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Preliminary Nafta Deal Reached Between U.S. and Mexico Trump Says Nafta Deal Reached Between U.S. and Mexico
(about 2 hours later)
WASHINGTON — The United States and Mexico have reached agreement to revise key portions of the 24-year-old North American Free Trade Agreement, a crucial step toward revamping a trade pact that has appeared on the brink of collapse during the past year of negotiations. WASHINGTON — President Trump said Monday that the United States and Mexico had reached agreement to revise key portions of the North American Free Trade Agreement and would finalize it within days, suggesting he was ready to jettison Canada from the trilateral trade pact if the country did not get on board quickly.
President Trump said on Monday that the countries would be entering into a new trade deal called the United States-Mexico trade agreement, and that he wanted to get rid of the name of Nafta, which he said sounded bad. Mr. Trump has frequently called the trade deal, which includes Canada, Mexico and the United States, the “worst” trade agreement in history. Speaking from the Oval Office on Monday, Mr. Trump touted the preliminary agreement with Mexico as a new trade pact that could replace Nafta and threatened to hit Canada with auto tariffs if it did not “negotiate fairly.”
The agreement with Mexico gives Mr. Trump a significant win in a trade war he has started with countries around the globe but it falls far short of actually revising Nafta. The preliminary agreement still excludes Canada, which has been absent from talks held in Washington in recent weeks. “They used to call it Nafta,” Mr. Trump said. “We’re going to call it the United States Mexico Trade Agreement,” adding that the term Nafta — which he has called the “worst” trade deal in history — had “a bad connotation” for the United States.
Speaking from the Oval Office, the president, flanked by advisers including Jared Kushner and Robert E. Lighthizer, the United States trade representative, hailed the preliminary agreements as “a big day for trade” and “a big day for our country.” The president has often floated the idea of reworking Nafta into one or more bilateral deals, but his comments threw the trade agreement’s future into doubt, prompting skepticism among lawmakers who support Nafta and concern among businesses whose supply chains depend on a deal encompassing Canada, Mexico and the United States. In dangling the prospect of a new, bilateral trade agreement, Mr. Trump appeared eager to pressure Canada to come to a quick resolution and accede to many of the United States’ demands.
“They used to call it Nafta,” Mr. Trump said. “We’re going to call it the United States Mexico Trade Agreement,” adding that the term Nafta had “a bad connotation” for the United States, which he said had been taken advantage of by the trade deal. “You know, they have tariffs of almost 300 percent on some of our dairy products, and we can’t have that. We’re not going to stand for that. I think with Canada, frankly, the easiest thing we can do is to tariff their cars coming in,” Mr. Trump said.
Mr. Trump called the new name of the trade deal “elegant” and repeatedly said that he didn’t like the sound of Nafta. The president, basking in the agreement, bragged that “many people” had thought that no one could make a deal with Mexico. The president called the new deal “very special” for our manufacturers and farmers in particular. Mexican officials said on Monday that they wanted to have Canada back in the process and were working toward a trilateral deal by the end of the week. Both the Mexicans and Americans have been eager to reach a fully revised Nafta deal by the end of August, a date that would give the Trump administration enough time to notify Congress that a deal had been finalized and still have that deal be signed by the outgoing Mexican administration of Enrique Peña Nieto.
“Ideally we’ll have the Canadians involved,” Robert E. Lighthizer, the United States trade representative said, adding that the administration planned to inform Congress by Friday of its intent to sign a new deal. “If we don’t have Canada involved, we will notify that we have a bilateral agreement that Canada is welcome to join.”
Chrystia Freeland, the Canadian foreign minister, will travel to Washington, D.C. on Tuesday to continue negotiations, Adam Austen, her spokesman, said Monday.
“We will only sign a new NAFTA that is good for Canada and good for the middle class. Canada’s signature is required,” Mr. Austen added.
The revised deal with Mexico makes significant alterations to rules governing automobile manufacturing, in an effort to bring more car production back to the United States from Mexico.
To qualify for zero tariffs under Nafta, car companies would be required to manufacture at least 75 percent of an automobile’s value in North America under the new rules, up from 62.5 percent previously. They will also be required to use more local steel, aluminum and auto parts, and have 40 percent to 45 percent of the car made by workers earning at least $16 an hour, a boon to both the United States and Canada.
