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Manufacturers relieved, dairy farmers angry in wake of NAFTA replacement deal

FILE PHOTO - Dairy cows walk in a pasture at Nicomekl Farms, in Surrey, B.C., on Thursday August 30, 2018.
Image Credit: THE CANADIAN PRESS/Darryl Dyck
October 01, 2018 - 1:00 PM

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 Sunday night, that U.S. President Donald Trump said he plans to call 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 new deal exempts Canadian autos from tariffs up to a point that is a de facto exemption and gives hopes for metal tariffs, said Frederic Bastien, an analyst at Raymond James 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."

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.

READ MORE: Five key takeaways from the new U.S.-Mexico-Canada Agreement

"The threat of capricious auto tariffs has been lifted, stabilizing future investment" said Dias in a statement.

Steel and aluminum producers looking for an end to the tariffs slapped on their products came away disappointed.

"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.

United Steelworkers Canadian director Ken Neumann was more direct, saying 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 association that represents Quebec's milk producers, said the concessions 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.

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 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 Toronto Stock Exchange was up slightly as of late afternoon trading in the wake of the deal while the loonie was up about half a cent.

"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 won't be a game changer for Canadian growth, said CIBC chief economist Avery Shenfeld.

"For the most part, this was a defensive deal for Canada," he said in an interview.

"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."

— With files from Linda Nguyen

News from © The Canadian Press, 2018
The Canadian Press

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