On Monday, August 27th, the United States and Mexico reached a preliminary accord that would modernize the 24-year-old North American Free Trade Agreement (NAFTA). Known as the U.S. – Mexico Trade Deal, the compromise follows hours after the United States and Canada failed to negotiate a full revision of NAFTA. Now, the countdown begins for Canada to be included in the final provisions, as the deal passes to Congress for a 90-day review.
The U.S. – Mexico Trade Deal covers the auto industry, protection of intellectual trade and digital property of American consumers:
- 40% to 45% of auto parts in cars sold must be made by workers earning at least $16 USD per hour;
- 75% of the parts in any car sold in North America be produced in either Mexico or the United States (currently, only 62% is produced in North America);
- The Sunset Clause: A mandatory revision of the U.S.-Mexico Trade Agreement every 6 years until the deal ends in 2034.
Mexican President Enrique Peña Nieto acknowledged that any progress between Mexico and the United States is a necessary requirement for any renewed NAFTA agreement. The ultimate scope of the deal weighs on whether Canada decides to join or not. With their support, President Donald Trump hopes to resolve issues including:
- Canada’s dairy industry;
- dispute settlements created in Chapter 19 of NAFTA; and
- cultural protection
U.S. and Canadian officials will continue negotiations this week, but with both countries putting interests’ first, it’s unclear if an agreement will be made any time soon. Unfortunately, this deal is on the fast-track for adoption, which might not allow Canada enough time to negotiate. President Trump’s announcement to enter the agreement with Mexico on Friday started a 90-day waiting period for Congress before they can vote. The Administration has 60-days to produce the final provisions with or without Canada’s involvement, but could include an intent of negotiation, allowing additional time for the two countries to continue discussion of terms.
If a deal is finalized by Friday, its future will be unclear. Congress’ views on NAFTA has been mixed over the past few years, and no one knows how the saga will play out. The best thing to do is to prepare for the worst and with a 25% tariff on cars looming, Canada needs to act fast.
To see the full Press Release and Fact Sheet of the U.S.-Mexico Trade Agreement, click here.
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