Mexico, US agree basis for NAFTA renegotiation
The United States and Mexico have reached a preliminary accord to end the North American Free Trade Agreement, NAFTA, and replace it with a deal that the Trump administration wants to be more favourable to the US.
President Donald Trump, in announcing the tentative agreement Monday at the White House, said a new deal would be called the United States-Mexico Trade Agreement. Trump has frequently condemned the 24-year-old NAFTA trade pact as a job-killing "disaster" for the United States.
Still, any new agreement is far from final. The administration still needs to negotiate with the third partner in NAFTA, Canada, to become part of any new
trade accord. Without Canada, America's No. 2 trading partner, it's unclear whether any new US trade agreement with Mexico would be possible.
It remains unclear where Monday's announcement leaves Canada. Trump said he would be calling Canadian Prime Minister Justin Trudeau.
Canada's NAFTA negotiator, Foreign Minister Chrystia Freeland, is cutting short a trip to Europe to fly to Washington today, Tuesday, to try to restart talks.
NAFTA reduced most trade barriers between the three countries. But Trump and other critics say it encouraged US manufacturers to move south of the border to exploit low-wage Mexican labour.
Talks to overhaul the agreement began a year ago and have proved contentious. To put pressure on Canada, Trump has threatened to tax Canadian auto imports and to leave Canada out of a new regional trade bloc.
US and Mexican negotiators worked over the weekend to narrow their differences. The Office of the US Trade Representative said Monday that Mexico had agreed to ensure that 75 per cent of automotive content be produced within the trade bloc - up from a current 62.5 per cent - to receive duty-free benefits and that 40 per cent to 45 per cent be made by workers earning at least US$16 an hour.
"Canada is encouraged by the continued optimism shown by our negotiating partners. Progress between Mexico and the United States is a necessary requirement for any renewed NAFTA agreement," said Adam Austen, a spokesman for the Canadian foreign minister.
Austen said the Canadians had been in regular contact with the NAFTA negotiators.
"We will only sign a new NAFTA that is good for Canada and good for the middle class," he said, adding that "Canada's signature is required."
The No. 2 Senate Republican, John Cornyn of Texas, hailed the "positive step" but said Canada needs to be party to a final deal. "A trilateral agreement is the best path forward," he said, adding that millions of jobs are at stake.
The US had proposed that a renegotiated NAFTA die after five years unless all three countries agree to continue it, but Canada and Mexico opposed it. The accord omits that provision. Instead, US Trade Representative Robert Lighthizer says periodic reviews will be required once a new agreement is signed.
Lighthizer says the agreement will be in force for 16 years. But every six years will bring an opportunity to resolve issues or modernise aspects of the agreement. The parties would then agree to continue the agreement for another 16 years. Lighthizer says he hasn't discussed the new proposal yet with Canada.