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After difficult and lengthy negotiations, the US and Canada agreed to update the North American Free Trade Agreement (NAFTA) and preserve it as a tripartite pact with Mexico, which can be signed in November. The deal happened almost in the very last minute – before the deadline for an agreement that ended at midnight local time.

In the future there will be a tripartite agreement with Mexico. The United States and Mexico have already reached a preliminary agreement for a new trade deal at the end of August and have announced that, in the event of a failure of the remaining negotiations, they will maintain the bilateral agreement in force.

The three countries signed the NAFTA agreement in 1994. It regulates one of the world’s largest free trade areas, which affects nearly 500 million people and generates economic output of nearly 23 trillion USD. The US trade volume with the two neighboring countries increased almost fourfold since 1994 to 1.3 trillion USD.

The US President Donald Trump has questioned the deal and started re-negotiating it because of complains for discrimination against the United States. From the US point of view, there is a significant trade deficit with both countries. Donald Trump criticized NAFTA as one of the worst US trade agreements.

The negotiations for a new version of NAFTA began more than a year ago, and in recent months many times fell into a dead end, and disputes were mostly between the United States and Canada. Among the problems is the fact that Ottawa protects its milk producers with high defensive duties. In the future, the US farmers are expected to gain better access to the Canadian milk market.

The deal will include additional quota agreements for Mexico and Canada that will protect their current car exports as well as future production from the duties that Trump threatens to impose.

Customs duties on steel and aluminum, which Trump imposed on both sides earlier this year, remain in force and will be reviewed separately. So far, however, there is no timetable for the possible abolition of these duties.

The so-called Dispute Settlement Mechanism (Chapter 19), which deals with bilateral anti-dumping and countervailing duties and which was a major point in trade negotiations, remains unchanged in the new agreement. The conflict settlement between investors and countries will be phased out between the US and Canada, but will remain in force for some sectors between the US and Mexico.

The US Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland said in a joint statement that the new deal guarantees more free markets, fairer trade and strong economic growth in the region.

The representatives of the US and Canadian governments intensively negotiated over the weekend. Late Sunday evening, Canadian Prime Minister Justin Trudeau called his cabinet for a short-term meeting. Upon leaving the Council of Ministers building, he said it was “a good day for Canada”, but did not comment on details of the deal.

The US officials called the renegotiation of NAFTA a “fantastic deal” and “success for all three countries”.