreement.

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Canada's The Globe and Mail cited four sources as saying an outline of a deal had been reached but Trump and Trudeau still needed to approve it.

Canada, the United States' No. 2 trading partner, was left out when the U.S. and Mexico reached an agreement last month to revamp the North American Free Trade Agreement.

Speaking at a political rally in Wheeling, West Virginia on Saturday night, Trump told supporters: "We'll see what happens with Canada, if they come along. It's either going to be the text goes in with Mexico and the US, or the text goes in with all three countries".

Under U.S. trade law, the administration was required to publish the text by the end of September. "So if you comply with the rules of origin, there's no way you are subject to 232 tariffs", he said.

Ottawa and Washington remained at odds over Canada's subsidized dairy sector, and the dispute resolution provisions in NAFTA.

"It's a good day for Canada", said Prime Minister Justin Trudeau as the meeting wrapped up just over an hour after it started.

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Canada had agreed to provide U.S. dairy farmers access to about 3.5 per cent of its approximately $16 billion annual domestic dairy market, the sources said, adding that the Canadian government is prepared to offer compensation to dairy farmers hurt by the deal. Chapter 19 allows countries to challenge each others' anti-dumping decisions in front of an expert panel.

"They're moving towards closing the deal - it's really not a question of if, it's a question of when", said Daniel Ujczo, an Ohio-based global trade lawyer at Dickinson Wright who represents large US automakers and auto-parts manufacturers.

Mexico and the USA have already agreed new terms, and only recently it looked as if Canada could be excluded in a final agreement.

The deal is "going to change peoples lives and it's going to make" America stronger and better, the officials conveyed.

The two nations signed a side letter allowing Washington to pursue tariffs on annual Mexican auto and SUV imports of over 2.4 million vehicles, a number that significantly exceeds last year's total. In force since 1994, Nafta eliminated tariffs on most goods and governs more than US$1 trillion in trade on the continent.

US dairy farmers are subsidized and create a huge oversupply of milk.

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This objection is largely more philosophical than practical - the idea of having quotas as a side letter to a free trade agreement. Talks to revamp NAFTA began in August a year ago.