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US and Mexico strike preliminary accord on NAFTA

By Don Lee • Aug 27, 2018 at 2:04 PM

WASHINGTON — The Trump administration has reached a deal with Mexico on a rewrite of the North American Free Trade Agreement (NAFTA), but the two sides now need a relatively quick buy-in from Canada, which is expected to return to the bargaining table but still has significant issues with some of President Donald Trump’s demands.

The preliminary agreement with Mexico, which includes a tightening of auto rules to increase production in North America, was struck after several weeks of talks and a marathon session over the weekend in Washington.

Trump today announced the deal in the White House and in front of reporters called Mexico’s outgoing president, Enrique Pena Nieto, to congratulate him on the agreement. Trump, putting Pena Nieto on a speaker in the Oval Room, said the agreement “makes it a much more fair bill.”

Though Trump characterized the agreement as a bilateral deal that will proceed with or without Canada, Pena Nieto said repeatedly he hoped and expected Canada would come on board.

“This is nothing short of a great victory for farmers and ranchers, because locking in our access to Mexican markets is critical to supporting farm income and strengthening rural communities,” U.S. Secretary of Agriculture Sonny Perdue said. “Mexico has historically been a great customer and partner and we are happy to have this resolved for our agricultural producers.”

It remained unclear whether Mexico would even sign an agreement without Canada. Despite Trump’s comments earlier, administration officials said in a subsequent conference call that they could not confirm Mexico would agree to a bilateral deal.

“We now hope that Canada will see the need to settle all of the outstanding issues between our two nations as well, and restore us to a true North American Free Trade Agreement,” Perdue said.

“President Trump is delivering on his promise to renegotiate the old, outdated North American Free Trade Agreement, making good on his pledge to strike the best deals possible for all of our economic sectors, including agriculture,” Perdue said. “The president has achieved important improvements in the agreement to enable our agricultural producers to be treated more fairly. This breakthrough demonstrates that the president’s common-sense strategy of holding trading partners accountable will produce results. President Trump and Ambassador (Robert) Lighthizer, our U.S. trade representative, are to be congratulated for their determination, vision, and leadership.

“The agreement specifically addresses agricultural biotechnology to keep up with 21st century innovations,” Perdue added. “And we mutually pledge to work together with Mexico to reduce trade-distorting policies, increase transparency, and ensure non-discriminatory treatment in grading of agricultural products.”

Pena Nieto thanked Lighthizer and Jared Kushner, the president’s assistant and son-in-law, who has been interceding during what have been strained bilateral relations, in part because of Trump’s insistence that Mexico pay for a wall along the two countries’ border to curb illegal immigration.

The news was lauded by U.S. farmers anxious to expand existing markets and pursue new ones.

“We need NAFTA and new free trade agreements to build and ensure the certainty of our markets for soy and livestock product exports,” said John Heisdorffer, a soy grower from Keota, Iowa and American Soybean Association president. “Approval of NAFTA would be a big step in the right direction for us, with the uncertainty and market loss resulting from China’s tariff on U.S. soybeans. We are hopeful that a new NAFTA agreement will set the tone for more trade agreements to come.”

The president of the National Corn Growers Association, Kevin Skunes, also had favorable things to say.

“NAFTA has been an unequivocal success story for American agriculture, dramatically expanding market access for all parties, integrating supply chains and providing economic opportunity to farmers and rural communities,” Skunes said. “Mexico is the largest export market for U.S. corn farmers and we are pleased the United States and Mexico are reaffirming mutual commitment to this important relationship.

“Farmers across the country have been closely following NAFTA negotiations and NCGA welcomes the opportunity to evaluate the details of this agreement with Mexico,” Skunes continued. “However, the trilateral relationship is important, and we urge President Trump to reconsider terminating the underlying agreement until full trilateral negotiations have been concluded and a new agreement is secured. This new agreement has the potential to deliver the economic certainty rural America needs, prematurely terminating the existing agreement would only undermine that potential.”

Trump said the U.S. would be negotiating with Canada “pretty much immediately. But the president, sticking with his playbook of hardball tactics, suggested that if Canada doesn’t bend to American demands, the U.S. would proceed with a bilateral agreement with Mexico, leaving Canada out. NAFTA has been in force for 24 years.

Moreover, Trump threatened to hit Canada with tariffs on autos if the two sides do not reach a negotiated deal.

The United States still has significant unresolved issues with Canada, including President Trump’s insistence that Canada open up its dairy market and. “We’re not going to stand for that,” Trump said referring to Canadian tariffs on dairy.

Overall, the U.S. had a trade surplus with Canada in 2017, including goods and services.

Time is of the essence to bring Canada into the deal.

Mexico and the United States want to have a three-way agreement by the end of this month, to allow enough time for Mexico’s parliament to ratify a revamped NAFTA before its new president takes office on Dec. 1. That means a three-way understanding must be reached by Friday.

“It will be difficult, but not impossible, to clear all of these hurdles in a week’s time,” said Daniel Ujczo, a trade lawyer at Dickinson Wright who has been closely monitoring the talks. “It is likely that the three NAFTA parties will reach a ‘handshake’ this week that will start the 90-day procedural countdown required before signing the deal.”

With various procedural requirements, the earliest U.S. lawmakers could vote on the deal would be next year, when a new Congress is seated.

Still, a handshake with Mexico was a welcome development after a year of difficult negotiations and repeated threats from Trump to withdraw from the pact. Stocks rose upon news of the agreement.

Canada has said it is open to resuming talks once the U.S. and Mexico have settled their differences, although Canadian Prime Minister Justin Trudeau also has noted that Canada would not rush to make a deal that was not in its interest.

“We still need to review the text of the tentative agreement with Mexico, but this is an important step forward,” U.S. Sen. Sherrod Brown (D-Ohio) said. “I have been working closely with our top trade negotiator, USTR Bob Lighthizer. In fact I just spoke to him again late last night. We still have a lot of work to do to bring Canada on board and write the legislation needed to make any deal a reality, and I will keep working with Lighthizer to make sure every detail is right for Ohio workers,” Brown said.

Brown, who voted against NAFTA, said he has worked closely with Lighthizer to secure a better deal for Ohioans.

EDITOR’S NOTE: The Norwalk Reflector staff contributed to this story.

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