Trump Reaches Revised Trade Deal With Mexico, Threatening to Leave Out Canada
President Trump with Mexico’s trade negotiators on Monday.CreditDoug Mills/The New York Times
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WASHINGTON
— President Trump said on Monday that the United States and Mexico had
reached an accord to revise key portions of the North American Free
Trade Agreement and would finalize it within days, suggesting he was
ready to jettison Canada from the trilateral trade pact if the country
did not get on board quickly.
Speaking
from the Oval Office, Mr. Trump promoted the preliminary agreement with
Mexico as a deal that could replace Nafta and threatened to hit Canada
with auto tariffs if it did not “negotiate fairly.”
“They
used to call it Nafta,” Mr. Trump said. “We’re going to call it the
United States-Mexico Trade Agreement,” adding that the term Nafta —
which he has called the “worst” trade deal in history — had “a bad
connotation” for the United States.
Yet
while Mr. Trump may try to change the name, the agreement reached with
Mexico is simply a revised Nafta, with updates to provisions surrounding
the digital economy, automobiles, agriculture and labor unions. The
core of the trade pact — which allows American companies to operate in
Mexico and Canada without tariffs — remains intact.
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Now,
the question becomes whether a trilateral pact becomes a bilateral deal
— or Mr. Trump’s threats pressure Canada to return to the negotiating
table and accede to many of the United States’ demands.
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The
president’s apparent willingness to move on without Canada prompted
confusion and concern among lawmakers — who said it may not be legally
permissible, let alone smart — and businesses whose supply chains depend
on a deal encompassing all three countries.
“Because
of the massive amount of movement of goods between the three countries
and the integration of operations which make manufacturing in our
country more competitive, it is imperative that a trilateral agreement
be inked,” Jay Timmons, the president and chief executive of the
National Association of Manufacturers, said in a statement.
Mexican
officials said on Monday that they wanted to have Canada back in the
process and were working toward a trilateral deal by the end of the
week. President Enrique Peña Nieto of Mexico, who joined the White House
announcement via phone, said, “It is our wish, Mr. President, that now
Canada will also be able to be incorporated in all this.”
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But
later in the day, Luis Videgaray Caso, Mexico’s foreign minister,
signaled that Mexico might be willing to move forward without Canada.
“There
are things that we don’t control, particularly the political
relationship between Canada and the U.S., and we definitely don’t want
to expose Mexico to the uncertainty of not having a deal,” Mr. Videgaray
said in an interview. “Not having a trade agreement with the U.S.,
that’s a substantial risk to the Mexican economy. Literally millions of
jobs in Mexico depend on access to the U.S. market.”
Both
the Mexicans and the Americans have been eager to reach a fully revised
deal by the end of August, a date that would give the Trump
administration enough time to notify Congress that a deal had been
finalized and still have that deal be signed by the outgoing Mexican
administration of Mr. Peña Nieto.
“Ideally
we’ll have the Canadians involved,” said Robert Lighthizer, the United
States trade representative, adding that the administration planned to
officially inform Congress by Friday of its intent to sign a new deal, a
step required before Congress votes on a trade pact. “If we don’t have
Canada involved, we will notify that we have a bilateral agreement that
Canada is welcome to join.”
Chrystia
Freeland, the Canadian foreign minister, will travel to Washington on
Tuesday to continue negotiations, said her spokesman, Adam Austen, on
Monday.
“We will only sign a new
Nafta that is good for Canada and good for the middle class,” Mr. Austen
added. “Canada’s signature is required.”
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The
revised deal with Mexico makes significant alterations to rules
governing automobile manufacturing, in an effort to bring more car
production back to the United States from Mexico. Those changes are
being watched carefully by the United States auto industry, which has
built its global supply chain around Nafta and expressed concern that
the Trump administration’s efforts to rewrite it could raise prices of
American-made cars and trucks. Automakers like General Motors and Ford
have set up plants in Canada and Mexico, and American automakers
routinely import car parts from other countries.
