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Preliminary US-Mexico trade deal leaves trail of uncertainty

President Donald Trump talks on the phone with Mexican President Enrique Pena Nieto, in the Oval Office on Monday. Trump is announcing a trade "understanding" with Mexico that could lead to an overhaul of the North American Free Trade Agreement. (AP Photo/Evan Vucci)

President Donald Trump talks on the phone with Mexican President Enrique Pena Nieto, in the Oval Office on Monday. Trump is announcing a trade “understanding” with Mexico that could lead to an overhaul of the North American Free Trade Agreement. (AP Photo/Evan Vucci)

By PAUL WISEMAN, LUIS ALONSO LUGO and ROB GILLIES
Associated Press

WASHINGTON (AP) — President Donald Trump’s declaration of victory on Monday in reaching a preliminary deal with Mexico to replace the North American Free Trade Agreement raised at least as many questions as it answered.

Can Canada, the third member country in NAFTA and America’s No. 2 trading partner, be coaxed or coerced into a new pact?

If not, is it even legal — or politically possible — for Trump to reach a replacement trade deal with Mexico alone?

And will the changes being negotiated to the 24-year-old NAFTA threaten the operations of American and foreign companies that have built supply chains spanning the three countries?

“There are still a lot of questions left to be answered,” said Peter MacKay, a former Canadian minister of justice, defense and foreign affairs who is now a partner at the law firm Baker McKenzie.

Trump was quick to proclaim the agreement a triumph, pointing to Monday’s surge in the stock market, which was fueled in part by the apparent breakthrough with Mexico.

“We just signed a trade agreement with Mexico, and it’s a terrific agreement for everybody,” the president declared. “It’s an agreement that a lot of people said couldn’t be done.”

Trump suggested that he might leave Canada out of a new agreement. He said he wanted to call the revamped trade pact “the United States-Mexico Trade Agreement” because, in his view, NAFTA has earned a reputation for being harmful to American workers.

But first, he said, he would give Canada a chance to get back in — “if they’d like to negotiate fairly.” To intensify the pressure on Ottawa, the president threatened to impose new taxes on Canadian auto imports.

Talking to reporters, the top White House economic adviser, Larry Kudlow, urged Canada to “come to the table.”

“Let’s make a great deal like we just made with Mexico,” Kudlow said. “If not, the USA may have to take action.”

The Canadian NAFTA negotiator, Foreign Minister Chrystia Freeland, is cutting short a trip to Europe to fly to Washington on Tuesday to try to restart talks.

“We will only sign a new NAFTA that is good for Canada and good for the middle class,” said Adam Austen, a spokesman for Freeland, saying that “Canada’s signature is required.”

MacKay added, “There is still a great deal of uncertainty — trepidation, nervousness, a feeling that we are on the outside looking in.”

Critics denounced the prospect of cutting Canada out of whatever trade pact might be reached, in part because of the risks such a change could pose for companies involved in international trade. Many manufacturers have built supply systems that depend on freely crossing all three NAFTA borders.

Noting the “massive amount of movement of goods between the three countries and the integration of operations,” Jay Timmons, president of that National Association of Manufacturers, said “it is imperative that a trilateral agreement be inked.”

Trump has frequently condemned the 24-year-old NAFTA trade pact as a job-killing “disaster” for American workers.

NAFTA reduced most trade barriers between the three countries. The president and other critics say the pact encouraged U.S. manufacturers to move south of the border to exploit low-wage Mexican labor.

The preliminary deal with Mexico might bring more manufacturing to the United States. Yet it is far from final. Even after being formally signed, it would have be ratified by lawmakers in each country involved.

The U.S. Congress wouldn’t vote on it until next year — after November midterm elections that could end Republican control of the House of Representatives. But initially, it looks like a public-relations victory for Trump, the week after his former campaign manager was convicted on financial crimes and his former personal attorney implicated him in hush-money payments to two women who say they had affairs with Trump.

Before the administration began negotiating a new NAFTA a year ago, it had notified Congress that it was beginning talks with Canada and Mexico. So Monday’s announcement raises the question: Is the administration authorized to reach a deal with only one of those countries?

A senior administration official, who briefed reporters on condition of anonymity, said “yes”: The administration can tell Congress it had reached a deal with Mexico — and that Canada is welcome to join that agreement.

But other analysts said the answer wasn’t clear: “It’s a question that has never been tested,” said Lori Wallach, director of the left-leaning Public Citizen’s Global Trade Watch.

Even a big Trump ally, Rep. Kevin Brady, the Texas Republican who is chairman of the House Ways and Means Committee, expressed caution about the apparent breakthrough. Brady said he looked forward “to carefully analyzing the details and consulting in the weeks ahead to determine whether the new proposal meets the trade priorities set out by Congress.”

Meanwhile the No. 2 Senate Republican, John Cornyn of Texas, hailed the news as a “positive step,” but said Canada needs to be party to any final deal.

“A trilateral agreement is the best path forward,” Cornyn said, adding that millions of jobs were at stake.

The Office of the U.S. Trade Representative said that Mexico, in order to receive duty-free benefits, had agreed to ensure that 75 percent of automotive content be produced within the trade bloc (up from a current 62.5 percent) and that 40 percent to 45 percent be made by workers earning at least $16 an hour. Those changes are meant to encourage more auto production in the United States.

 

Copyright 2019 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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