Trudeau caves in last minute NAFTA deal

The impending collapse of NAFTA may not have been seen as a “big deal” on the same scale as Brexit, at least internationally, but it certainly had President Trump’s critics quite exercised over it. Now, however, it looks like everyone can go back about their normal business. After months of stalling and preening to the media, Canada’s Prime Minister Justin Trudeau has come back to the table at the eleventh hour and tentatively agreed to join the United Staes and Mexico in a new version of the deal. How much of substance has actually changed remains to be seen, but in the game of diplomatic chess, this round clearly seems to have gone to Trump. (NY Post)

The US and Canada reached a deal late Sunday on reforming the North American Free Trade Agreement, according to reports.

Canada agreed to join the revised trade deal that the US and Mexico had signed last month — just hours before a midnight deadline, that allows Mexico’s president Enrique Peña Nieto to sign the accord on his last day in office, two people familiar with the talks told The Washington Post.

The new treaty is expected to be signed by President Trump and his counterparts in Canada and Mexico within 60 days — preserving a three-country NAFTA trade pact.

We still don’t know much about the new deal with Canada. At this point, all that’s being specifically mentioned is improved U.S. access to Canada’s dairy market in exchange for some protection against future American tariffs on automobiles. Canada has traditionally operated a strict system of government control of the dairy market, protecting Canadian dairy suppliers from any foreign competition through a strict market management scheme. But they already had to make some concessions to the EU in an earlier deal and Canadian analysts were predicting back in August that Trudeau would have to offer the same benefits to the United States if he wanted a deal with Trump.

As recently as early June, Trudeau was talking tough and rejecting not only the dairy market access idea but also a provision for a five-year sunset clause in the new NAFTA deal. His position has clearly changed, but there’s no word as to whether or not he’s accepted the five-year window. Don’t be surprised if it’s in there, though.

So how did the tough-talking Trudeau wind up coming onboard the new NAFTA train? It seems obvious that Trump and outgoing Mexican President Enrique Peña Nieto were finished with their negotiations and if last night’s deadline had passed, Canada would have found itself out in the cold watching a new Mexican-American trade pact go into effect without them. Mexico’s incoming President Andrés Manuel López Obrador’s position on trade, including their future relationship with Canada, isn’t entirely clear yet. Trudeau seems to have realized that half a loaf now might be better than nothing in the future.

There are more details to be worked out and this could still fall apart, but Canada is clearly back at the table and ready to bargain. It would appear that Donald Trump’s version of hardball on a new NAFTA deal has paid off, though how much actual economic benefit we’ll see from it remains unknown.