U.S. President Donald Trump announced that his administration had reached a preliminary trade deal with Mexico to rework the NAFTA trade agreement. In a televised appearance at the White House, Trump said the U.S. and Mexico had agreed on terms that would make for an "incredible" deal that was "much more fair".
But the deal left open the question of whether Canada, the third country in NAFTA, would agree to the changes -- and Trump said he wanted to throw out the name NAFTA altogether.
"They used to call it NAFTA," Trump said. "We're going to call it the United States-Mexico trade agreement. We're going to get rid of NAFTA because it has a bad connotation."
U.S. Trade Representative Robert Lighthizer said the agreement was "absolutely terrific" and would modernize a trade deal that had "gotten seriously out of whack." He said he hoped Congress would approve it with broad bipartisan support.
Lighthizer highlighted some big changes that negotiators from both countries agreed to.
- Auto manufacturing: The new deal would require that 75% of the parts in any car sold in North America be produced in the United States or Mexico. Currently, about 62% of parts are required to be produced in the United States, Mexico or Canada.
- Higher labor standards: The new deal would require that 40% to 45% of auto parts in cars sold be made by workers earning at least $16 USD per hour.
- Sunset clause: The agreement will last for 16 years, and will be reviewed every six years.
The development follows about a year of talks triggered by Trump, who had threatened to pull out of the North American Free Trade Pact. He demanded renegotiation of the 1994 trade agreement, which he blames for a decline in U.S. manufacturing jobs, especially in the auto industry.
Trump also said he is not committed to a three-country agreement and would be willing to strike separate, bilateral deals. "We will see whether or not we decide to put up Canada or just do a separate deal with Canada," he said.
A spokesman for Canadian Foreign Minister Chrystia Freeland said the country is "encouraged" by the progress made by the U.S. and Mexico but did not comment on the specific terms.
The U.S. and Canada have been at loggerheads on a range of trade matters, including Canadian protections for its dairy industry and U.S. tariffs on steel and aluminium.
In a telephone call with Trump, which was televised, Mexican President Enrique Pena Nieto stressed the importance of an agreement that includes Canada. Pena Nieto also wrote on Twitter that he hoped all three sides would be able to conclude negotiations this week.
NAFTA covers more than $1 trillion in annual trade.