U.S. and Mexico Agree to Preliminary NAFTA Deal

The United States and Mexico have reached agreement to revise key portions of the 24-year-old North American Free Trade Agreement and a preliminary deal could be announced on Monday, a crucial step toward revamping a trade pact that has appeared on the brink of collapse during the past year of negotiations.

Reaching an agreement on how to revise some of the most contentious portions of what President Trump has long called the worst trade pact in history would give Mr. Trump a significant win in a trade war he has started with countries around the globe, including Mexico, Canada, the European Union and China.

Still, a preliminary agreement between the United States and Mexico would fall far short of actually revising Nafta. The preliminary agreement still excludes Canada, which is also a party to Nafta but has been absent from talks held in Washington in recent weeks.

The agreement with Mexico centers on rules governing the automobile industry, resolving a big source of friction, but leaves aside other contentious issues that affect all three countries.

The revised Nafta would also need congressional approval before it can go into effect, including votes by Republican lawmakers who have criticized some of the president’s plans for remaking the deal.

On Monday morning, Mr. Trump tweeted, “A big deal looking good with Mexico!”

That followed other tweets the president sent over the weekend trumpeting the renewed talks with Mexico.

Finalizing a revised Nafta will now hinge on bringing Canada back into the talks. While Canada has not been a party to recent discussions, the potential for a two-country deal appears highly unlikely, given opposition by Mexico, American lawmakers and North American industries whose supply chains rely on all three countries. Both Mexican and American officials have said they hope their progress encourages Canada to come back to the negotiations quickly.

America’s trade relations with Canada have chilled in recent months, as Mr. Trump has repeatedly criticized the country’s trade practices and Canadian leaders have insisted they will not rush to sign a deal that does not work in their favor.

On Friday, Canadian Foreign Minister Chrystia Freeland said that Canada would be “happy” to rejoin the talks once the United States and Mexico had made progress on their specific issues. “Once the bilateral issues get resolved, Canada will be joining the talks to work on both bilateral issues and our trilateral issues,” Ms. Freeland said.

Many of the most significant changes agreed to by Mexico and the United States simply update the pact to take into account the rise of the internet and the digital economy since the agreement was negotiated. But Mr. Trump’s advisers have also pressed for big alterations to the rules governing automobile manufacturing, in an effort to bring more car production back to the United States from Mexico.

[Read more on NAFTA and how Trump might change it.]

To qualify for zero tariffs under Nafta, 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 previously. They will also be required to use more local steel, aluminum and auto parts, and have a certain proportion of the car made by workers earning at least $16 an hour, a boon to both the United States and Canada.

Talks in recent days had stumbled over how these rules would overlap with additional auto tariffs that the president has threatened, as well as new measures that would open Mexico’s oil and gas sector to foreign companies, provisions that are controversial within the new elected Mexican administration that is poised to take office in December.

Speaking Sunday, Ildefonso Guajardo, the Mexican economy secretary, said that Jesus Seade, the designated chief negotiator of Mexican President-elect Andres Manuel Lopez Obrador, had worked out an agreement on energy with his American counterparts in recent days.

Both the Mexicans and Americans have been eager to reach a fully revised Nafta 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 Enrique Peña Nieto. That goal now looks doubtful, given Canada’s recent absence from the negotiating table.

Still, progress in the negotiations with Mexico will come as a relief to American businesses that depend on trade agreements and have been shaken by Mr. Trump’s confrontational approach to America’s biggest trading partners.

Mr. Trump has continued to inject uncertainty into the Nafta talks, believing that the strategy gives his advisers an upper hand at the negotiating table. He has hit Canada and Mexico with hefty tariffs on their shipments of steel and aluminum and threatened further taxes on their cars.

Source: Ana Swanson, The New York Times

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