U.S., Mexico ready to replace NAFTA
Canada may be left out of new trade deal
WASHINGTON — Snubbing Canada, the Trump administration reached a preliminary deal Monday with Mexico to replace the North American Free Trade Agreement — a move that raised legal questions and threatened to disrupt the operations of companies that do business across the three-country trade bloc.
President Donald Trump suggested that he might leave Canada, America’s No. 2 trading partner, out of a new agreement. He said he wanted to call the revamped trade pact “the United States-Mexico Trade Agreement” because, in his view, NAFTA had earned a reputation as being harmful to American workers.
But first, he said, he would give Canada a chance to get back in — “if they’d like to negotiate fairly.” To intensify the pressure on Ottawa, the president threatened to impose new taxes on Canadian auto imports.
Canada’s NAFTA negotiator, Foreign Minister Chrystia Freeland, is cutting short a trip to Europe to fly to Washington on Tuesday to try to restart talks.
“We will only sign a new NAFTA that is good for Canada and good for the middle class,” said Adam Austen, a spokesman for Ms. Freeland.
“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.
Critics denounced the prospect of cutting Canada out of a trade pact, in part because of the risks it could pose for companies involved in international trade. Many manufacturers have built complex but vital supply chains that cross all three NAFTA borders.
“We just signed a trade agreement with Mexico, and it’s a terrific agreement for everybody,” Mr. Trump said. “It’s an agreement that a lot of people said couldn’t be done.”
Mr. Trump has frequently condemned the 24-year-old NAFTA trade pact as a jobkilling “disaster” for American workers. NAFTA reduced most trade barriers between the three countries. But the president and other critics say it encouraged U.S. manufacturers to move south of the border to exploit low-wage Mexican labor.
The preliminary deal with Mexico is far from final. Even after being formally signed, it would have to be ratified by lawmakers in each country.
The U. S. Congress wouldn’t vote on it until next year — after November midterm elections.
“There are still a lot of questions left to be answered,” Mr. MacKay said. He noted, for example, that Mr. Trump said nothing Monday about dropping U.S. tariffs on Mexican or Canadian steel — tariffs that were imposed, in part, to pressure those countries to reach an agreement on NAFTA.
Before the administration began negotiating a new NAFTA a year ago, it notified Congress that it was beginning talks with Canada and Mexico. So Monday’s announcement raises the question: Is it authorized to reach a deal with only one of those countries?
A senior administration official, who briefed reporters on condition of anonymity, said yes: The administration can tell Congress it had reached a deal with Mexico — and that Canada is welcome to join.
But other analysts said the answer wasn’t clear: “It’s a question that has never been tested,” said Lori Wallach, director of the left-leaning Public Citizen’s Global Trade Watch.
And the No. 2 Senate Republican, John Cornyn of Texas, while hailing Monday’s news as a “positive step,” said Canada needs to be party to a final deal.
“A trilateral agreement is the best path forward,” Mr. Cornyn said, adding that millions of jobs were at stake.
“Mexico will have a difficult time selling ‘Trump’s deal’ back home if Canada does not think it is a good deal,” said Daniel Ujczo, a trade attorney with Dickinson Wright PLLC. “It will appear that Mexico caved.”
The Office of the U.S. Trade Representative said Monday that Mexico had agreed to ensure that 75 percent of automotive content be produced within the trade bloc (up from a current 62.5 percent) to receive duty-free benefits and that 40 percent to 45 percent be made by workers earning at least $16 an hour. Those changes are meant to encourage more auto production in the United States.
For months, the talks were held up by the Trump administration’s insistence on a “sunset clause”: A renegotiated NAFTA would end after five years unless all three countries agreed to continue it.
On Monday, the Trump administration and Mexico announced a compromise on that divisive issue: An overhauled NAFTA would remain in force for 16 years. After six years, the countries would review the agreement and decide whether it needed to be updated or changed. They then would either agree to a new 16-year deal or the pact would ex-