Factbox: Five key takeaways from Trump's U.S.-Mexico
trade deal, by Reuters Staff, 8/27/18.
AUTOS DOMINATE - The new deal requires 75 percent of the value of a vehicle to be produced in the United States or Mexico, up from the NAFTA threshold of 62.5 percent.
NO SUNSET - Trump backed off from an initial U.S. demand for a “sunset” clause that would kill the pact unless it was renegotiated every five years and which businesses said would stymie long term investment in the region.
DISPUTE SETTLEMENT - Mexico agreed to eliminate a settlement system for anti-dumping disputes, NAFTA’s Chapter 19. The move, sought by the United States, puts Canada in a difficult position because Prime Minister Justin Trudeau had insisted on maintaining Chapter 19 as a way to fight U.S. duties on softwood lumber, paper and other products that it views as unfair. Ottawa now has less than a week to decide to accept a deal without that provision.
AGRICULTURE, LABOR - The new deal will keep tariffs on agricultural products traded between the United States and Mexico at zero and seeks to support biotech and other innovations in agriculture. It lacks a previous U.S. demand to erect trade barriers to protect seasonal U.S. fruit and vegetable growers from Mexican competition. It contains enforceable labor provisions that require Mexico to adhere to International Labor Organization labor rights standards in an effort to drive Mexican wages higher.
NOW CANADA - The U.S.-Mexico NAFTA deal opens the door for Canada to immediately rejoin the talks and is a major step forward in updating the accord.
U.S., Mexico reach NAFTA deal, turn up pressure on Canada, by Roberta Rampton, Jeff Mason, 8/27/18.
(Reuters) - The United States and Mexico
agreed on Monday to a sweeping trade deal that pressures Canada to accept new
terms on autos trade, dispute settlement and agriculture to keep the trilateral
North American Free Trade Agreement (NAFTA).
President
Donald Trump (L) announces a deal to replace the North American Free Trade
Agreement (NAFTA) at the White House in Washington, U.S., August 27, 2018.
U.S. Trade Representative Robert
Lighthizer said the White House was ready to notify the U.S. Congress by Friday
of President Donald Trump’s intent to sign the bilateral document, but that it
was open to Canada joining the pact.
The 24-year-old NAFTA is a trilateral
deal between the United States, Canada and Mexico that underpins $1.2 trillion
in North American Trade. Here are some of the main issues at the heart of the
negotiations:
The higher threshold is aimed at keeping
more parts from Asia out, boosting North American automotive manufacturing and
jobs. Even if more plants are built in Mexico, jobs will grow in the United States due to high levels of
integration, with studies showing that U.S. parts make up 40 percent of the
value of every Mexican-built car exported to the United States. The pact also
requires greater use of U.S. and Mexican steel, aluminum, glass and plastics.
The provision started out as a U.S.
demand for 85 percent regional content, with 50 percent coming from U.S.
factories. That plan was vehemently opposed by Mexico, Canada and the auto
industry. It later morphed into the U.S.-Mexico deal’s requirement of 40 to 45
percent of a vehicle’s value to be made in high wage areas paying at least $16
an hour, requiring significant automotive production in the United States.
Although full automotive details have
not yet been released, auto industry officials say it will allow Trump the
ability to impose higher national security tariffs on vehicles that do not
comply with the new thresholds. Most Mexican auto exports are in a position to
comply with the new limits, the country’s economy minister said.
Canada and Mexico were strictly opposed
to the clause. Instead, the United States and Mexico agreed to a 16-year
lifespan for NAFTA, with a review every six years that can extend the pact for
16 years more, providing more business certainty.
A settlement system for disputes between
investors and states was scaled back, now only for expropriation, favoritism
for local firms and state-dominated sectors such as oil, power and infrastructure.
Canada, which sat out the last leg of
discussions while the United States and Mexico ironed out their bilateral
differences, is now pressured to agree to the new terms on auto trade and other issues to remain part of the three-nation
pact.
Trump has presented this as a bilateral
deal and threatened Canada with car tariffs. Some lawmakers have said that a
bilateral deal would face a higher vote threshold in Congress because the NAFTA
fast-track negotiating authority law calls for a trilateral agreement.
Compiled by Anthony
Esposito in Mexico City and David Lawder in Washington; Editing by Sandra Maler
and Rosalba O'Brien
WASHINGTON (Reuters) - The United States
and Mexico agreed on Monday to overhaul the North American Free Trade Agreement
(NAFTA), putting pressure on Canada to agree to new terms on auto trade and
dispute settlement rules to remain part of the three-nation pact.
Auto stocks soared and the S&P 500
and the Nasdaq rallied to record highs on the expectation that Canada would
sign onto the deal and ease the economic uncertainty caused by U.S. President
Donald Trump’s repeated threats to ditch the 1994 accord.
Details of gains and concessions in the
deal were only starting to emerge on Monday. Trump threatened he still could
put tariffs on Canadian-made cars if Canada did not join its neighbors and
warned he expected concessions on Canada’s dairy protections.
“I think with Canada, frankly, the
easiest we can do is to tariff their cars coming in. It’s a tremendous amount
of money and it’s a very simple negotiation. It could end in one day and we
take in a lot of money the following day,” Trump said.
Norb Leahy, Dunwoody
GA Tea Party Leader
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