Trump announces trade pact with Mexico

Ann Santiago
August 29, 2018

Mexicans and US officials have been eager to revise NAFTA by the end of August to give allow the outgoing Mexican administration of Enrique Peña Nieto to sign the deal before leaving office.

There is no formal free trade deal between the USA and Mexico, only an agreement between the two countries on how to resolve key issues in their trade relationship as part of the NAFTA talks.

But after a year of intense negotiations to salvage NAFTA, US and Mexican negotiators are keen to seal a new deal before Pena Nieto hands power to President-elect Andres Manuel Lopez Obrador on December 1.

While the full text and details of the U.S. -Mexico deal have not been published yet, officials from both countries told S&P Global Platts that the new agreement would not significantly change the so-called Investor-state dispute settlement (ISDS) mechanism that gives protection to foreign companies that have invested in the oil and gas industry.

"We will only sign a new NAFTA that is good for Canada and good for the middle class", said Adam Austen, a spokesman for Freeland, adding that "Canada's signature is required".

Analysts at ANZ Bank New Zealand, (ANZ), explained that the USA and Mexico have reached a trade agreement that will replace a soon-to-be-terminated NAFTA bill, according to both Presidents in a joint announcement.

"The U.S. -Mexico deal seemed to boost confidence that the trade war is moving closer to an end, and the next question is who's next to close a deal with Trump?" he said. All of this is on a very tight timetable, economists and observers said.

"They used to call it NAFTA", Trump said.

A key focus of the new agreement involves new rules for the digital economy, which didn't really exist when NAFTA was negotiated in the early 1990s.


The planned call did not go off without a hitch, though, when Trump was stuck behind his Oval Office desk pressing buttons on the console in an attempt to connect with Neito - to no avail - for well more than a minute.

This preliminary agreement does not include Canada.

He also said he wanted to get rid of the name Nafta, which he said has "bad connotations". "We're glad to see Mr. Trump step back from the suicide of Nafta withdrawal, but on the public evidence so far his new deal is worse".

The president is critical of Canada's lopsided treatment of the USA, especially with the northern nation's tariffs on dairy products that be almost 300 percent.

Many hurdles remain, including the fact that any final deal would need to be ratified by Congress.

The deal slightly reduces incentives for carmakers to relocate to Mexico and limits some companies' ability to challenge government trade rules, which could prompt opposition from United States businesses. Meanwhile, Mexico's president made clear Monday he wants Canada to be part of the updated agreement.

Trump has utterly flipped the script with China, which our elite effectively told us would supplant us economically and strategically, and with which we had to accept unfair trade factors.

President Trump was joined by Senior Adviser Jared Kushner, Chief of Staff Kelly, United States Trade Representative Robert Lighthizer, Mexican Foreign Minister Luis Videgaray and Mexican Economic Minister Ildefonso Guajardo.

Some experts interpreted the administration's signaling about a possible bilateral deal as an attempt to pressure Canada into a swift agreement on revising NAFTA, which the USA administration denied. It also mandates 40 percent to 45 percent of content will be made by workers earning at least $16 an hour.

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