Media Moves

Coverage: The U.S. has a new trade deal with Mexico

August 28, 2018

Posted by Chris Roush

The United States and Mexico agreed on Monday to overhaul the North American Free Trade Agreement, putting pressure on Canada to agree to new terms on auto trade and dispute settlement rules to remain part of the three-nation pact.

Roberta Rampton and Jeff Mason of Reuters had the news:

“I think with Canada, frankly, the easiest we can do is to tariff their cars coming in. It’s a tremendous amount of money and it’s a very simple negotiation. It could end in one day and we take in a lot of money the following day,” Trump said.

Negotiations among the three partners, whose mutual trade totals more than $1 trillion annually, have dragged on for more than a year, putting pressure on the Mexican peso and the Canadian dollar. Both currencies gained against the U.S. dollar after Monday’s announcement.

The political stakes are high for all three countries. Trump and Republicans in the U.S. Congress up for re-election in November want to ensure farmers and other voters whose jobs depend on trade with Canada and Mexico that the deal is sealed.

Mexican President Enrique Peña Nieto wants to sign the agreement before leaving office at the end of November, and Canadian Prime Minister Justin Trudeau faces a national election expected by October 2019.

Bob Bryan of Business Insider reported that Mexico’s leader wants Canada to be part of the deal:

Peña Nieto said that the deal was a good sign for the US and Mexico but that he hoped Canada would join the deal. He repeatedly referred to NAFTA by its current name.

“It is our wish Mr. President that Canada will be able to be incorporated in all of this,” Peña Nieto said.

Before the White House appearance, Peña Nieto tweeted that he spoke with Trudeau to give an update on the Mexico-US talks and urge for Canada to reengage. Peña Nieto also set an aggressive timeline to complete the trilateral talks, calling for a final deal to be struck “this week.”

A representative for Canadian Foreign Minister Chrystia Freeland said that the country’s “signature is required” on any new deal and that Canada was not guaranteed to sign off.

Michael Collins of USA Today reported that the auto rules of origin were a sticking point in the talks:

Negotiators for the United States and Mexico worked over the weekend to iron out remaining differences and strike a deal before Canada is brought back to the table.

One of the sticking points in the talks has centered on the so-called auto rules of origin, which dictate that, to avoid tariffs, a certain percentage of an automobile must be built from parts that originated from countries within the NAFTA region.

Under the new rules, cars must be built with at least 75 percent of parts made in North America, up from 62.5 percent under NAFTA. Also, 40 to 45 percent of an auto will have to be made by workers earning at least $16 an hour.

Other stumbling blocks included the procedure to settle disputes between corporations and governments and the Trump administration’s push for a sunset provision under which the revised NAFTA agreement would expire after five years unless all three countries took steps to extend it.

Mexico and Canada balked at such a provision, arguing that trade agreements are supposed to offer the assurance of continuity for businesses and make it easier for them to comply with regulatory requirements.

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