President Donald Trump announced a new trade deal with Mexico:
President Donald Trump said Monday the U.S. and Mexico have reached a new trade deal, paving the way for the possible revision of the North American Free Trade Agreement.
In an Oval Office announcement, Trump said the new agreement would be called the United States Mexico trade agreement and would replace NAFTA, which he said had “bad connotations” for the United States.
“It’s a big day for trade,” he said. “It’s a big day for our country.”
Trump said he intends to terminate NAFTA and that the U.S. would immediately begin negotiations with Canada, the third party in the trilateral trade pact that he has called the “worst deal ever.”
“If they would like to negotiate fairly, we will do that,” Trump said. He said it’s possible that a separate deal could be reached with Canada.
The announcement of a deal between the U.S. and Mexico comes after five consecutive weeks of talks between the two nations to revise key parts of the NAFTA.
In a phone call with Trump, Mexican President Enrique Pena Nieto called the deal “something very positive for the United States and Mexico.”
The U.S. and Mexico are hoping to get a final deal signed before Peña Nieto leaves office on Dec. 1. But before the U.S. can sign the deal, Congress must be given 90 days’ notice. A formal notice will be sent to Congress on Friday.
Pena Nieto repeatedly expressed interest for Canada to be incorporated into the agreement. Trump said the U.S. would have a deal with Canada “one way or another.”
“It’ll either be a tariff on cars or it’ll be a negotiated deal,” he said. “Frankly, a tariff on cars is a much easier way to go. Perhaps, the other would be much better for Canada.”
In Mexico City, Marcelo Ebrard, Mexico’s incoming foreign minister under President-elect Andres Manuel Lopez Obrador, said Monday he was pleased to see the U.S and Mexico craft a new trade deal, according to Reuters.
“We see the agreement announced today as positive progress … in the coming days we will continue in trilateral negotiations with Canada, which is vital to be able to renew the (trade) pact,” said Marcelo Ebrard, the future foreign minister.
Douglas George, the Detroit-based consul general of Canada responsible for Michigan, Ohio, Indiana and Kentucky, sounded upbeat on Monday.
“We’re encouraged by the optimism shown by our negotiating partners,” George told the Detroit Free Press on Monday. “Progress between Mexico and the U.S. is a necessary requirement for any renewed NAFTA agreement. While they’ve been negotiating, we’ve been in regular contact with them over the last weeks. We’ll continue to work toward a modernized NAFTA. We have a three-way negotiation that’s been ongoing.”
How can we analyze the costs and benefits of this agreement compared to NAFTA?
Well, we can’t yet. The text of the agreement isn’t available. Ace of Spades zeroes in on this:
According to a fact sheet from the United States Trade Representative, the agreement includes new rules of origin to incentivize manufacturers to source goods and materials in North America — including requiring 75 percent of auto content be made in the United States and Mexico.
I’m going to guess that the point of this is to require Mexico to buy the bulk of the steel used in making cars from US/Mexican steel-makers, which probably means “US steel makers” in practice. Rather than, say, Chinese or Canadian or other makers.
I’m not a fan of the trade warrior fetishization of steel over other industries, but as previously noted, President Trump’s unorthodox negotiating style seems to be lowering trade barriers for American products. The success with Mexico will likely increase pressure on Canada and Mexico to do the same.