Exporters hope for US-Canada breakthrough

On Friday the US and Canada resolved enough differences to trigger a statement from US president Donald Trump to Congress that he intends to keep Canada as part of the new North American Free Trade Agreement (Nafta), setting in motion a 90-day clock for the parties to sign the agreement, writes John Whelan.

Exporters hope for US-Canada breakthrough

The news followed on from the prior week’s statement by the Trump administration that a bilateral deal would be signed with Mexico.

Friday’s deadline for agreeing a new trade deal with Canada was always a typical Trump bluff as he blustered to push for an early deal to suit his November mid-term election plans.

It was clear for some time now that Congress would not sign a new Nafta deal without Canada included.

Key issues for the US and Canada are dairy and anti-dumping dispute panels.

The US wants to dismantle Canada’s dairy system and kill the panels. Canada has signalled it would compromise on dairy and wants to preserve the so-called Chapter 19 panels.

These panels prevent dumping of surplus US products into Canada, dairy products in particular.

Mr Trump spent much of the June G-7 meeting of the top 7 global economies, complaining about Canadian dairy tariffs, mentioning it repeatedly during a leaders’ session on trade.

He seized on one number in particular: Canada’s 270% tariff on certain products.

However, typical of Trump tactics, the 270% only applies to surplus dumped on the market, the normal US dairy exports carry a tariff of 7.5%.

Recent trade figures show that Canada imports twice as much dairy from the US as it exports.

One would question whether an entire trading relationship needs to be jeopardised to appeal to dairy farmers in a few Trump supporting states.

Friday’s announcement is good news for many Irish exporters who ship to Mexico and use their affiliate companies located there to finalise, package and ship products into the US market at the favourable terms available under Nafta.

Kerry Group has subsidiary manufacturing facilities in Mexico and ships from there to the US.

For those exporting to Canada, it is too early say if the new deal will be good or bad.

There will be pressure on Canadian negotiators over the coming weeks to concede some ground on expanding the dairy quota, before a final deal is done.

If this happens, there is likely to be a lower quota available to EU and Irish diary producers shipping to Canada.

However, companies such as Glanbia which have the second largest cheese- producing factories in the US are likely to gain from the new deal.

Pharmaceutical companies based in Ireland and shipping into north America will also welcome the added protection for branded drugs.

Most of Ireland’s pharmaceutical exports are patented in the US.

For the Trump administration, getting a deal done with Canada and Mexico will be seen as proof positive that its trade tactics are effective.

The Nafta deal follows the US-Japan accord on trade in June when Trump, after White House talks with Japanese prime minister Shinzo Abe, said the leaders were working together to improve trading relations and that Abe promised new Japanese investment in the US.

More significantly was the EU-US accord in July, where Trump and Commission president Jean-Claude Juncker pledged to work toward negotiating a broad reduction in tariffs on industrial goods and to co-operate against unfair Chinese trade practices.

The US agreed not to impose tariffs on European cars as long as negotiations are ongoing.

However, beyond a shift in rhetoric, the concrete results so far remain minimal, but they do point to a winding down of the trade war syndrome and perhaps we will see a settlement of the China-US trade disputes in the near future.

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