In a briefing Monday, administration officials said that the United States and Mexico had also come to an agreement on a controversial “sunset clause,” proposed by the Trump administration, that would cause Nafta to automatically expire every five years unless the three countries voted to extend it.
The two countries agreed to a review of the trade pact every six years that would extend its lifetime for 16 more years, officials said. That longer time horizon would give lawmakers a chance to review the trade pact’s progress, while also giving businesses certainty for the immediate future.
The countries also came to an agreement that would limit the kinds of legal challenges that investors can currently make against foreign government under Nafta.
It is unclear whether the revisions will be enough to get Canada to sign on to a revised deal. But any agreement that doesn’t involve Canada is likely to face legal challenges and intense opposition from Congress, which had granted the Trump administration authority to renegotiate Nafta as a trilateral deal.
In a statement, Senate Finance Committee Chairman Orrin G. Hatch, a Republican from Utah, said that improving Nafta would help American businesses, manufacturers and farmers but that a bilateral deal was not the answer. “To achieve that goal, a final agreement should include Canada,” he said.
Industry groups also said a final agreement must include Canada. “While we’re still awaiting the full details of this preliminary deal with Mexico, it is critical that any modernized NAFTA continue to include all three North American partners,” Rufus Yerxa, president of the National Foreign Trade Council, which represents exporters. “NAFTA has made North America an economic powerhouse, and the only way we can compete for global markets with Asian and European producers is to maintain and strengthen the entire North American production base.”
The president, flanked by advisers including Mr. Lighthizer and Jared Kushner, hailed the preliminary agreements as “a big day for trade” and “a big day for our country.” The president bragged that “many people” had thought that no one could make a deal with Mexico and called the new deal “very special” for our manufacturers and farmers in particular.
Mexican foreign and economy ministers attended the White House meeting, and Enrique Peña Nieto, the outgoing Mexican president, joined by phone call. In a series of tweets on Monday, Mr. Nieto said that he had also spoken to Justin Trudeau, the Canadian prime minister, and that he was working toward a three-way agreement with the United States and Canada by the end of the week.Mexican foreign and economy ministers attended the White House meeting, and Enrique Peña Nieto, the outgoing Mexican president, joined by phone call. In a series of tweets on Monday, Mr. Nieto said that he had also spoken to Justin Trudeau, the Canadian prime minister, and that he was working toward a three-way agreement with the United States and Canada by the end of the week.
“I expressed the importance of his reinstatement in the process,” Mr. Peña Nieto said in Spanish about Mr. Trudeau, “in order to conclude a trilateral negotiation this week.”“I expressed the importance of his reinstatement in the process,” Mr. Peña Nieto said in Spanish about Mr. Trudeau, “in order to conclude a trilateral negotiation this week.”
“It is our wish, Mr. President, that now Canada will also be able to be incorporated in all this,” Mr. Peña Nieto said through a translator. “I assume that they are going to carry out negotiations of the sensitive bilateral issues between Canada and the United States.”“It is our wish, Mr. President, that now Canada will also be able to be incorporated in all this,” Mr. Peña Nieto said through a translator. “I assume that they are going to carry out negotiations of the sensitive bilateral issues between Canada and the United States.”
Mr. Trump, however, seemed to hedge the possibility, saying “we’ll see if Canada can be part” of any deal, and that separate negotiations would start soon.Mr. Trump, however, seemed to hedge the possibility, saying “we’ll see if Canada can be part” of any deal, and that separate negotiations would start soon.
Mr. Trump said that he would be calling Mr. Trudeau “very soon” but then immediately groused that the country issued 300 percent tariffs on American dairy products. The president suggested that the United States might add tariffs to Canadian car imports in response, reiterating a threat he has used frequently to push trade partners to the negotiation table.
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The president has often floated the idea of reworking Nafta into one or more bilateral deals, butmany practical hurdles stand in the way of him doing so. Republican lawmakers, North American industries and Canadian and Mexican officials have all objected to the plan.
