Trade: US-Mexico-Canada Trade Pact Greeted with Relief

The full effects of the new United States-Mexico-Canada Agreement (USMCA) on North America's paper industry are still being absorbed, but the reshaped 25-year-old North Atlantic Free Trade Agreement (NAFTA) provisionally got a cautious thumbs-up from both sides of the US-Canada border.

"The biggest plus is it's a trilateral agreement ‒ there was talk of either two separate agreements or none at all, and we're very glad it maintains the basic structure," one trade source in the US said.

"Everyone is still digesting the nitty gritty, but we see it as a very positive result for us," a trade contact in Canada said.

USMCA does not address the 10 percent duties set by Canada on a range of US imports including some US$850 million of US paper industry products, including converted tissue and toweling.

Those duties were applied in July in retaliation for US tariffs imposed by the Trump Administration on Canadian steel and aluminum. While Canada has received some assurances on future tariffs on imported cars and auto parts, there was no formal agreement on existing US import tariffs on Canada's steel and aluminum, and, for now, the tariffs remain in place, media reports said.

"The USMCA will ensure certainty and improved trade stability among all three countries," said Forest Products Assn of Canada (FPAC) CEO Derek Nighbor. "FPAC is specifically pleased with the outcome of maintaining the existing dispute settlement mechanism as this allows all industries in the three countries to challenge discriminatory trade actions."

"It is not so much that the agreement was a 'win' for Canada, but rather that Canada avoided a potentially catastrophic outcome," said Equity Research Associates analyst Kevin Mason. "Canada retained the Ch 19 dispute settlement mechanism, which it has used many times in the past. Other than that, not much has changed."

The preservation of Ch 19, an extrajudicial trade dispute system that allowed NAFTA members to bring grievances against other members over allegedly unfair trade practices, was a key goal of the Canadian side. Ch 11 dispute settlement provisions, which allow investors to bring disputes against other NAFTA member governments, are to be phased out with Canada ‒ a key goal for the USA.