US, Mexico reach trade "understanding", Trump threatens to cut out Canada


Speaking from the White House Monday morning, President Trump announced a reboot of NAFTA after weeks of negotiations with Mexico.

Trump inflamed the situation by saying the deal would be renamed the U.S. -Mexico trade agreement and threatening to impose auto tariffs on Canada if the northern neighbor didn't capitulate.

USA law requires a three-month waiting period after a deal is completed before Congress can ratify it. Mexico will swear in its incoming president, Andrés Manuel López Obrador, on December 1. A month of talks followed, in August, but a new roadblock emerged: Mexico's outgoing administration had a different position on foreign access to the country's energy sector than the incoming one, which delayed an agreement to this week. They will also be required to use more local steel, aluminum and auto parts, and have a certain proportion of the vehicle made by workers earning at least $16 an hour, a boon to both the United States and Canada. And possibly a second bilateral deal with Canada.

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

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U.S. Trade Representative Robert Lighthizer also said the deal will be likely signed-off in November and sent to Congress on Friday.

Canada's NAFTA negotiator, Foreign Minister Chrystia Freeland, is cutting short a trip to Europe to fly to Washington Tuesday to try to restart talks.

"My farmers, the farmers have stuck with me, and I said we were going to do this", he said.

"A lot of [US-based] jobs went to Mexico, where the labour supply was cheaper", she added.

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Trudeau has said Canada "will not, cannot" sign on to an auto-terminating deal, which business leaders say would generate the kind of uncertainty trade agreements are supposed to eliminate.

The BIS predicts that revoking NAFTA would also cause wages to fall in all Canadian provinces and Mexican states, and in all but one of the 435 congressional districts in the U.S. That requirement would deter U.S. auto manufacturers from moving production to Mexico, where labor costs are lower, something central to Trump's attacks on NAFTA. The NAFTA talks have dragged on for more than a year.

"The story of these types of things is always defined in the final minute, and I would say that we're practically into the final hours of this negotiation", Guajardo told reporters. Trump said he would talk to Canadian Prime Minister Justin Trudeau soon. By definition, we buy more from them than they buy from us, which gives us the power any major consumer has over a seller. The new deal will help American workers and manufacturers.

The breakthrough between the US and Mexico involved an agreement on the amount of North American content a vehicle must have in orderto pass duty-free across borders.

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Canada has not been part of the marathon talks.