President Trump announced on August 27, 2018 that the U.S. had reached a trade agreement with Mexico, after talking with Mexican President Enrique Peña Nieto, and was proceeding with plans to scrap the North American Free Trade Agreement (NAFTA). Mexico’s president-elect, Andrés Manuel López Obrador, was also briefed on the “United States-Mexico Trade Agreement.” Attention has now turned to negotiations with Canada – the other trading partner included as part of NAFTA. Trump indicated he will be speaking separately with Canadian Prime Minister Justin Trudeau and hinted at punitive auto tariffs, if negotiations with Canada stall. The current deal does not address climate change, a key issue for Canada and a linchpin in its international agenda.
U.S. Trade Representative Robert Lighthizer indicated the President intends to send notification to Congress that would trigger a U.S. trade law 90-day wait period before any new pact could be signed. The White House said the “United States-Mexico Trade Agreement” is expected to be finalized by the end of November. A key feature of the agreement is a requirement that 75% of a car’s value be manufactured in North America, up from NAFTA’s current level of 62.5%. News agencies report that it would also require 40% to 45% of the car to be made by workers earning at least $16 per hour.
It also purportedly strengthens rules of origin for “chemicals, steel-intensive products, glass, and optic fiber” goods and strengthens enforcement mechanisms for intellectual property (IP) violations and protections of IP. The Agreement would also establish a zero-tariff level for digital con-tent such a e-books and software, as well as strengthen distributor and consumer protections for digital goods. According to some news outlets, the Agreement does not resolve the steel and aluminum tariffs placed on Mexican products under the Section 232 determination earlier this year. It remains to be seen whether this bilateral agreement will be approved or whether Canada will entertain its own bilateral agreement with the U.S. or agree to be included in the current agreement with Mexico.