Canada mulls NAFTA rejig as Trump unveils new Mexico trade deal

Ann Santiago
August 29, 2018

Wall Street surged overnight, with the S&P 500 and Nasdaq indices hitting fresh records on news that the United States and Mexico have agreed to enter into a new trade deal to replace the North American Free Trade Agreement (NAFTA).

Of the new trade deal, Lighthizer told reporters, "I think it's going to set the rules for the future at the highest standards in any agreement yet negotiated by any two nations for things like intellectual property and digital trade and financial services trade and all of the things that we think of as the modernizing, cutting-edge places that our economy is going".

Although Carter said he spoke with Canadian officials on television earlier, all of whom were "very concerned" about the future relationship with the us and Mexico, he remained optimistic that an agreement could be struck.

"The main change - raising the North American regional value content for tariff-free trade in automobiles from 62.5 per cent to 75 per cent - would already be met by nine of 16 vehicle models now produced in Canada". Much of the trade pact dealt with auto manufacturing, as Detroit has increasingly seen jobs shipped south of the border where workers earn an average of $7.34 an hour making cars and $3.41 an hour in auto parts suppliers.

"There is still a great deal of uncertainty. trepidation, nervousness - a feeling that we are on the outside looking in", said Peter MacKay, a former Canadian minister of justice, defense and foreign affairs who is now a partner at the law firm Baker McKenzie. Freeland's spokesman Adam Austen said in a statement Canada "will only sign a new NAFTA that is good for Canada and good for the middle class".

Officials said they hope Canada will agree to the terms by Friday (Aug 31), when the White House plans to formally notify Congress that Trump will sign the deal in 90 days. Trump has presented this as a bilateral deal and threatened Canada with auto tariffs.

The No. 2 Senate Republican, John Cornyn of Texas, hailed the "positive step" but said Canada needs to be party to a final deal. He said in a Monday Oval Office conference that NAFTA had harmed American workers.

USA automakers have opposed raising the North American content requirement, but the United Auto Workers union has supported it. I said we were going to do this.

John Cornyn of Texas, the No. 2 Senate Republican and chairman of the subcommittee on worldwide trade, said in a statement the Mexico agreement is a "positive step", but he added that Canada needs to be party to a final deal.

Bipan Rai, head of North American foreign exchange strategy at CIBC Capital Markets, said markets have already priced in a trilateral deal for valuing the Canadian dollar, but there is a significant chance the Trudeau government will decide that the U.S. -Mexico deal does not suit them.

Mexico agreed to eliminate dispute settlement panels for certain anti-dumping cases, a move that could complicate talks with Canada, which had insisted on the panels.

Mr Trump has threatened to tax Canada's auto sector or cut it out entirely if a deal is not reached soon.

The president says he will be calling Canadian Prime Minister Justin Trudeau.

A fact sheet describing the bilateral agreement specified the content would be made in the United States and Mexico.

US officials, when asked by reporters for clarity, could not say if Mexico is comfortable with a bilateral trade deal instead of the three-way accord they have been seeking for nearly two years.

Mr Trump then pressed another button and said: "How are you?"

The agreement is evidence that Trump's trade delegation is willing to negotiate in good faith, and even accept some concessions on key issues.

Although full automotive details have not yet been released, auto industry officials say it will allow Trump the ability to impose higher national security tariffs on vehicles that do not comply with the new thresholds.

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