Canada and the United States have reached a deal for Canada to stay in a free trade pact with the US and Mexico.

US Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland announced the deal in a joint statement.

They said the newly-named the United States-Mexico-Canada Agreement (USMCA) will result in freer markets and fairer trade.

The agreement preserved a NAFTA dispute-resolution process that the US wanted to jettison, the official told Associated Press ahead of an official announcement. The official was not authorised to speak publicly and requested anonymity.

The agreement also exempts tariffs on 2.6 million cars. On dairy the official said Canada essentially gave the US the same access it offered in the Trans Pacific Partnership trade agreement that President Donald Trump rejected.

“It’s a good day for Canada,” Prime Minister Justin Trudeau said as he left his office, saying he would have further thoughts to share on the pact.

“It is a good night for Mexico, and for North America,” Mexican Foreign Minister Luis Videgaray tweeted.

“USMCA will give our workers, farmers, ranchers, and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region,” the joint statement said.

“It will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home.”

Canada, the United States’ No. 2 trading partner, was left out when the US and Mexico reached an agreement last month to revamp the North American Free Trade Agreement.

The Trump administration officially notified Congress of the US-Mexico trade agreement on August 31. That started a 90-day clock that would let outgoing Mexican President Enrique Pena Nieto sign the new pact before he leaves office December 1.

Mexico’s economics ministry said in a tweet earlier on Sunday that the text of the pact would be delivered to the Mexican Senate on Sunday night, adding that “if there is agreement with Canada, the text will be trilateral. If there is not, it will be bilateral”.

Trump had said he wanted to go ahead with a revamped NAFTA – with or without Canada. It was unclear, however, whether Trump had authority from Congress to pursue a revamped NAFTA with only Mexico, and some lawmakers said they wouldn’t go along with a deal that left out Canada.

US-Canada talks bogged down earlier this month, and most trade analysts expected the September 30 deadline to come and go without Canada being reinstated.

They suspected that Canada, which had said it wasn’t bound by US deadlines, was delaying the talks until after provincial elections Monday in Quebec, where support for Canadian dairy tariffs runs high.

-AAP