The North American Free Trade Agreement, better known as NAFTA, has been around for 24 years, easing trade between the United States, Mexico, and Canada. However, President Trump considers NAFTA “one of the worst deals” in trade history, and in his ongoing global trade war, he has mentioned wanting to rewrite the deal.
Now, he may have gotten his wish. The U.S. and Mexico have reached a preliminary agreement to revise key portions of the arrangement, the New York Times reports, leaving out Canada altogether for now. The U.S. and Mexico are hoping to get a final deal signed before Mexican President Enrique Peña Nieto leaves office on December 1.
Here are four takeaways:
- New name: The new deal between the U.S. and Mexico will aptly be called the United States-Mexico Trade Agreement, doing away with the NAFTA name, which Trump claims has “bad connotations,” per Reuters.
- Canada’s role: While the deal is just between the U.S. and Mexico, the hope is that Canada will “negotiate fairly” to join the agreement at a later date, enter into a separate deal, or face automobile tariffs. “There are still issues with Canada but I think they could be resolved very quickly,” a senior official told Reuters.
- Auto-immunity: Per Reuters, the agreement helps resolve one of the stickiest issues that arose under NAFTA surrounding the rules of origins for cars, which required that a certain percentage of car parts be from countries within the NAFTA region in order to avoid tariffs. Under the new deal, 75% of an automobile’s value must be manufactured in North America, up from NAFTA’s current level of 62.5%. It would also require 40% to 45% of the car to be made by workers earning at least $16 an hour.
- Your move, Congress: Despite Trump’s statement from the Oval Office, he does need Congressional approval to sign onto a new deal. Trump is expected to send formal notice to Congress by the end of the week. The hope is to have a deal for Mexican President Enrique Pena Nieto to sign before he leaves office, and the more left-leaning Andres Manuel Lopez Obrador takes over as president.
A big deal looking good with Mexico!
— Donald J. Trump (@realDonaldTrump) August 27, 2018