Japanese Nikkei hits 27-year high as markets cheer Nafta deal

Canadian Foreign Affairs Minister Chrystia Freeland speaks to the media as she arrives at the Office of the United States Trade Representative Tuesday Sept. 11 2018 in Washington

Canadian Foreign Affairs Minister Chrystia Freeland speaks to the media as she arrives at the Office of the United States Trade Representative Tuesday Sept. 11 2018 in Washington

Canada and the United States reached a deal Sunday night for Canada to stay in a free trade pact with the U.S. and Mexico.

The agreement will increase USA access to Canada's dairy market beyond Trans-Pacific Partnership levels, a senior Trump administration official said.

US President Donald Trump had threatened to walk away from NAFTA unless major changes were made - blaming the deal for the exodus of manufacturing jobs to Mexico.

The agreement will boost U.S. access to Canada's dairy market and protect Canada from possible U.S. auto tariffs, two sources with direct knowledge of the talk told Reuters.

Dispute resolution: Chapter 19, an extrajudicial trade dispute system that allows NAFTA members to bring grievances against other members over allegedly unfair trade practices, will remain in place as it is under the current NAFTA. The U.S. had previously negotiated a deal with Mexico in late August.

David MacNaughton, Canada's ambassador to Washington, said earlier that the USA and Canada had made a lot of progress, but there was no deal yet.

Canadian and United States negotiators came to an agreement just hours before the self-imposed midnight deadline, according to a CNN report.

"His tariffs are too high, he doesn't seem to want to move and I've told him forget about it", Trump said at a freewheeling press conference.

Among the tough issues that needed to be hashed out between Ottawa and Washington were access to Canada's dairy sector, tariffs and a dispute resolution mechanism that the United States wanted to scrap.

Daniel Ujczo, a trade attorney with the Dickinson Wright law firm who has followed the talks closely, said he expects the U.S.to get more access to the Canadian dairy market.

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Canada and Mexico each agreed to a quota of 2.6 million passenger vehicles exported to the United States in the event that Trump imposes 25 percent global autos tariffs on national security grounds.

The US and Canada came to an agreement Sunday to tweak key pieces of the North American Free Trade Agreement, known as NAFTA.

Keeping chapter 19 will not affect Washington's enforcement of anti-dumping and anti-subsidy laws, said a US official.

Current Mexican President Enrique Peña Nieto leaves office November 30 and therefore, the clock was ticking to get the deal done.

Earlier Sunday, one of Trump's senior trade advisers, Peter Navarro, told Fox News that Canada's positions on dairy sector regulations and on worldwide dispute resolution remained among "several sticking points", but suggested that disagreements over digital intellectual property and certain pharmaceutical protections had been largely resolved.

"Lots of progress but we're not there yet", MacNaughton told reporters in Ottawa, where the Canadian team is gathered.

But the USA and Canada had trouble dealing with other areas in the pact, including Canada's dairy industry, its insistence on a strong dispute settlement mechanism and concerns about intellectual property and culture. Talks to revamp NAFTA began in August a year ago.

Canada, the US' second largest trade partner, was excluded from a revamped NAFTA deal separately negotiated between Mexico and the USA in August after nearly a year of negotiations. "It's either going to be the text goes in with Mexico and the US, or the text goes in with all three countries".

The deal represents a win for Trump, who has derided Nafta for years and threatened to pull the U.S. from the pact if it was not rewritten in Washington's favour.

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