US, Mexico reach NAFTA deal as pressure turns to Canada

President Donald Trump talks with Mexican President Enrique Pena Nieto, in the Oval Office of the White House, Monday, Aug. 27, 2018, in Washington. File picture: Evan Vucci/AP Photo.

President Donald Trump talks with Mexican President Enrique Pena Nieto, in the Oval Office of the White House, Monday, Aug. 27, 2018, in Washington. File picture: Evan Vucci/AP Photo.

Published Aug 27, 2018

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WASHINGTON - The United States and Mexico

agreed on Monday to overhaul the North American Free Trade

Agreement (NAFTA), putting pressure on Canada to agree to the

new terms on auto trade and other issues to remain part of the

three-nation pact.

U.S. President Donald Trump and outgoing Mexican President

Enrique Pena Nieto said talks with Canada would begin

immediately, though Trump threatened he could put tariffs on

Canadian-made cars if a three-way deal could not be reached.

"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.

Negotiations between the three trade partners have dragged

on for more than a year and repeated threats by Trump that he

would ditch the 1994 accord have roiled financial markets,

putting pressure on the Mexican peso and the Canadian dollar.

Officials said they hope Canada will agree to the terms by

Friday, when the White House plans to formally notify Congress

that Trump will sign the deal in 90 days. Congress has to

approve it.

"There are still issues with Canada but I think they could

be resolved very quickly," a senior trade official told Reuters

in an interview.

If talks with Canada are not wrapped up by the end of this

week, Trump plans to notify Congress that he has reached a deal

with Mexico, but would be open to negotiations with Canada to

join the pact, U.S. Trade Representative Robert Lighthizer told

reporters on Monday.

Some Republicans in the U.S. Congress called the deal a

positive step but said Canada must be part of the new pact to

avoid hurting U.S. jobs.

"Millions of jobs in Texas depend on an updated NAFTA, and

it’s important that we get this right," said Senator John

Cornyn, the No. 2 Republican in the Senate.

Republican lawmaker Kevin Brady, chairman of the tax and

trade-focused Ways and Means Committee, called on Canada to

return to talks quickly "with the aim of concluding a modern,

seamless three-way agreement."

Canada plans to continue to negotiate, but would only sign a

new agreement that is good for the country, a spokesman for

Canadian Foreign Minister Chrystia Freeland said. Trump said he

would talk to Canadian Prime Minister Justin Trudeau soon.

NEW AUTO RULES

The United States, Mexico and Canada do more than 1 trillion

dollars in trade between them every year. The announcement of a

U.S.-Mexico agreement lifted financial markets.

Trudeau spoke to Pena Nieto on Sunday and shared their

commitment to reaching a successful conclusion of NAFTA "for all

three parties" the prime minister's office said.

The Trump administration said the deal improves labor

provisions. The Mexico-U.S. discussions focused on crafting new

rules for the automotive industry, which Trump has put at the

heart of his drive to rework the pact he has repeatedly

described as a "disaster" for American workers.

Matt Blunt, president of the American Automotive Policy

Council, which represents General Motors Co, Ford Motor

Co and Fiat Chrysler Automobiles NV, said the

group was optimistic about the new deal, though it was still

reviewing the details.

The deal would require 75% of auto content to be made

in the NAFTA region, up from the current level of 62.5%,

a U.S. trade official said. A fact sheet describing the

bilateral agreement specified the content would be made in the

United States and Mexico.

The deal also would require 40% to 45% of auto

content to be made by workers earning at least $16 per hour.

The United States and Mexico also agreed to a 16-year

lifespan for the North American Free Trade agreement, with a

review every six years that can extend the pact for 16 years,

U.S. Trade Representative Lighthizer said.

The plan would not contain an automatic expiration for NAFTA

as proposed in the prior U.S. demand for a "sunset clause."

Mexico also agreed to eliminate dispute settlement panels for

certain anti-dumping cases, a move that could complicate talks

with Canada.

U.S., Mexican and Canadian stocks opened higher on Monday on

optimism about a trade deal.

Mexican stocks jumped 1.4% to a seven-month

high, while the peso firmed about 1.3% against the

dollar, heading for its best one-day gain in more than a month.

Reuters

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