Trump Announces New U.S.-Mexico Trade Agreement

Evan Vucci  AP

Evan Vucci AP

The Trump administration on Monday announced what it called a breakthrough in talks with Mexico to fix NAFTA, but it's not at all clear if Canada-or the U.S. Congress, for that matter-will support the outlines of the new trade deal.

"We are now inviting the Canadians in as well and hope that we can reach a fair and successful conclusion with them as well", the official told Reuters in an interview.

The US-Mexico agreement has tougher new protections for collective bargaining, and requires 40 percent of autos receiving duty-free treatment to come from factories where workers make at least US$16 an hour.

The United States and Mexico have reached an "understanding" on several critical trade issues following bilateral talks to renegotiate the North American Free Trade Agreement.

Freeland's spokesman said Canada would only sign a new agreement that is good for the country.

"It's a big day for trade, it's a big day for our country", Trump said with reporters present, who were called to the Oval Office to watch as Trump spoke on the telephone with Mexican President Enrique Pena Nieto. Moreover, Trump has threatened to impose tariffs on imports of Canadian-made vehicles if Ottawa doesn't relent.

But Canada is likely to object to revisions in Nafta that include rules that will make it harder for treaty members to challenge United States trade penalties.

Instead, the United States and Mexico agreed to a 16-year lifespan for the deal, with a review every six years that can extend the pact for 16 years, Lighthizer said.

Austen said the Canadians had been regular contact with the NAFTA negotiators.

The U.S. Congress wouldn't vote on it until next year - after November midterm elections that could end Republican control of the House of Representatives.

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This time past year, all three parties sat down to begin trilateral renegotiations of Nafta, a landmark free trade agreement that came into effect in 1994.

Canada's role: While the deal is just between the USA and Mexico, the hope is that Canada will "negotiate fairly" to join the agreement at a later date, enter into a separate deal, or face automobile tariffs.

"It is hard to extrapolate much out of it, as the U.S. continues to treat each country and deal on its own merit". Two-way trade between the United States and Canada, at $673 billion a year ago, is larger than that between the United States and Mexico, which came to $616 billion.

Much of the business world has been anxious about Trump's trade policies, and the stock market reacted positively to the news of a deal. The administration didn't go into specifics, but said the proposed United States-Mexico Trade Agreement is a "mutually beneficial win for North American farmers, ranchers, workers and businesses".

Trump said he would call Canadian Prime Minister Justin Trudeau soon and that the United States is open to talks with Canada if it is willing to negotiate fairly.

What the USA and Mexico have agreed to is a "review clause" every six years on an agreement that would be renewed every 16 years.

Mexico and Canada have stood firm on the importance of maintaining the trilateral format of the NAFTA free trade deal, even as Trump has signaled a desire for individual deals with each country.

Wilbur Ross, the U.S. commerce secretary, confirmed on Tuesday that the Trump administration is "fully prepared to go ahead with or without Canada" in ripping up Nafta and warned that Canada's economy "can't survive well" without a USA deal.

Therefore, details and legal language remain subject to further negotiation - which means the final agreement could change significantly.

For instance, under NAFTA, cars exported from one signatory to the next are free of tariffs as long as 62.5 percent of their content comes from a country in the agreement.

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