Mexican president-elect insists on trilateral NAFTA

U.S.-Mexico text awaited

lopez obrador
Mexico's president-elect Andres Manuel Lopez Obrador looks on while listening to relatives of missing persons in Mexico City on Sept. 14, 2018. (File photo: Reuters/Violeta Schmidt)

Washington/Mexico City | Reuters — The United States and Mexico are due to release the text of their trade agreement on Friday, increasing pressure on Canada to join its partners in revamping the North American Free Trade Agreement while Mexico’s president-elect said he would insist on a trilateral pact.

President-elect Andres Manuel Lopez Obrador said Canadian Prime Minister Justin Trudeau asked him during a Thursday phone call “to intervene and call on the U.S. government to reach an agreement” with Canada. “We agreed to that.”

But Lopez Obrador, who takes office on Dec. 1, said the NAFTA language between Washington and Mexico City was now final.

“We are not going to re-open the negotiation. That you can be sure of,” Lopez Obrador told reporters in Mexico City.

Even so, Lopez Obrador said “the negotiation is not closed” between the U.S. and Canada, and said he had received information that the Trump administration has made a new counterproposal to Ottawa.

Queries to Canadian officials and the U.S. Trade Representative’s office to verify the U.S. proposal were not immediately answered.

Mexican Economy Minister Ildefonso Guajardo was scheduled to present the text of the Aug. 27 agreement, which aims to rebalance auto trade and modernize parts of NAFTA, to Mexico’s Senate at 7 p.m. ET, Mexican government and Senate sources said.

Mexican Senator Ricardo Monreal said on Twitter the text would be released simultaneously in Mexico and the U.S. A USTR spokesman declined comment on the timing.

The text of the U.S.-Mexico deal needs to be published by late Sunday night — 60 days ahead of the Nov. 30 deadline for Trump and Mexico’s outgoing president, Enrique Pena Nieto, to sign the deal before Lopez Obrador takes office on Dec. 1.

U.S. Trade Representative Robert Lighthizer has argued that the U.S. would have to reopen negotiations with the new Mexican government if the deadline is missed, but Lopez Obrador’s comments appear to call that into question.

Canada’s Liberal government says it does not feel bound by the latest NAFTA deadline, and it repeated on Friday that it would not bow to U.S. pressure to sign a quick deal.

“We are in a very tough negotiation with the United States over NAFTA… there is no deadline on this. As far as we are concerned we want a deal that is good for Canadians and that’s the bottom line,” Transport Minister Marc Garneau told reporters in Ottawa.

Some U.S. Democratic lawmakers said on Thursday they could not support a NAFTA deal without Canada.

“Canada is exceptionally important. I think it would be malpractice, both for economic and political reasons, not to have a major agreement with Canada,” said Senator Ron Wyden, the top Democrat on the tax and trade Senate Finance Committee.

President Donald Trump, a Republican who blames the 1994 NAFTA pact for the loss of U.S. manufacturing jobs, trumpeted the deal with Mexico as a win for Americans and threatened to close the door on Canada if it did not sign on by Sept. 30.

Trump also floated slapping auto tariffs on Canada, which could sow disarray in supply chains, take the wind out of the sails of a resurgent Canadian economy and rattle investors already unnerved by an escalating U.S.-China trade war.

Auto trade

The U.S.-Mexico text will flesh out an agreement in principle that aims to rebalance automotive trade between the two countries and update NAFTA with new chapters on digital trade and stronger labour and environmental standards.

It is expected to conform to details previously released on auto rules requiring an increase in regional value content to 75 per cent from 62.5 per cent previously, with 40 per cent to 45 per cent coming from “high-wage” areas, effectively the U.S.

Auto industry executives say it is unlikely those targets can be met if Canada is not part of the deal, given supply chains that crisscross NAFTA borders multiple times.

Details also are expected on a side-letter that preserves the Trump administration’s ability to impose global national security tariffs on imports of autos and auto parts, granting Mexico a quota for tariff-free exports to the United States that allows some expansion of production.

And more light is likely to be shed on the enforcement of new labour standards and trade dispute settlement arrangements. The U.S. has said Mexico agreed to eliminate a system of settlement panels to arbitrate disputes over anti-dumping and anti-dumping tariffs.

But a Mexican source close to the talks said the U.S. had in turn agreed to drop a demand for tariffs to protect U.S. seasonal produce growers.

Mexico also secured an exemption from U.S. “global safeguard” tariffs such as those imposed in January on washing machines and solar panels, the source said. Mexican-made products were hit by those actions, which were aimed at protecting U.S. producers from import surges.

The release of the trade deal text starts a months-long process for U.S. congressional approval that will require a lengthy analysis by the independent U.S. international Trade Commission and notification periods before an up-or-down vote.

Lawmakers briefed by Lighthizer said he told them the earliest a vote could occur, either on a U.S.-Mexico deal or a trilateral deal including Canada, would be February or March 2019, after the U.S. Congress elected in November is sworn in.

Reporting for Reuters by David Lawder in Washington and Anthony Esposito in Mexico City; additional reporting by Ana Isabel Martinez and Diego Ore in Mexico City and David Ljunggren in Ottawa; writing by David Lawder and Paul Simao.

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