But it is not certain that the US Congress will ratify it outright given the high prospects for the Democrats to regain majority in the mid-term elections earlier that month. It is expected that this new North American agreement will be signed by the end of November by the respective heads of government. Mexico will benefit greatly from what Canada was able to achieve in its negotiations with the United States, mainly the preservation of the dispute resolution panels stipulated in NAFTA’s chapters 19 and 20, now specified in Chapter 31 of the USMCA.
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This new deal, whose name lacks any reference to free trade, keeps NAFTA’s trilateral character but also secures Trump’s interests and goals. In this way, Canada joined these trading partners into what was oddly called United States–Mexico–Canada Agreement (USMCA). The agreed increase in wages in the Mexican auto industry enables jobs that migrated south under NAFTA to move back north across the Rio Grande.įortunately for Mexico, Canada struck a last-minute deal with the United States on 30 September after Ottawa agreed to partially open its dairy market to imports from the United States and Mexico. He simultaneously killed NAFTA, as he threatened since he took office, and honoured his campaign promise to bring back jobs to the United States. On top of all that, Mexico agreed that the United States can invoke Section 232 of the Trade Expansion Act of 1962 to impose, in the interest of national security, a 25 per cent tariff on imports of light vehicles, SUVs and auto parts produced in Mexico when they exceed 2.4 million vehicles and US$90 billion in auto parts.Įven worse, Mexico accepted the elimination of the dispute settlement panels stipulated in Annex 1901.2 of NAFTA - only those to resolve controversies in matters related to oil, gas and infrastructure were retained. In these cases, the regional content requirement will be of only 40 to 45 per cent of the total value of vehicles. In some cases, wages will also be forced to sharply increase up to US$16 per hour from an average of US$2.50. If this percentage is not met, a 2.5 per cent tariff will apply. The regional content requirement for the products of this sector will jump from 62.5 to 75 per cent. Mexico also accepted huge concessions in the automotive sector. In the new deal, the clause was only modified by extending the timeframe to 16 years, with revisions every six. Another is that Mexican negotiators were incapable of eliminating the so-called ‘sunset’ clause through which Trump originally intended that the agreement expired every five years. One is that it was negotiated largely without the participation of Canada so that Mexico ceded upfront to Trump’s declared intention of abolishing NAFTA. The problem is that such a deal has many downsides. The logic that prevailed was that it is better for Mexico to strike a suboptimal deal rather than do business with the world’s largest economy without any rules and with some degree of certainty. The fact, though, is that this sovereignty was never subject to negotiation. In particular, he is satisfied that under the new deal Mexico retains its sovereignty to pass reforms in the energy sector and thus implement policies to expand oil exploration, extraction and processing to produce gasoline domestically. Fortunately for him, the main issues of interest to his government were treated favourably in the negotiations. Since he opposed NAFTA in the early 1990s when he was a rising social leader, it would be awkward for him, now as a leftist president, to sign another ‘neoliberal’ trade agreement. The new president-elect, Andrés Manuel López Obrador, is pleased as well. He used it from day one to mend his political image greatly damaged by the rampant impunity and corruption that plagued his administration. Peña Nieto made significant concessions to cut this deal so he can sign it before he leaves office on 1 December. It looked ‘impossible’ given Trump’s continuing threats and systematic bullying throughout the negotiations.
On 27 August, Mexico and the United States reached an agreement to sign a new trade deal to replace the North American Free Trade Agreement (NAFTA), which regulated trade between these two countries since 1 January 1994.įor outgoing Mexican President Enrique Peña Nieto, the deal represented a significant achievement.
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