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.