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U.S. and Canada Reach Deal to Salvage Nafta

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U.S. and Canada Reach Deal to Salvage Nafta

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A dairy farmer in Canada in August. Canada is expected to ease protections on its dairy market and provide access that is similar to what the United States would have gained through the Trans-Pacific Partnership.CreditCreditChristinne Muschi/Reuters

WASHINGTON — The United States and Canada have reached a last minute deal to salvage the North American Free Trade Agreement, according to people familiar with the negotiations, overcoming deep divisions to keep the 25-year-old trilateral pact intact.

The deal came after a weekend of frantic talks to try and preserve a trade agreement that has stitched together the economies of Mexico, Canada and the United States but that was in danger of collapsing amid deep divisions between President Trump and Canadian Prime Minister Justin Trudeau.

The 11th-hour agreement was punctuated by a frenetic Sunday, with Canada’s leaders teleconferencing throughout the day with top American officials in Washington. Mr. Trudeau convened a 10 p.m. cabinet meeting in Ottawa to brief officials on the deal, as Jared Kushner, one of Mr. Trump’s closest advisers, and Robert E. Lighthizer, the president’s top trade negotiator, hashed out the final details. Mexico’s under secretary of foreign trade, Juan Carlos Baker, was expected to present the texts of the agreement to the Mexican senate just before midnight.

Text of the agreement was expected to be presented to Congress as early as Sunday evening.

The deal represents a win for President Trump, who has derided Nafta for years and threatened to pull the United States from the pact if it was not rewritten in America’s favor. The Trump administration struck a deal with Mexico last month to rewrite Nafta and had threatened to jettison Canada from the pact if it did not agree to concessions like opening its dairy market to United States farmers. The White House had set a Sept. 30 deadline to release the text of its new trade agreement with Mexico.

According to people briefed on the negotiations, Canada will ease protections on its dairy market and provide access that is similar to what the United States would have gained through the Trans-Pacific Partnership, a trade treaty that President Trump withdrew from last year.

The United States is poised to relent on its demands to eliminate an independent tariff dispute settlement system that Canada has said is a red line in negotiations, according to a person consulted on the negotiations.

The countries also appear to have reached an understanding that would protect Canada from the threat of automobile tariffs, which Mr. Trump has routinely threatened, though it is not clear how far those protections would extend. Canada also appears ready to accept assurances that steel and aluminum tariffs that Mr. Trump has imposed will be lifted, though it remains unclear whether the taxes would be replaced by quotas that limit metal imports.

After months of sputtering talks, momentum picked up this weekend as Mr. Trudeau inserted himself and made clear that he wanted to get something done. Mexico has also scrambled to try and ensure that the Nafta pact remains trilateral.

President-elect Andrés Manuel López Obrador of Mexico said on Friday that Mr. Trudeau had appealed to him to help pave the way for a three-nation deal and that he would insist that a revised Nafta include Canada.

While Canada had played down the end-of-the-month deadline, the talks were restarted in earnest this weekend as the United States and Mexico signaled they would release text of their bilateral trade agreement as early as Friday. Mexico wants a deal signed before Dec. 1, when the new Mexican administration takes over and the Trump administration wants the current, Republican-controlled Congress to vote on the deal quickly, given a potential change in control after the November midterm elections.

Lawmakers from both parties have urged the White House to include Canada in any revised Nafta, warning that excluding Canada, which is America’s largest export market, could disrupt supply chains, cost jobs and slow the United States economy. Companies and business groups, including the U.S. Chamber of Commerce, have repeatedly called on President Trump to ensure Canada remains part of the pact, which has become critical for industries across North America, including automakers, agriculture and manufacturers.

Discussions between the United States and Canada had stalled amid souring relations between Mr. Trudeau and Mr. Trump, who lashed out at Canada last week during the United Nations General Assembly meeting for mistreating the United States on trade. The president said he had rejected a meeting with Mr. Trudeau because of Canada’s high tariffs, though Mr. Trudeau’s office said no meeting had ever been requested. Mr. Trump also threatened to tax Canada’s auto exports into the United States if it did not agree to America’s demands. That followed a testy meeting in June, when Mr. Trump accused Mr. Trudeau of being “dishonest.”

A revised Nafta that includes Canada has a far greater chance of being ratified by Congress but its fate is still somewhat uncertain. Democrats could take control of the House or the Senate in the midterm elections in November and attempt to call for changes to the agreement. Lawmakers have said they do not expect Congress to vote on the deal until early next year.

Katie Rogers contributed reporting.

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