US and Mexico tentatively set to replace NAFTA with new deal

WASHINGTON (AP)—The Trump administration and Mexico have reached a preliminary accord to end the North American Free Trade Agreement and replace it with a deal that the administration wants to be more favorable to the United States.

President Donald Trump, in announcing the tentative agreement Aug. 27 at the White House, said a new deal would be called “the United States-Mexico Trade Agreement. Trump has frequently condemned the 24-year-old NAFTA trade pact as a job killing “disaster” for the United States.

Still, any new agreement is far from final. The administration still needs to negotiate with the third partner in NAFTA, Canada, to become part of any new trade accord. Without Canada, America’s No. 2 trading partner, it’s unclear whether any new U.S. trade agreement with Mexico would be possible.

The president said that he would be calling Canadian Prime Minister Justin Trudeau.

“If they’d like to negotiate fairly, we’ll do that,” Trump said.

Trump put pressure on Canada by threatening to tax Canadian auto imports and to leave Canada out of a new regional trade bloc.

NAFTA reduced most trade barriers between the three countries. But Trump and other critics say it encouraged U.S. manufacturers to move south of the border to exploit low-wage Mexican labor.

Talks to overhaul the agreement began a year ago and have proved contentious.

U.S. and Mexican negotiators worked over the weekend to narrow their differences. 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.

It remains unclear where the announcement leaves Canada.

Adam Austen, a spokesman for Canadian Foreign Minister Chrystia Freeland, said: “Canada is encouraged by the continued optimism shown by our negotiating partners. Progress between Mexico and the United States is a necessary requirement for any renewed NAFTA agreement.”

Agriculture sector reaction

The agriculture sector had varying reaction to the announcement. Secretary of Agriculture Sonny Perdue said, “President Trump is delivering on his promise to renegotiate the old, outdated North American Free Trade Agreement, making good on his pledge to strike the best deals possible for all of our economic sectors, including agriculture.”

Senate Agriculture Committee Chairman Pat Roberts, R-KS, said in a statement, “I am eager to learn more of the details of the new U.S.-Mexico trade deal. The value of U.S. agricultural exports to Mexico has increased by 305 percent since NAFTA entered into force; farmers and ranchers need to be able to rely on that important market. I’m hopeful the administration will move quickly on securing a beneficial trade deal with Canada in the coming days.”

House Agriculture Committee Chairman Mike Conaway, R-TX, said, “Mexico and Canada are key agricultural trade partners—but for a trilateral agreement to succeed, we need all three parties to engage in the process. I call on Canada to resume its seat at the table so we can ensure that a strong, modern agreement among our three nations can be finalized as quickly as possible.”

U.S. Grains Council President and CEO Tom Sleight said, “We are grateful for news that the United States and Mexico have reached an agreement that will keep NAFTA modernization efforts moving.

“Mexico is extremely important to every sector we represent. Yet, so too is Canada, our second largest ethanol market and a top ten corn market. We hope the agreement today opens the door for Canada’s reengagement, and we continue to oppose withdrawal from the existing NAFTA under any circumstances except the adoption of a new, beneficial and trilateral pact.”

The National Corn Growers Association President Kevin Skunes said, “NAFTA has been an unequivocal success story for American agriculture, dramatically expanding market access for all parties, integrating supply chains and providing economic opportunity to farmers and rural communities.”

U.S. Wheat Associates Chairman Chris Kolstad, a Ledger, Montana, producer, said, “We are glad to see progress toward a renegotiated NAFTA that builds on the opportunities the existing agreement opened with Mexico’s wheat importing flour millers. We hope it spurs negotiations with Canada to resolve outstanding issues like its discriminatory wheat grading law. The new market development program will help us plan new activities that will begin repairing the cracks in our crucial, long-term trade relationships with Mexico and other countries.”

Kolstad said USW agrees with the National Association of Wheat Growers that while it is important to hold China and other countries accountable for unfair trade practices, policies that invited retaliation and created the need to provide federal aid to farmers are not the best course.

“Like NAWG, we believe the long-term solution is to end the trade war and move on to negotiating new trade deals that work for farmers and for our overseas customers,” Kolstad said.

Senior Field Editor Larry Dreiling contributed to this report.