While Canada has not been a party to recent discussions, the potential for a two-country deal appears highly unlikely, given opposition by Mexico, American lawmakers and North American industries whose supply chains rely on all three countries.
Instead, Mr. Trump’s threats against Canada could prove to be a negotiating tactic. Both Mexican and American officials have said they hope their progress encourages Canada to come back to the negotiations quickly.
The agreement with Mexico centers on rules governing the automobile industry, resolving a big source of friction, but leaves aside other contentious issues that affect all three countries.
The revised Nafta would also need congressional approval before it can go into effect, including votes by Republican lawmakers who have criticized some of the president’s plans for remaking the deal.
On Monday morning, Mr. Trump tweeted, “A big deal looking good with Mexico!”
That followed other tweets the president sent over the weekend trumpeting the renewed talks with Mexico.
Mr. Peña Nieto, who has at times exchanged harsh words with Mr. Trump as the two countries have squabbled over funding for a wall along the border of the two countries, added a moment of praise on Monday.Mr. Peña Nieto, who has at times exchanged harsh words with Mr. Trump as the two countries have squabbled over funding for a wall along the border of the two countries, added a moment of praise on Monday.
“I recognize your political will,” Mr. Peña Nieto said, “and your participation in this.”“I recognize your political will,” Mr. Peña Nieto said, “and your participation in this.”
America’s trade relations with Canada have chilled in recent months, as Mr. Trump has repeatedly criticized the country’s trade practices and Canadian leaders have insisted they will not rush to sign a deal that does not work in their favor.
On Monday, Adam Austen, a spokesman for Canadian Foreign Minister Chrystia Freeland, said that Canada is “encouraged” by progress between Mexico and the United States but that “we will only sign a new NAFTA that is good for Canada and good for the middle class.”
On Friday, Ms. Freeland said that Canada would be “happy” to rejoin the talks once the United States and Mexico had made progress on their specific issues. “Once the bilateral issues get resolved, Canada will be joining the talks to work on both bilateral issues and our trilateral issues,” Ms. Freeland said.
Many of the most significant changes agreed to by Mexico and the United States simply update the pact to take into account the rise of the internet and the digital economy since the agreement was negotiated. But Mr. Trump’s advisers have also pressed for big alterations to the rules governing automobile manufacturing, in an effort to bring more car production back to the United States from Mexico.
To qualify for zero tariffs under Nafta, car companies would be required to manufacture at least 75 percent of an automobile’s value in North America under the new rules, up from 62.5 percent previously. They will also be required to use more local steel, aluminum and auto parts, and have a certain proportion of the car made by workers earning at least $16 an hour, a boon to both the United States and Canada.
Talks in recent days had stumbled over how these rules would overlap with additional auto tariffs that the president has threatened, as well as new measures that would open Mexico’s oil and gas sector to foreign companies, provisions that are controversial within the new elected Mexican administration that is poised to take office in December.
Speaking Sunday, Ildefonso Guajardo, the Mexican economy secretary, said that Jesus Seade, the designated chief negotiator of Mexican President-elect Andres Manuel Lopez Obrador, had worked out an agreement on energy with his American counterparts in recent days.
Both the Mexicans and Americans have been eager to reach a fully revised Nafta deal by the end of August, a date that would give the Trump administration enough time to notify Congress that a deal had been finalized and still have that deal be signed by the outgoing Mexican administration of Enrique Peña Nieto. That goal now looks doubtful, given Canada’s recent absence from the negotiating table.
Still, progress in the negotiations with Mexico will come as a relief to American businesses that depend on trade agreements and have been shaken by Mr. Trump’s confrontational approach to America’s biggest trading partners.
Mr. Trump’s decision to impose tariffs on foreign steel and aluminum has put American manufacturers, farmers, retailers and other industries in the middle of the trade war as other countries fire back with retaliatory taxes of their own. That has driven up costs for American businesses and reduced access to foreign markets.
Mr. Trump has continued to inject uncertainty into the Nafta talks, believing that the strategy gives his advisers an upper hand at the negotiating table. He has hit Canada and Mexico with hefty tariffs on their shipments of steel and aluminum and threatened further taxes on their cars.