August 28, 2018
President Donald Trump said the U.S. is signing a new trade accord with Mexico to replace the North American Free Trade Agreement and called on Canada to join the deal soon or risk being left out.
Trump announced the agreement with Mexico in a hastily arranged Oval Office event Monday with Mexican President Enrique Pena Nieto joining by conference call. Pena Nieto told Bloomberg News he is “quite hopeful” Canada would soon be incorporated in the revised agreement, while Trump said that remains to be seen but that he wanted those negotiations to begin quickly.
Canadian Foreign Minister Chrystia Freeland is leaving a trip in Europe early to travel to Washington for NAFTA talks on Tuesday, spokesman Adam Austen told Bloomberg News.
The U.S. and Mexico agreed to increase regional automotive content to 75 per cent from the current 62.5 per cent in NAFTA, with 40 per cent to 45 per cent of production by workers earning at least $16 an hour, the U.S. Trade Representative’s office said in an emailed statement. They agreed to review the deal after six years, softening a demand by the U.S. for a clause to kill the pact after five years unless it’s renewed by all parties.
Duty-free access for agricultural products will remain in place, USTR told Bloomberg News.
As he announced the move, Trump said he would drop the name NAFTA from the accord because of its unpopularity.
“We’re going to call it the United States/Mexico Trade Agreement,” he told Bloomberg News. NAFTA “has a bad connotation because the United States was hurt very badly by NAFTA for many years.”
The U.S. hopes Canada will join the pact this week, but it will have the option to sign on later, he said.That suggests the administration believes it has congressional authority to move ahead with its current plan as a two-way deal.
But some experts are less certain. Trump would have to go back to Congress to ratify a bilateral agreement with Mexico, Mickey Kantor, who oversaw America’s entry into NAFTA as Bill Clinton’s first U.S. trade representative, told Bloomberg News.
“They’d have to go back to the Congress,” he said. “To walk away from an arrangement with the two and try to set up bilateral deals would probably cause a tremendous political response.”
Republican Senator Orrin Hatch, chairman of the Senate Finance Committee, called the deal with Mexico an important step but added that “a final agreement should include Canada.” As the main trade committee in the Senate, the finance panel’s approval will be key to any deal.
Canada, which has been on the sidelines of the talks since July as Mexico and the U.S focused on settling differences, said an overhaul of the trilateral pact will still require its endorsement.
“Canada’s signature is required,” Austen, Freeland’s spokesman, said in an email to Bloomberg News on Monday. “We will only sign a new NAFTA that is good for Canada and good for the middle class.”
Pena Nieto said in a tweet on Monday that he spoke with Trudeau and stressed the importance of Canada rejoining NAFTA talks.
Trump doesn’t plan to invoke a clause to formally withdraw from the pact, which any country can do with six months’ notice, said Lighthizer. Since his election campaign, the president has repeatedly threatened to kill the pact.
Talks to update NAFTA began a year ago, but in recent weeks have been held between just the U.S. and Mexico. The U.S. president says the 24-year-old deal has led to hundreds of thousands of lost American jobs, and he promised to either change it to be more favourable to the U.S., or withdraw.
The U.S. push to finish NAFTA talks comes at the same time it’s in a spiralling trade war with China, and has threatened to place tariffs on cars imported from major manufacturing centres in Asia and Europe — efforts that have created new uncertainty for many businesses and investors.