August 27, 2018

United States, Mexico Reach Trade Agreement

Representatives from the U.S. and Mexican governments continued negotiations last week about updating the North American Free Trade Agreement (NAFTA) and, on Monday, Aug. 27, announced a preliminary agreement.

According to the Office of the United States Trade Representative, the deal, if finalized and agreed to by Congress, will be the first free trade agreement “to require all of the following to protect United States rightsholders from theft of trade secrets, including by state-owned enterprises: civil remedies, criminal remedies, prohibition on impeding licensing of trade secrets, protections for trade secrets during the litigation process, and penalties for government officials who wrongfully disclose trade secrets.”

A White House fact sheet explained the deal also includes:

  • New “rules of origin” requirements to incentivize billions a year in vehicle and automobile parts production in the United States;
  • Fully enforceable labor standards;
  • New commitments to reduce trade-distorting policies for agricultural goods;
  • Strong and effective intellectual property protections; and
  • Robust transparency obligations.

Additionally, as CNNreports, the deal would:

  • Require 75 percent of the parts in any car sold in North America be produced in the United States or Mexico. Currently that number is 62 percent for United States, Mexico or Canada.
  • Require 40 percent to 45 percent of auto parts in cars sold be made by workers earning at least $16 per hour.
  • Last for 16 years, but be reviewed every six years.

Click here to read the full outline of the agreement.

While negotiations on this agreement did not include Canada, President Donald Trumpand U.S. Trade Representative Robert Lighthizer expressed hope that the United States would reach a deal with Canada this week.

President Trump also said that if a deal could not be reached, the United States would impose tariffs on automobiles from Canada. The office of Canadian Foreign Minister Chrystia Freeland has indicated that she will head to Washington Tuesday to begin negotiations. Finally, President Trump said he’ll begin work to terminate the existing North American Free Trade Agreement, but did not provide any timetable for doing so.

Notably, the agreement between the United States and Mexico does not mention steel or aluminum tariffs. Last week American Metal Market (AMM, subscription required) reported Mexican steel executive were in Washington, D.C. to discuss with U.S. government officials the prospect of replacing the Section 232 steel and aluminum tariffs with a system of quotas. While there were not many details about the talks, executives involved in the talks say the decision will have no bearing on NAFTA negotiations.

As a reminder, the Metals Service Center Institute (MSCI) supports NAFTA modernization and continues to encourage its members to discuss their opinions about the issue with lawmakers. The Canadian government has established a webpage for stakeholders to submit their views. MSCI members in the United States who are interested in weighing in on NAFTA deliberations should contact their representatives in the U.S. House and Senate to let them know how altering or eliminating NAFTA would affect their businesses, employees, and customers. Click here for contact information for every member of the House and here for senators.

MSCI’s comments to the Office of the U.S. Trade Representative regarding NAFTA reauthorization are here. Also of interest: the Congressional Research Service released an overview of NAFTA modernization discussions at the end of July. The report includes a review of all of the issues being discussed.