A preliminary deal between the U.S. and Mexico to update the 24-year-old North American Free Trade Agreement (NAFTA) has several provisions that could prove to be a boon to American auto workers, according to multiple reports.
American and Mexican trade negotiators met in Washington over the weekend to iron out the details of the bilateral agreement and are close to a breakthrough after months of frustration. (RELATED: US And Mexico On The Brink Of A New NAFTA Deal)
The agreement with Mexico revolves around changes to NAFTA’s rules on automobile manufacturing and imports, one of President Donald Trump’s longtime complaints about the trade pact. Trump administration negotiators have been pushing for new rules that would encourage automakers to return production back to the U.S. that had been moved to Mexico.
Under the preliminary deal, car companies would be required to manufacture at least 75 percent of a vehicle’s value in North America if they want to avoid U.S. import duties, The New York Times reported. The current requirement is set at 62.5 percent of a car’s value.
Additionally, car makers would have to source more locally produced steel, aluminum and auto parts, and they would have to make a certain amount of the car using workers that earn at least $16 hourly. The change reduces the incentive to shift production to Mexico, where American car companies pay an average of $8-10 per hour.
The preliminary deal is only between the U.S. and Mexico, meaning that Canada will have to be brought in to future talks in order to actually revise NAFTA. The Trump administration hopes progress in bilateral talks with Mexico will encourage Canada to return to the negotiating table.
Canadian Foreign Minister Chrystia Freedland said Friday that Ottawa would be “happy” to rejoin the talks after the U.S. and Mexico sort out their differences on automobile trade.
“Once the bilateral issues get resolved, Canada will be joining the talks to work on both bilateral issues and our trilateral issues,” she said, according to Reuters.
The Trump administration and its Mexican counterpart, the outgoing Enrique Pena Nieto administration, are eager to reach an agreement on NAFTA by the end of August. The deadline would give Trump enough time to present the deal to Congress for a 90-day review period and still have Pena Nieto sign it.
Mexican President-elect Andres Manuel Lopez Obrador, a leftist who has been critical of the NAFTA talks, takes office on Dec. 1. A trade representative for Lopez Obrador’s administration has been participating in the negotiations.
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