Trump Administration Hails ‘Terrific’ NAFTA Replacement Deal With Mexico, Turns Up Pressure On Canada
- U.S. Trade Representative Bob Lighthizer praised a tentative deal with Mexico to update NAFTA.
- The new rules governing automobile manufacturing and labor protections will benefit both American and Mexican workers, Lighthizer said.
- The Trump administration is now trying to bring Canada on board the agreement, which many U.S. lawmakers say is necessary for any new trade deal.
The Trump administration’s senior trade negotiators on Monday hailed a tentative deal with Mexico that could supplant the North American Free Trade Agreement (NAFTA), saying it was a long-needed update to the 24-year-old trade pact.
The preliminary deal, which the administration is calling the U.S.-Mexico Trade Agreement, is a bilateral agreement that modifies a wide range of existing NAFTA provisions, including country-of-origin rules, labor requirements and automobile manufacturing. (RELATED: Preliminary NAFTA Deal Includes A Big Win For American Auto Workers)
“We had a NAFTA that had gotten seriously out of whack” and needed to be updated, U.S. Trade Representative Bob Lighthizer told reporters Monday, calling the U.S.-Mexico deal “great for business [and] great for labor.”
The deal does not include NAFTA’s third member, Canada, which was absent from trade talks in recent weeks. The Trump administration intends to immediately start negotiating to bring Canada into the agreement, but has said it will settle for a standalone deal with Mexico if it can’t agree to terms with Ottawa.
President Donald Trump said Monday that “we’ll see” if Canada can join the agreement or if Washington and Ottawa will have to negotiate a separate deal. He also threatened to tax Canadian auto imports and leave Ottawa out of a regional trade bloc if it doesn’t agree to a NAFTA overhaul.
Trump administration officials denied that pursuing bilateral talks with just Mexico was part of a strategy to pressure Canadian Prime Minister Justin Trudeau into resuming talks. The two-party negotiations were necessary because it had become too difficult to iron out policy differences between three sides at once, they said.
The U.S.-Mexico deal centers on changes to NAFTA’s rules governing auto manufacturing, which Trump has railed against for years. Under the new requirements, 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, up from 62.5 percent now. They would also have to source more locally produced steel, aluminum and auto parts.
Other rules aim to protect U.S. auto jobs by reducing Mexico’s labor cost advantages. The accord requires between 40 and 45 percent of a car’s value to be produced by workers making at least $16 an hour, which is about twice the current average wage of Mexican employees of U.S. auto makers. It also includes provisions that give stronger rights to Mexican labor unions.
A senior U.S. trade negotiator called the deal’s labor provisions stronger than NAFTA’s “by a mile” and said the administration was “optimistic” they would receive bipartisan support in Congress.
“There’s never been a trade agreement as [good] from the point of view of organized labor,” the official said.
Still, it remains unclear if U.S. lawmakers would approve a bilateral deal to supplant NAFTA if Canada cannot be brought on board. Many Republicans, especially, have said Ottawa would have to be part of any deal they approve.
Nor is it certain that Mexico would go forward with an agreement that doesn’t include Canada. In a telephone conversation Monday, Trudeau and Mexican President Enrique Pena Nieto affirmed their preference for a trilateral agreement over separate two-party deals.
“The leaders discussed the ongoing negotiation of the North American Free Trade Agreement and shared their commitment to reaching a successful conclusion to this agreement for all three parties,” Trudeau’s office said in a readout of his call with Pena Nieto.
The Trump administration and the outgoing 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 Dec. 1. A trade representative for Lopez Obrador’s administration has been participating in the negotiations.
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