Published: Mon, August 27, 2018
Business | By Pearl Harrison

US, Mexico reach NAFTA deal as pressure turns to Canada

US, Mexico reach NAFTA deal as pressure turns to Canada

The countries are said to have agreed that automakers who don't comply with the new NAFTA rules will pay a 2.5 per cent tariff, the same as they would if they skirted the existing NAFTA, while any new Mexican plants wouldn't have a guarantee.

United States Trade Representative Robert Lighthizer, left, and Mexican Secretary of Economy Idelfonso Guajardo, right, walk to the White House on Monday August 27, 2018. He explained he plans to terminate the North American Free Trade Agreement and replace it with "the United States-Mexico Trade Agreement".

The U.S. and Mexico are hoping for a full deal with Canada by the end of the week, so current Mexican President Enrique Pena Nieto can sign it before he leaves office December 1. Trump says negotiations with Canada have yet to begin and called on the country to negotiate fairly.

If trilateral talks collapse, Canada would suffer a GDP loss of US$37 billion, compared with US$40 billion in the U.S, and US$22 billion in Mexico, according to the report.

Negotiations between the three trade partners have dragged on for more than a year and repeated threats by Trump that he would ditch the 1994 accord have roiled financial markets, putting pressure on the Mexican peso and the Canadian dollar.

The agreement between the U.S. and Mexico on Monday was a significant marker in the yearlong effort to renegotiate the trilateral trade pact, sweeping away key obstacles impacting the USA and Mexico that had held up trilateral talks. He called the agreement "a really good deal for both countries", and added that negotiations with Canada will start soon, or additional tariffs on Canadian imports will be applied.

Canada's foreign minister, Chrystia Freeland, spent most of her time on visits to the US lobbying governors and congressmen rather than talking seriously to our trade negotiators.

The deal would require 75 percent of auto content to be made in the NAFTA region, up from the current level of 62.5 percent, a USA trade official said. The new deal with Mexico would be signed in November.

Mr Trump has been critical of NAFTA, signed in 1994, which he blamed for sending United States manufacturing jobs to Mexico. But what Trump's going for here is headlines saying he won ... and too many USA media outlets will probably give him that. But Trump and other critics say it encouraged US manufacturers to move south of the border to exploit low-wage Mexican labor.

"I believe the president is on the phone", Trump said, getting no response. All of these remaining sticking points require Canada to return to the bargaining table to resolve.

She now is on a European trip but Guajardo said last week Freeland had indicated she would be available as soon as the United States and Mexico were ready to move to the next phase. The U.S. wanted to bring back auto manufacturing jobs that had gone to Mexico. They then would either agree to a new 16-year deal or the pact would expire. Trump flipped states like Michigan, Pennsylvania, and OH from Democrat to Republican in 2016 by promising economic prosperity in part by improving trade deals.

Trump used his announcement on Monday to gripe about Canadian tariffs on American dairy products.

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