[CTC] Mexico to unveil trade deal with U.S. tonight as pressure mounts on Canada

[Arthur Stamoulis]

https://business.financialpost.com/news/economy/update-1-u-s-mexico-trade-deal-text-to-be-released-as-focus-remains-on-canada <https://business.financialpost.com/news/economy/update-1-u-s-mexico-trade-deal-text-to-be-released-as-focus-remains-on-canada>

Mexico to unveil trade deal with U.S. tonight as pressure mounts on Canada

By: David Lawder and Anthony Esposito   
9/28/2018

WASHINGTON/MEXICO CITY — The text of the Trump administration’s trade agreement with Mexico is due to be released on Friday, launching a contentious approval process as pressure mounts on Canada to sign a revamping of the trilateral NAFTA pact.

Mexico’s Economy Minister Ildefonso Guajardo was scheduled to present the long-awaited document to Mexico’s Senate at 7 p.m. EDT, Mexican government and Senate sources said.

U.S. lawmakers briefed by U.S. Trade Representative Robert Lighthizer on Thursday said they expected the text to largely exclude language related to Canada, but added they were still hoping for Canada to join.

They expressed little optimism a deal with Canada could be reached quickly. U.S. and Canadian negotiators have spent several weeks trying to overcome disagreement over dairy trade and dispute settlement resolutions in talks to modernize the North American Free Trade Agreement.

The deal underpins US$1.2 trillion in trade between the United States, Canada and Mexico, and financial markets are nervous that key supply chains could unravel if Washington and Ottawa fail to reach an agreement.

Some U.S. Democratic lawmakers said they could not support a NAFTA trade 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.

“I think leaving Canada out of a new deal amounts to the Trump administration surrendering on fixing NAFTA.” Wyden is from Oregon, a state that trades more with Canada than Mexico.

A Trump administration official and congressional aides said the U.S.-Mexico text was due for release on Friday, but a USTR spokesman declined to comment on timing.

The text needs to be published by late Sunday night – 60 days ahead of a Nov. 30 deadline for President Donald Trump and Mexico’s President Enrique Pena Nieto to sign the deal before his successor takes office on Dec. 1.

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The text will flesh out an agreement in principle reached by the United States and Mexico on Aug. 27 that aims to rebalance automotive trade between the two countries and modernize the 1994 NAFTA pact with new chapters on digital trade, stronger labor and environmental standards.

The text is expected to conform to details previously released on tighter automotive 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 United States.

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 are also expected on an automotive 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.

The publishing of the 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 a series of notification periods before an up-or-down vote can occur.

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.

Democrats could significantly strengthen their numbers in the November elections or even take control of the House of Representatives.

Several Democrats questioned whether the Trump administration has legal authority to proceed with a Mexico-only deal as prior notifications under the “fast-track” trade negotiating authority law were for a trilateral deal including both Mexico and Canada.

“That’s not what’s being proposed right now,” said Representative Suzan DelBene of Washington state. “Obviously Congress will have a say in that.”
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