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NAFTA: US, Mexico, Trump administration close to deal, Canada not involved



Donald Trump Enrique Pena Nieto
Donald Trump meets with Mexican President Enrique Pena Nieto at
the G20 Summit, Friday, July 7, 2017, in

AP Photo/Evan

  • The Trump administration is expected to announce a
    preliminary agreement with Mexico on updates to a number of
    rules contained within the North American Free Trade Agreement,
    or NAFTA, particularly when it comes to automobiles.
  • The agreement would be a big step toward the ultimate
    goal of renegotiating NAFTA.
  • But work still remains, as Canada was left out of the
    bilateral talks and more issues must be resolved.

The US and Mexico are
nearing a bilateral framework
that would make changes to
several rules in the North American Free Trade Agreement, or
NAFTA, a kew breakthrough in the months-long talks over the
seminal free trade agreement.

According to reports, the Trump administration plans to announce
a breakthrough in the Mexico talks on Thursday. But given
Canada’s exclusion from the talks and several outstanding issues,
a redo of the trade agreement is not guaranteed.

How they got here

During the campaign, Trump
called NAFTA
 the “worst trade deal in the history
of the country” and
 argued that the current version
of NAFTA was
harming workers in the industrial areas
of the US and
enriching Mexico and Canada unfairly.

Trump kicked off the process
of renegotiating NAFTA just a
few days after stepping into the Oval Office with an executive
order instructing a reexamination of the two-decade old deal.

But formal negotiations on the deal
only started in August 2017,
since several top trade posts
needed to be filled in the administration. Between the kickoff a
year ago and June, the sides made little progress on reaching a
new deal.

Where they are

After the lack of progress in trilateral negotiations, the Trump
administration decided to engage Mexico directly to try and solve
some of the issues that lingered between the two countries.

The talks between the US and Mexico have mostly focused on
contentious rules related to cars:

  • The US wants to increase the percentage of a car’s parts that
    have to be sourced from a NAFTA country for the finished product
    to move duty-free between the countries.
  • But Mexico wants to keep that level lower.
  • Additionally, the US is seeking to create a mandate that
    would force a certain percentage of auto workers to make more
    than $16 an hour for the car to move duty-free.

It’s unclear where the two sides have settled on these matters,
reports point to Mexico
accepting a threshold increase to 75%
from the current 62.5% in exchange for other US concessions.

Mexico’s economy minister, Ildefonso Guajardo, told
reporters before entering negotiations Wednesday that a deal
wasn’t far off.

“We hope that we’ll have a solution in the next couple of
hours or next couple of days,” Guajardo said, adding that
the two sides could “finish everything between the US and Mexico
this week.”

There were also political reasons for the bilateral engagement.
Mexico elected Andrés Manuel López Obrador as
president on July 1. López Obrador’s leftist political views
could complicate the talks when he takes office in September, so
Trump and current Mexican President Enrique Peña Nieto are trying
to nail down some of the more contentious details now.

What they have left to complete

While the breakthrough with Mexico is promising, it does not
guarantee a new NAFTA deal.

The obvious, and giant, issue to resolve is Canada’s involvement.
Any changes to which the US and Mexico agree would need to be
approved by Canada . Canadian Foreign Minister
Chrystia Freeland expressed optimism
about the talks while
talking to reporters Wednesday.

“We are very encouraged by what we’re hearing from our NAFTA
partners,” she said.

But other issues that are not a part of the US-Mexico talks also
need to be addressed..

For instance, the US has insisted that there be
a five-year “sunset clause”
that allows the members to walk
away every half-decade. Both Canada and Mexico believe such a
clause would sow economic uncertainty in their countries and have
called the idea a deal-breaker.

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