Reaction from Canadian business groups to the terms of a renegotiated trade pact between Canada, the U.S. and Mexico range from relief to dismay as the details of the proposed new pact begin to sink in.
The deal, which U.S. President Donald Trump said he plans to call the United States Mexico Canada Agreement (USMCA), was reached late Sunday night amid 11th-hour negotiations ahead of the U.S.-imposed Oct. 1 deadline.
The steel and aluminum industry has expressed concern that the trade deal doesn’t include an end to tariffs, dairy producers claim it will completely undercut their industry, while manufacturers – especially the automotive industry – have welcomed an end to the threat of tariffs and the many months of uncertainty.
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“Certainly disappointed because they didn’t agree on a solution on the 232 sanctions regarding aluminum and steel,” said Jean Simard, CEO of the Aluminium Association of Canada.
“We find it very unfortunate, and to us it’s certainly very important in the coming days and weeks leading to the final signing of the agreement that they are able to resolve the situation.”
United Steelworkers Canadian director Ken Neumann said Canada “sold out” steel and aluminum workers by not getting the 25 per cent steel tariffs and 10 per cent aluminum tariffs.
“It appears Canadian steel and aluminum workers are among those being sacrificed in the concessions made by the Liberal government in this deal,” he said in a statement.
The dairy industry was also heavily critical of the deal, which will grant expanded market access to the domestic dairy market and eliminate competitive dairy classes.
Bruno Letendre, head of the association that represents Quebec’s milk producers, said the concessions in the agreement are the equivalent of 13 days fewer production for his members.
“We’ve been sacrificed,” he said in an interview. “There’s no doubt about that. Supply management has been sacrificed.”
The measures will have a “dramatic impact” on dairy farmers and cause the industry to shrink, said Pierre Lampron, president of Dairy Farmers Canada, in a statement.
“This has happened, despite assurances that our government would not sign a bad deal for Canadians,” he said.
The general sentiment among manufacturers is one of relief, said Dennis Darby, president and CEO of Canadian Manufacturers & Exporters.
“It removes that uncertainty that was hanging over the sector, in terms of our access to this North American market, in terms of the rules related to our integrated North American supply chain.”
He said he hopes the aluminum and steel tariffs can be resolved shortly, but that the manufacturing industry didn’t lose on what’s in the new deal.
“At a minimum we haven’t lost any ground. Versus a very unpredictable and protectionist U.S. administration, I think Canada did as well as it could.”
The deal preserved the key dispute-resolution provisions – Chapter 19 – which allow for independent panels to resolve disputes involving companies and governments, as well as Chapter 20, the government-to-government dispute-settlement mechanism.
A side letter published along with the main text of the agreement exempts a percentage of eligible auto exports from the tariffs. A similar agreement between Mexico and the U.S. preserves duty-free access to the U.S. market for vehicles that comply with the agreement’s rules of origin.
Here are some key elements of the new deal:
Getting milked
Trump frequently railed against Canada’s dairy industry throughout the trade talks, calling it unfair to the United States. The new deal grants the U.S. access to 3.6 per cent of the Canadian dairy market, a move roundly criticized by domestic dairy farmers. The access given to the U.S. is slightly more than the 3.25 per cent conceded in the Trans-Pacific Partnership trade deal with Pacific Rim countries. Aside from new quotas on American ice cream, there will also be increases in access for American poultry and eggs, in exchange for greater access south for Canadian peanuts and sugar.
Tariffs and taunts
Trump joked that the deal wouldn’t have been made without tariffs, specifically on Canadian-made steel and aluminum, which prompted tit-for-tat retaliatory tariffs from Canada on a number of U.S. goods. And as negotiations dragged on, Trump threatened to slap Canada’s auto industry with significant tariffs – a threat apparently now dodged. The deal says the first 2.6 million Canadian autos exported to the U.S. will be exempted from tariffs, a figure well above the current export rate of 1.8 million. But the steel tariffs remain in place and Trump has given no indication when he might lift them.
Attention shoppers
The trade deal raises the threshold for duty-free purchases online from American retailers. When the deal takes effect, shoppers won’t pay duties until their online purchase is worth more than $150 – a significant bump from the current threshold of $20. But there’s more: Language in the agreement no longer requires companies – such as Google or Microsoft, for example – to put a data centre in Canada in order to do business here, meaning Canadians’ information could be housed south of the border and subject to American laws.
Intellectual property
The rules around copyright and intellectual property are set to change. On copyright, the length of time after a creator’s death that they maintain rights will move to 70 years from 50. On pharmaceuticals, new biologics – drugs made from natural sources – will be copyright protected for 10 years, up from the current eight, an extension that analysts believe will benefit U.S. companies over Canadian firms and delay when Canadian patients can access cheaper, generic versions of drugs.
Resolving quarrels
Two of Ottawa’s key sticking points throughout the talks involved holding on to dispute-resolution tools and decades-old cultural exemptions that leave Canada in control of its own media content, from broadcasting to publishing to music. The USMCA preserves what was known as Chapter 19, which allows independent panels to resolve disputes over tariffs and duties, as well as Chapter 20, the government-to-government dispute-settlement mechanism. Chapter 11, which allows companies to sue governments over perceived mistreatment, has been dumped.
Turnover on downs
The National Football League and Bell Media lost their 2017 legal challenges to sack a CRTC decision that banned the long-time practice of Canadian advertisers inserting their ads into Super Bowl broadcasts over the more popular American ones. They now appear to have a win. The University of Ottawa’s Michael Geist points out on his blog that wording in the new trade deal would see Canada “rescind the CRTC policy with a requirement that all programs be treated equally.” Result? American ads could be punted from Canadian airwaves during the big game. It was one of many cultural issues in the deal, but the language around a decades-old cultural exemption remains in place, leaving Canada in control of its own media content, from broadcasting to publishing to music.
Indigenous rights
The Liberals pushed inclusion of a new chapter on Indigenous rights in the trade deal. In the end, the chapter turned into provisions sprinkled through the text, including one allowing governments to enact measures needed to meet their legal obligations to Indigenous Peoples. Similarly, a gender chapter didn’t materialize as originally envisioned.
Trading places
There is also language in the deal that requires any of the three partners to notify the others when they start or finish trade agreement talks with a non-market economy – like China – and gives the other partners a say in the text of that deal. While this language is new, the list of professions that can more easily enter another partner country on a temporary basis hasn’t been updated to include, for instance, many tech jobs.
