U.S. and Mexico Reach Preliminary NAFTA Renegotiation Deal

On Monday, August 27, 2018 President Trump announced that the United States and Mexico had reached a preliminary agreement in revising a number of specific aspects of the North American Free Trade Agreement, commonly referred to as NAFTA, and that the agreement would be referred to as the United States-Mexico Trade Agreement. This news follows the past year of negotiations between the U.S., Mexico and Canada over various points of contention over NAFTA policy.

The Mexican government is still eager to include Canada in this process and is dedicated to having a solution between the three countries finished by the end of August, giving Mexico enough time to approve the deal before outgoing Mexican president Enrique Peña finishes his term. The United States-Mexico Trade Agreement puts the ball in Canada’s court to address and discuss the idea of renegotiating certain points in NAFTA.

What does this US/Mexico trade deal mean for trade in North America?

This new deal marks significant changes in the automobile industry, with the U.S. pushing for bringing back more production of cars into the country from Mexico. Under these new rules, companies would need to produce 75 percent of a car’s value in the United States in order to qualify for zero tariffs under NAFTA. These companies will additionally need to use increased amounts of local steel, aluminum, and car parts, and will require 40 to 45 percent of each car made by employees who are paid at a minimum of $16 per hour.

Mexico and the United States agreed to review this deal every six years that would extend the lifetime of the deal for an additional sixteen years. The countries additionally agreed that they would limit the types of legal challenges that investors could make against foreign governments under NAFTA.

It is not yet known how Canada will pursue this deal and given the Trump administration’s hard-line statements in regards to Canada and NAFTA negotiations throughout the past year, there is no shortage of speculation for how the Canadian government plans to protect its interests in regards to free trade in Canada.

D’Alessio Law Group is closely monitoring this news and will provide updates as they become available.

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