By Sasha Issenberg
President Donald Trump announced Monday a breakthrough between the U.S. and Mexico in NAFTA talks, a step that clears the way for Canada to rejoin negotiations to revamp the free trade pact.
Story Continued Below
"It’s a big day for trade. It’s a big day for our country," Trump told reporters in brief remarks from the Oval Office.
Trump added that he wants to get rid of the name NAFTA, which he said has a bad connotation.
The United States and Mexico will announce a two-way deal on NAFTA Monday morning, moving President Donald Trump one step closer to fulfilling a core campaign promise to revamp the trade pact.
The development would clear the way for Canada to return to the table to try to reach a final updated agreement in the coming days, according to three sources close to the negotiations.
The U.S.-Mexico breakthrough follows months of stalemate and comes just over a year after negotiators from the U.S., Mexico and Canada first sat down to discuss modernizing the 24-year-old trade pact. Despite the progress between the U.S. and Mexico on issues that were widely seen as more integral to the U.S.-Mexico relationship, it remains unclear how long it will take NAFTA negotiators to resolve the remaining issues between the three countries. Canada has not been at the negotiating table for more than two months.
“A big deal looking good with Mexico!” Trump tweeted Monday morning. Trump is expected to make an announcement on the U.S.-Mexico deal Monday morning from the Oval Office.
But the final deal with Mexico shows that Trump has agreed to back off some of his major demands.
The U.S. has settled on a scaled-back approach to a controversial proposal that would have potentially terminated the proposal after five years unless the countries agreed to keep it going.
Instead of automatically “sunsetting” NAFTA at five years, the U.S. put forward a proposal that would set up a review at six years. If the countries don’t agree to keep the deal going at that time, NAFTA would be ended 10 years after that point, said one source close to the talks.
The U.S. also put forward a revised approach to NAFTA’s investor-state dispute settlement mechanism that allows private firms to seek damages from a government for any violation of the pact’s investment rules.
The U.S. had originally proposed making that process fully optional, reflecting U.S. Trade Representative Robert Lighthizer’s concerns that the process cedes U.S. sovereignty.
The new approach would extend full investment protections, including the dispute process, to U.S. companies that have contacts with the government in the oil and gas, infrastructure and transportation services sectors, said a source with direct knowledge of the proposal.
U.S. companies with investments in other sectors in Mexico would be able to file disputes as well, but only on a limited basis, the source said.
Mexican Economy Secretary Ildefonso Guajardo said this morning that there’s one U.S.-Mexico issue that remains to be fully resolved before all the talks between the two countries are complete.
Story Continued Below
But he cautioned that Canada must still go over all the solutions that the U.S. and Mexico reached. Canada is expected to return to the negotiating table as soon as the two countries announce a breakthrough in the bilateral talks, and Guajardo has said at least a week of three-way talks will be needed.
“A lot of these things imply Canada. Therefore, until we finish with the position of Canada, we will not be able to disclose the elements,” Guajardo said.
A NAFTA breakthrough between the U.S. and Mexico comes as welcome news after more than a year of negotiations between the U.S., Mexico and Canada. Last month, negotiators from the U.S. and Mexico made a renewed push to wrap up their two-way issues in the renegotiation, including the rules that govern how automobiles made in the North American region qualify for reduced tariffs under the trade pact.
The progress between the U.S. and Mexico gives Trump a trade victory to herald heading into the thick of campaign season. It also allows him to argue that his hard-line trade tactics — which have caused U.S. farmers, manufacturers and consumers to feel the pain of retaliatory duties — are capable of getting results, industry sources and experts following the talks have said.
Still, any export gains from the new NAFTA agreement could be small, since the original agreement 24 years ago phased out most tariffs between the three nations. However, reaching a final agreement would help settle the uncertainty that has hovered over the pact for nearly two years and kept farmers concerned about losing sales to two of their top markets because of Trump’s threats to withdraw from the deal.
A final agreement with Canada could open up that country’s highly restricted dairy market, but it remains to be seen whether Ottawa is willing do more in that area than it agreed to in the Trans-Pacific Partnership, which Trump abandoned on his third day in office. The U.S. International Trade Commission will do an economic analysis of any final agreement before Congress votes on the pact.
The NAFTA nations would need a three-way deal by Aug. 31 or Sept. 1, at the latest, in order for Mexican President Enrique Peña Nieto to sign it before leaving office at the end of November. But it's unclear if the next week is enough time for Canada to return to the table and wrap up the renegotiation.
There is some expectation that the breakthrough could be enough to get Trump to grant Mexico an exemption from the administration’s tariffs on steel and aluminum imports. Trump slapped duties on $3 billion worth of Mexican steel and aluminum in May, prompting Mexico to responded with retaliatory tariffs on dozens of American goods, such as pork, whiskey and potatoes.
Doug Palmer and Megan Cassella contributed to this report.