After a year of negotiations, Mexico and the US have achieved a preliminary trade agreement where they have set new rules and are waiting for Canada's approval to seal NAFTA's modernization.
What did the US give up?
The Mexican representatives avoided the Sunset clause, a proposal that looked to end the agreement after five years. It was agreed that it will last 16 years, although it will be reviewed in the 6th year.
What did Mexico give up?
In the rules of origin it was established that 75% of vehicles must be fabricated in the US and Mexico , but between 40% and 45% of the car parts must be made in places where workers earn USD $16 per hour.
The chapters about dispute settlements were left undefined, waiting for Canada to join the negotiations and settle for a resolution.
This is a comparison between the before and after of the NAFTA :
Validity:
The NAFTA didn't have an expiration date, the new agreement will last 16 years and will include annual revisions every year.
Rules of origin for cars:
The original NAFTA established a 62%. The new agreement establishes a 75% of content between Mexico and the US , and 40% and 45% of the car parts must be made in places where workers earn USD $16 per hour.
Dispute settlements:
The former NAFTA had a chapter on dispute settlements in regards to farming issues. The US eliminated seasonality. The new agreement is waiting for Canada to join the discussion.
The original NAFTA also had a chapter on disputes between investor and governments. The new agreement details in which cases would this scheme be used, mostly in regards to expropriation cases.
President Donald Trump threatened to end the NAFTA if Canada doesn't reach an agreement this week, and will create the Free Trade Agreement Mexico-US.
In Washington , after Trump and Peña Nieto announced the bilateral agreement, through the broadcasting of a phone call, the Foreign Affairs Secretary, Luis Videgara y, said that it's fundamental that Canada joins the agreement.
“If Canada and the US don't reach an agreement, for any reason, we know that there will be a free trade deal between Mexico and the US”, he said.
Justin Trudeau, the Canadian Prime Minister,
announced that his country's representatives will join the negotiations this week.
The Canadian chancellor, Chrystia Freeland , has said previously that “We will only sign a new NAFTA if it's good for Canada and the middle class”, and warned that their signature is required for a trilateral agreement.
The Secretary of Economy, Ildefonso Guajardo , said that the agreement “didn't accept fees, restrictions, not trade tariffs”, and will allow that 70% of car exportations from Mexico to the US comply with new standards.
We're in the face of a “modernized, strengthened deal”, said Jesús Seade , who will be in charge of the negotiations during the next administration.
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