Mexico, US announce bilateral trade deal

Monday, August 27, 2018

US President Donald Trump announced the end to an impasse with Mexico in trade renegotiations, representing the single most important development in a year of formal Nafta 2.0 talks, saying agreements were finalized on what he termed the United States-Mexico trade agreement.

At the White House press conference on Monday morning, Trump hailed the bilateral deal, but gave no actual details of presumed agreements on provisions handling rules of origin and labor in Mexico's auto industry.

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Trump added that at some point soon he would initiate the 90-day process to withdraw from the current Nafta agreement, timed in a way to enter the revised trade agreement at the end of that three-month period.

In a subsequent press conference and a phone call to media from US trade representative Robert Lighthizer, key negotiators shed light on a number of aspects of the deal, including a decision to modify the "sunset clause" to give the agreement a 16-year liftetime that would need to be reevaluated every six years.

The auto deal would require that 75% of the parts in any car sold in the region be made in the treaty zone of Mexico and the US, an increase from the current 62% in Nafta. It would also require between 40% and 45% of auto parts be made by workers earning at least US$16 per hour, which will place pressure on Mexico-based manufacturers to wean themselves from cheap labor.

The results reflect considerable concessions from the Mexican delegation.

Presiding over the press event in Washington, Mexican foreign relations secretary Luis Videgaray said that if the US and Canada "do no arrive at any agreement, no understanding like we have reached ... Mexico and the US will have a bilateral agreement."

Videgaray, nevertheless, stressed that for Mexico it was "fundamental" that Canada stay in the negotiation process, saying that a three-way deal "is what we want, is our conviction."

Canadian foreign relation minister Chrystia Freeland reportedly cut short a trip to Europe to head to Washington DC to rejoin talks.


"It's a big day for trade, big day for our country, a lot of people thought we'd never get here," said Trump in the Oval Office. "Because we all negotiate tough, we do, so does Mexico and this is a tremendous thing."

"It used to be called Nafta, we're going to call it the United States-Mexico trade agreement, and we'll get rid of the name Nafta because it has a bad connotation," said Trump, later calling Nafta "a rip off" and "a horrible deal for this country."

The US leader then conversed live via speakerphone with Mexican President Enrique Peña Nieto, indicating that the new name was not formalized yet, saying, "Probably you and I will agree to the name."

Peña Nieto congratulated Trump, acknowledging his "political will" and participation, adding "I think this is something very positive for the United States and Mexico."

The Mexican leader said the agreement with the US came in part due to the "involved and committed participation of the administration and the president-elect of Mexico [Andrés Manuel López Obrador or AMLO]," to which Trump also offered his recognition.

Both leaders said they expected to meet soon to formalize the agreement, and Peña Nieto said of AMLO that he was "terrific in every way," signaling that AMLO's involvement was a welcome catalyst to the negotiations.

Spotlight moves to Canada

With the major stumbling blocks now removed, it will be critical to see whether the bilateral agreements between the US and Mexico will emerge as a separate deal from Nafta, leaving Canada to hash out a separate arrangement with the US.

"It is our wish, Mr. President, that now that Canada would also be able to be incorporated in all of this, and I assume that they are going to carry out negotiations on sensitive bilateral issues between Canada and the United States," said Peña Nieto, bringing to the live conversation Canada and its role in the agreement (with no mention of a name change) but calling for Canada's inclusion in a trilateral deal.

Trump responded, "As far as Canada is concerned, we wanted to do Mexico and see if that was possible to do ... Canada will start negotiations shortly, I will be calling the prime minister very soon. We'll be starting negotiations, and if they want to negotiate fairly."

"I think frankly the easiest thing we could do is tariff the cars coming in. It's a tremendous amount of money ... we'll give them a chance to probably have a separate deal," said Trump. "We could have a separate deal, or we could put it into this deal."

Peña Nieto was unrelenting on the point of Canada, "I really wish that this part with Canada will materialize ... That we could have an agreement as we proposed it at the start of this negotiation process - a tripartite."

In a tweet ahead of the conference, Peña Nieto said, "I spoke with the Prime Minister of Canada, @JustinTrudeau, about the status of the NAFTA negotiations and the progress between Mexico and the US. I expressed the importance of his reincorporation to the process, with the purpose of concluding a trilateral negotiation this week."

The chapter handling dispute resolution has been a key issue of conflict in the Nafta talks between the Canadian and US negotiating teams.

Canada's foreign minister Chrystia Freeland on Friday indicated that the Canadian government was allowing the US and Mexico to work out their key issues before rejoining talks.

"Once the bilateral issues get resolved, Canada will be joining the talks to work on both bilateral issues and our trilateral issues," Freeland told reporters. "And will be happy to do that, once the bilateral US-Mexico issues have been resolved."