Mexican & American Flags

On August 27, President Donald Trump announced he would terminate the North American Free Trade Agreement (NAFTA) and sign a new trade accord with Mexico, potentially leaving Canada out of the bloc. Trump announced the agreement with Mexico in an Oval Office event Monday with Mexican President Enrique Pena Nieto joining by conference call. Pena Nieto said he is “quite hopeful” Canada would soon be incorporated in the revised agreement, while Trump said that remains to be seen. Trump said he would speak with Canadian Prime Minister Justin Trudeau “in a little while” and hoped to begin negotiations with him “almost immediately.”

As he announced the move, Trump said he would drop the name NAFTA from the accord because of its unpopularity. The president showcased the path in which he sees negotiations going from replacing the NAFTA name with “the United States-Mexico Trade Agreement” to calling Canadian Prime Minister Justin Trudeau to discuss Canada coming to the table.

Trump shared, “If they’d like to negotiate fairly, we’ll do that.”

He also threatened to tax Canadian auto imports to increase the pressure on Canada’s government. Trump went on to claim: “We could have a separate deal (with Canada) or we could put it into this deal.”

USTR Robert Lighthizer stated that, “It will likely be signed at the end of November because it’s a 90-day layover period.” “We expect to submit our letter to Congress beginning that process on Friday,” Lighthizer he went on to say, “90 days later it will be signed.”

The details about the agreement are just now coming out. It supposedly includes provisions requiring 40%-45% of auto content be made by workers earning at least $16 per hour, U.S. Trade Representative’s Office said in emailed statement.

The new rules will “incentivize billions annually” in additional U.S. vehicle and auto parts production and help preserve and re-shore industry jobs and investment. The deal also maintains duty-free access to farm products.

The countries have also agreed to stronger rules-of-origin for industrial products such as chemicals, steel-intensive products, glass and optical fiber. A new “market access chapter” will address non-tariff barriers in re-manufactured goods along with import/export licensing.

They also agreed to new language on textile and apparel trade, which will promote greater use of American-made fibers, yarns and fabrics, and limit the use of non-NAFTA inputs for the industry. Several “NAFTA” issues remain outstanding including the U.S. push for a sunset clause, dairy market access, Chapter 19-related issues to anti-dumping and countervailing measures, intellectual property and others.

In response to the announcement by the U.S. and Mexico, a spokesperson for Canada shared the following: “Canada is encouraged by the continued optimism shown by our negotiating partners. Progress between Mexico and the United States is a necessary requirement for any renewed NAFTA agreement. We are in regular contact with our negotiating partners, and we will continue to work toward a modernized NAFTA. We will only sign a new NAFTA that is good for Canada and good for the middle class. Canada’s signature is required.”

Read the United State Trade Representatives Fact Sheet here.

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