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US, Mexico finalize trade pact; Canada to rejoin talks Tuesday
WASHINGTON, Aug 28, 2018 (BSS/AFP) – After months of intense negotiations,
the United States and Mexico agreed Monday on a thoroughly overhauled free
trade pact, while talks with Canada are to begin Tuesday.
The uncertainty around the 25-year-old North American Free Trade Agreement
now revolves around whether it can remain a three-nation deal, as President
Donald Trump suggested he could cut Ottawa out.
“It’s a big day for trade. It’s a really good deal for both countries,”
President Donald Trump said in announcing the agreement from the Oval Office,
with Mexico’s President Enrique Pena Nieto participating by telephone.
With the outlines of a NAFTA 2.0 now on paper, including provisions on auto
trade, tougher worker protections and a provision to review the deal every
six years, Canadian Prime Minister Justin Trudeau spoke to Trump and said the
aim is to reach a new agreement.
The leaders “had a constructive conversation” on NAFTA, and “look forward
to having their teams engage this week with a view to a successful conclusion
of negotiations,” Trudeau’s office said.
Canada’s top diplomat and trade negotiator Chrystia Freeland cut short her
trip to Europe to travel to Washington on Tuesday to rejoin the talks.
Negotiators have worked for a year to update and rewrite NAFTA, but in the
last five weeks, Washington and Mexico City had worked to resolve their own
differences without Ottawa.
Trump stressed that he could go ahead without Ottawa in the new agreement.
“We could have a separate deal or we could put it in the same deal,” Trump
said.
The president indicated he would take a tough line with Canada on autos
and dairy tariffs, long a source of tension between the neighboring
countries.
White House economic adviser Larry Kudlow added this warning: “My message
to Canada is look carefully.”
“We hope Canada is watching carefully on how successful negotiations can
go,” he said.
– Not a sunset clause –
Mexican officials have insisted all along that NAFTA must be a trilateral
deal, but also acknowledged that either way it will have free trade
commitments with both nations.
“It is our wish, Mr President, that now Canada will also be able to be
incorporated in all this,” Mexico’s Pena Nieto told Trump.
Pena Nieto said on Twitter he had spoken with Trudeau, urging Ottawa to
rapidly rejoin the talks with the goal of reaching a final NAFTA rewrite this
week.
Freeland’s spokesman Adam Austen said Canada “will only sign a new NAFTA
that is good for Canada and good for the middle class. Canada’s signature is
required.”
The Canadian team could be more amenable to the talks now that the United
States has backed away from a controversial and strenuously-opposed provision
to require the three nations to renegotiate NAFTA after five years.
MORE/MSY/1047 hrs
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Instead, senior US officials told reporters the agreement had been extended
for 16 years but would be reviewed every six years. If the parties agree to
continue with no changes, it will be renewed for another 16 years.
However, if the governments want to make changes, they will negotiate while
the agreement remains in place, giving them a longer time horizon of 10 years
to make changes, which is less likely to spook investors and businesses.
“It’s an alternative to sunset which we think works,” another senior
official said.
And in fact, financial markets were delighted by the news with the S&P 500
and the tech-dominated Nasdaq stock indexes hitting fresh records.
Mexico’s peso strengthened against the US dollar, as did the Canadian
dollar, while the US dollar index weakened slightly.
– NAFTA 2.0 –
US Trade Representative Robert Lighthizer told reporters in a call that the
agreement was “historic” and provided the “highest standards” of any existing
agreement on digital trade, financial services and labor rights.
“We had a NAFTA agreement that had gotten seriously out of whack, that led
to large trade deficits and needed updating,” Lighthizer said.
The labor protections are “stronger and more enforceable than any agreement
by a mile. It’s not even close.” And he said the new pact would create jobs
in the United States and Mexico.
Lighthizer said the administration would notify Congress by Friday of the
new agreement, which would allow the required 90 days’ notice so that Pena
Nieto could sign the deal before handing over the Mexican presidency to
President-elect Andres Manuel Lopez Obrador on December 1.
A senior administration official said the notification would highlight the
US-Mexico deal with the hope that Canada would join.
However, it was unclear whether the administration had the authority to
substitute NAFTA with a bilateral trade agreement.
Mexico’s Foreign Minister Luis Videgaray told reporters that if the United
States and Canada fail to agree to the new terms, Mexico would still benefit
from an existing pact with Ottawa through the Trans-Pacific Partnership —
the deal Trump withdrew from as soon as he took office.
A key element of the US-Mexico talks has been content requirements for
autos, which Mexico agreed to increase to 75 percent from North America to
get duty-free NAFTA treatment.
The sides also agreed that 40-45 percent of cars must be made at “high
wage” factories where workers are paid $16 an hour in order to receive duty-
free treatment, something that could deter US factories from offshoring to
Mexico.
BSS/AFP/MSY/1047 hrs