Donald Trump. Picture: REUTERS
Donald Trump. Picture: REUTERS

Washington -A new US trade pact with Canada and Mexico is "a great deal" for all three countries, President Donald Trump said on Monday, hailing the replacement of the old North American Free Trade Agreement deal, which he had long railed against and threatened to cancel.

"Late last night, our deadline, we reached a wonderful new Trade Deal with Canada, to be added into the deal already reached with Mexico," Trump said on Twitter.

"It is a great deal for all three countries." The pact, the United States-Mexico-Canada Agreement (USMCA) "solves the many deficiencies and mistakes" in the 24-year-old Nafta deal it replaces, Trump said after accomplishing one of his signature policy initiatives.

Agreement will bring all three great nations closer together in competition with rest of the world

The agreement "greatly opens markets to our Farmers and Manufacturers" while reducing trade barriers "and will bring all three Great Nations closer together in competition with the rest of the world. The USMCA is a historic transaction!" the president said.

The rewritten deal "will result in freer markets, fairer trade and robust economic growth in our region", a joint statement from US trade representative Robert Lighthizer and Canada’s foreign affairs minister Chrystia Freeland read late on Sunday after six weeks of intense talks and more than a year of fraught, broader negotiations. In the end, Canada and the US overcame their differences after both sides conceded some ground to reach a deal covering a region of 500-million inhabitants and that conducts about $1-trillion in trade a year.

"It’s a good day for Canada," Canadian Prime Minister Justin Trudeau said. Mexican foreign minister Luis Videgaray tweeted the deal was good for his country "and for North America".

The political stakes were high. Trump, who pursues an "America First" policy on trade, needs to look strong heading into the November midterm elections where his Republican Party is fighting to keep control of the Congress.

Trudeau did not want to be seen as caving in before the general election in Canada in 2019. But it risked being frozen out of a US-Mexican deal that was reached in August.

The Canadian dollar jumped to a five-month high in Asian trade after initial reports of the agreement, which also helped Tokyo’s benchmark Nikkei index touch a 27-year high on Monday.

The pact can now be signed before Mexico’s President Enrique Pena Nieto leaves office on December 1, the date that caused the last-minute flurry of activity.

In order to reach the deal Canada agreed to open its dairy market further to US producers, and — in return — Washington left unchanged the dispute settlement provisions.

Under Canada’s supply-managed dairy system, Ottawa effectively sets production quotas, which raises prices to consumers but provides farmers with a stable income.

Canada had opposed US demands to weaken or eliminate Nafta’s dispute resolution mechanism, whose arbitration panels Ottawa used to resolve trade conflicts.

In recent days warnings were mounting that time was running out to clinch a new deal, but a senior US administration official said the final rewrite is a "fantastic agreement". Alongside changes to the dairy market in Canada, officials said it includes stronger protections for workers, tough new environmental rules, and updates the trade relationship to cover the digital economy and provides "groundbreaking" intellectual property protections.

The AFL-CIO, a Washington-based federation representing millions of unionised employees, said it was too early to "make a final judgment" on the new deal’s effect on working people. One of the most important sectors concerns the car industry, which Nafta revolutionised. The US had sought increased US content for duty-free cars. The new text provides rules to encourage North American supply of components.

While the pact should protect Mexico and Canada from Trump’s threatened 25% tariffs on cars, still pending are the duties on steel and aluminium, which officials said was on a "separate track", handled by the department of commerce.

The trade pact will remain in force for 16 years but will be reviewed every six years.