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U.S., Mexico strike new trade deal that could pave the way for an overhaul of NAFTA

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Donald Trump called NAFTA the “worst trade deal maybe ever signed anywhere.’’ So he wants to renegotiate it — or kill it altogether. So just what is NAFTA? (May 18)
AP

WASHINGTON – 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 Peña 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.

Peña 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.”

He added, “We’ll only sign a new NAFTA that’s good for Canada and the middle class.”

George declined to comment on the idea of renaming of NAFTA.

Negotiators the U.S. and Mexico worked over the weekend to iron remaining differences and strike a deal between those two countries before Canada is brought back to the table.

One of the key sticking points in the talks has centered on the so-called auto rules of origin, which dictate that, to avoid tariffs, a certain percentage of an automobile must be built from parts that originated from countries within the NAFTA region.

Other stumbling blocks have included the procedure used to settle disputes between corporations and governments and the Trump administration’s push for the inclusion of a sunset provision under which the revised NAFTA agreement would expire after five years unless all three countries take steps to extend it.

Mexico and Canada have both balked at such a provision, arguing that trade agreements are supposed to offer the assurance of continuity for businesses and make it easier for them to comply with regulatory requirements.

Meanwhile, the Alliance of Automobile Manufacturers, which represents major automakers on policy issues in Washington, sounded an optimistic note Monday after reports of a preliminary deal between the U.S. and Mexico.

Automakers had expressed concerns that a breakdown in NAFTA could compromise their profits, lead to higher vehicle prices and force them to shift production.

“Automakers support modernizing NAFTA to bring this nearly 25-year-old agreement into the 21st century,” the Auto Alliance said Monday in a statement. “We are pleased to hear that the U.S. and Mexico have reached a consensus on several issues, including automotive rules of origin, and we look forward to learning more.”

Trump’s supporters have argued that Mexico has benefited from NAFTA and the deal should be reworked.

Mexico’s share of vehicles manufactured in North America has grown from about 12 percent in 2007 to an estimated 23 percent in 2017, according to the Center for Automotive Research. The U.S. share has fallen from 70 percent to 62 percent during that period.

The Auto Alliance on Monday urged the U.S. and Mexico to “quickly re-engage with Canada to continue to build on this progress.”

The group called for negotiators to “continue to strike the right balance by incentivizing production and investment in North America while keeping new vehicles affordable for more Americans.”

Contributing: Nathan Bomey of USA Today and Phoebe Wall Howard of the Detroit Free Press.

More: What is NAFTA? Seven things to know about the North American free trade pact

More: U.S.-Mexico are close to reaching a deal in NAFTA talks, but Canada is still a wild card

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