- The US and Mexico announced a preliminary trade deal on Monday as part of President Donald Trump’s desire to renegotiate the North American Free Trade Agreement.
- The deal includes stricter rules for autos, textiles, and many other goods.
- It also includes new regulations concerning intellectual property and digital goods.
- Here are the highlights of the deal and some initial reaction.
US President Donald Trump and Mexican President Enrique Peña Nieto announced a new US-Mexico trade deal on Monday, completing a major step toward the renegotiation of the North American Free Trade Agreement, or NAFTA.
The deal is the result of five weeks of intense one-on-one talks between the Trump administration and Mexican officials.
It’s not final, since Canada is still involved in the NAFTA process, but Trump said the US and Mexico could move forward with a bilateral agreement if the Canadians drive a hard bargain.
Here’s a rundown of the major changes in the agreement. It would:
- Require that for a car to move between the US and Mexico without being subject to tariffs, 75% of the car must originate in a NAFTA country. This would be up from the current 62.5%.
- Establish that 40% to 45% of a car or truck’s content must be made by workers earning more than $US16 an hour. This is a push that could help the US retain more auto work. US auto unions have been fighting for such a change for some time.
- Strengthen rules of origin for “chemicals, steel-intensive products, glass, and optical fibre” goods. Similar to autos, this would strengthen the requirements for goods to move across the US-Mexican border tariff-free.
- Toughen rules for textile supply chains to push countries toward producing more apparel domestically.
- Strengthen enforcement mechanisms for intellectual property violations and protect intellectual property. For instance, the deal would set the minimum for copyright protections at 75 years.
- Establish a zero-tariff level for digital content such as e-books and software, as well as strengthen distributor and consumer protections for digital goods.
- Mexico would raise its de minimis shipment value level to $US100 from the current $US50. (A de minimis shipment value is the threshold at which a business has to pay duties on goods moving across the border and are subject to more stringent security checks.) Small US businesses or persons shipping goods worth $US100 or less to Mexico would not be subject to tariffs and would face simpler customs checks.
Senior administration officials told reporters that the goal is to send a formal notification of the renegotiation to Congress on Friday, kicking off the clock for lawmakers to support or reject the new deal.
The deal drew a mixed response, with lawmakers and experts praising the preservation of many parts of NAFTA but also warning that the agreement could be a step in the wrong direction.
“I am working through the details of the possible US-Mexico agreement, but there is reason to worry that this might be a step backward from NAFTA for American families especially on fundamental issues of presumed expiration of the deal, and empowering government bureaucrats rather than markets to determine the components in cars and other goods,” GOP Sen. Ben Sasse, a critic of Trump’s trade policy, said in a statement.
Some conservative advocacy groups, such as American for Prosperity and Freedom Partners, also took issue with the deal.
“We’re encouraged by news that the White House is edging closer to an agreement on NAFTA and look forward to getting more specifics about this agreement soon,” AFP President Tim Phillips and Freedom Partners Executive Vice President Nathan Nascimento said in a joint statement. “The devil is in the details, and we are concerned by reports that the agreement may contain protectionist country-of-origin requirements that create, rather than dismantle, barriers to free trade.”
Canada is also facing a limited window to express concerns or fight for changes in the new deal. Trump and some of his aides argued that Canada could be excluded from the agreement if they object to its terms.
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