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Under
the changes agreed to by Mexico and the United States, car companies
would be required to manufacture at least 75 percent of an automobile’s
value in North America under the new rules, up from 62.5 percent, to
qualify for Nafta’s zero tariffs. They will also be required to use more
local steel, aluminum and auto parts, and have 40 to 45 percent of the
car made by workers earning at least $16 an hour, a boon to both the
United States and Canada and a win for labor unions, which have been
among Nafta’s biggest critics.
“Automakers
urge the U.S. and Mexico to quickly re-engage with Canada to continue
to build on this progress,” the Alliance of Auto Manufacturers, which
represents most carmakers that sell vehicles in the United States, said
in a statement. “The industry is hopeful that any changes to Nafta auto
rules of origin continue to strike the right balance by incentivizing
production and investment in North America while keeping new vehicles
affordable for more Americans.”
In a
briefing Monday, administration officials said the United States and
Mexico had also reached an agreement over a “sunset clause,” proposed by
the Trump administration, that would cause Nafta to automatically
expire unless the three countries voted to extend it.
The
two countries agreed to a review of the trade pact every six years that
would extend its lifetime for 16 more years, officials said. That
longer time horizon would give lawmakers a chance to review the pact’s
progress, while giving businesses certainty for the near future.
The
countries also agreed to limit the kinds of legal challenges that
investors can make against foreign governments under Nafta. The oil and
gas, infrastructure, energy generation and telecom industries are
exempted from these more restrictive rules, and will operate under the
previous terms, Mr. Lighthizer said — a win for those industries.
One
contentious issue that remains unresolved is whether the administration
will exempt Mexico from its steel and aluminum tariffs. Mr. Trump hit
Mexico, along with Canada, the European Union and other nations, with 25
percent tariffs on steel and 10 percent tariffs on aluminum, in part to
force concessions on other trade issues. Mexican officials said they
expected the tariffs to be addressed down the road.
“I
don’t think it was necessary to address them now,” Mr. Videgaray said.
“We’d like those to be addressed alongside Canada. It would be great if
we could have a trilateral agreement on lifting those and our
retaliatory tariffs on U.S. goods.”
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It
is unclear how eager Canada will be to sign on to the revised deal.
Relations between the United States and Canada have been strained for
months and Mr. Trump has personally berated Prime Minister Justin Trudeau of Canada as “very dishonest and weak” and accused him of “false statements” after a tense meeting of global leaders in June.
Any
agreement that does not involve Canada is likely to face legal
challenges and intense opposition from Congress, which had granted the
Trump administration authority to renegotiate Nafta as a trilateral
deal.
“Nafta is a trilateral
agreement. It requires legislation and a change to Nafta requires
legislation,” said Senator Patrick J. Toomey, Republican of
Pennsylvania. “I’ve told them any change has to go through Congress.
There is not necessarily complete agreement about that.”
Senator Lamar Alexander, Republican of Tennessee, said no one “is envisioning” a revised Nafta that does not include Canada.
“Modernizing
it is a good thing, but I hope the president takes whatever agreement
he has with Mexico and gets one properly with Canada and we get back to
business,” Mr. Alexander said.
Industry groups also said a final agreement must include Canada.
“Coming
to terms with Mexico is an encouraging sign, but threatening to pull
out of the existing agreement is not,” said Matthew Shay, the chief
executive of the National Retail Federation. “The administration must
bring Canada, an essential trading partner, back to the bargaining table
and deliver a trilateral deal.”
The
president, flanked by advisers including Mr. Lighthizer and Jared
Kushner, hailed the preliminary agreement as “a big day for our
country,” adding that “many people” had thought that no one could make a
deal with Mexico.
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Mr.
Peña Nieto, who has at times exchanged harsh words with Mr. Trump as
the two countries have squabbled over Mr. Trump’s proposed wall along
their border, added a moment of praise on Monday.
“I recognize your political will,” Mr. Peña Nieto said, “and your participation in this.”
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