Automakers pleased
Dairy farmers, steel and aluminum sector unhappy with pact
TORONTO — Canada’s automakers appear to be the big winners from a renegotiated trade pact between Canada, the U.S. and Mexico, while steel and aluminum makers and dairy producers have less to celebrate.
The breakthrough deal reached late Sunday night, called the United States-Mexico-Canada Agreement (USMCA), exempts a percentage of eligible auto exports from tariffs — one of the biggest wins in the new deal, said David Adams, president of Global Automakers of Canada.
“One of the largest things is just having certainty now in terms of what the trading relationship is and what the business environment is going to be going forward. Because business desperately needs certainty, and uncertainty is anathema to getting things done.”
The USMCA, which replaces NAFTA, makes enough Canadian auto exports tariff-free to be a de facto exemption, and gives hope that metal tariffs could be reversed, Frederic Bastien, an analyst at Raymond James, said in a note.
“This a victory for Canada because that amount is actually well above what we currently send south of the border. That gives us confidence a side deal on Canadian steel and aluminum can also be reached before the new NAFTA is ratified,” he said.
The terms reached between the U.S. and Mexico on higher wage thresholds will also be positive for Canadian producers, said Unifor president Jerry Dias, who welcomed the deal.
“The threat of capricious auto tariffs has been lifted, stabilizing future investment,” the union leader said in a statement.
Prime Minister Justin Trudeau told a news conference in Ottawa on Monday the auto sector was a priority in negotiations.
“Protecting our auto industry was one of the core concerns that Canadians had about getting to a deal, and we’re glad to say that we have significant protections.”
But steel and aluminum producers came away disappointed, with no deal in place to lift the tariffs the U.S. imposed on their products at the end of May.
“Certainly disappointed because they didn’t agree on a solution on the 232 sanctions regarding aluminum and steel,” Jean Simard, CEO of the Aluminium Association of Canada, said, referring to Section 232 of the U.S. Trade Expansion Act, which covers national security tariffs.
Ken Neumann, United Steelworkers national director for Canada, said Canada “sold out” steel and aluminum workers by not getting the 25 per cent steel tariffs and 10 per cent aluminum tariffs removed.
“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.
Most critical of the deal was the dairy industry, which railed against expanded U.S. access to the domestic dairy market and the elimination of competitive dairy classes.
Bruno Letendre, head of the group that represents Quebec’s milk producers, said the concessions amount to 13 fewer days’ production for his members.
The measures will have a “dramatic impact” on dairy farmers and cause the industry to shrink, Pierre Lampron, president of Dairy Farmers Canada, said in a statement.
Ontario and Quebec premiers criticized the dairy concessions as a bad deal for farmers, though Foreign Affairs Minister Chrystia Freeland told Monday’s news conference that they would be made whole.
“Our supply-managed producers will be fully compensated, because that is the fair thing to do,” she said without providing details on compensation.
For the general manufacturing sector, the sentiment 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.
“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.”
Markets took the news of the deal in stride, with the S&P/TSX composite index closing 0.2 per cent higher, while the loonie posted an average gain of 0.86 of a U.S. cent over Friday.
“The markets are reacting positively and with relief, but they’re certainly not euphoric by any means. They’re happy but not delighted,” said Doug Porter, chief economist at the Bank of Montreal.
The new trade pact is significantly better than an all-out trade war, but it won’t be a game changer for Canadian growth, CIBC chief economist Avery Shenfeld said.
“We had a NAFTA deal that was working reasonably well, so we will call it a win because we were able to retain the key parts of the existing NAFTA deal in terms of our access to the U.S. market.”