New us-mexico free trade agreement: the tequila deal

Trump and Enrique Pena Nieto have struck a new deal. It could bring jobs back to the US. Canada’s role is still unclear.

Trump talks to Pena Nieto on the phone and congratulates himself and him on a "great day for trade. "Photo: dpa

Donald Trump has repeatedly called the "North American Free Trade Agreement" NAFTA a "disaster." And he has so strained relations with Mexico with racist insults and the absurd demand that the southern neighbor pay for the wall Trump wants built along the border that President Enrique Pena Nieto has already unceremoniously canceled visits to Washington at least twice.

On Monday afternoon, however, when Trump wants to present his own trade agreement with Mexico, which he has negotiated in recent months, all that will be forgotten. The U.S. president is grating sweet nothings: "Enrique," he says into the speaker-switched phone on his desk in the Oval Office at a press conference organized at the last moment, calling the Mexican president a "friend" on the other end of the line. He praises him – and himself – for a "great day for trade" and suggests congratulating each other on the "fantastic deal." "The deal is good for both our countries – for workers, farmers and citizens," Trump says into the phone. Pena Nieto remains more distant in the speech. Instead, he suggests "President Trump" celebrate with a shot of tequila. Trump, who does not drink alcohol, looks pained.

In fact, the deal is only a preliminary agreement so far. Numerous details are still under lock and key. What is known is that in the future more car parts are to be produced inside the free trade zone: 75 instead of the previous 62.5 percent. And that a certain portion of the workers involved (40 to 45 percent) should receive wages of at least $16 an hour in the future. In his own election campaign, Trump had promised that he would bring back factories and jobs. With two and a half months to go before the midterm elections, he is now trying to call full tilt. The 75 percent rule could cause some auto production to shift from China to Mexico. And setting hourly wages could cause some jobs to move back to the United States.

But beyond that, key elements of the agreement are still unknown. U.S. government spokesmen say the deal is better than Nafta on all counts, including regulations on intellectual property and financial services. But so far, the deal does not even have a name that all parties have agreed on – and it is equally unclear who the signatory countries are. Trump does not want to talk about "Nafta" because it has a "negative sound. He also consistently avoids the keyword "free trade." During the election campaign, he used the keyword "free trade" like a swear word, but after taking office, he brought in advisers who are free-trade advocates.

Mexico wants Canada to stay in

On the phone with Pena Nieto, Trump calls the deal, "U.S.-Mexico trade agreement." He says that sounds "elegant." But Pena Nieto continues to refer to it as the "North American Free Trade Agreement." Another difference: unlike Trump, Pena Nieto wants Canada to stay in. Trump, who has already denounced several other international treaties, also prefers to proceed bilaterally rather than multilaterally in this case. In the end, Canada is only expected to sign the finalized deal.

The U.S. and Mexico have been negotiating without Canada since the standoff between Trump and Canadian Prime Minister Justin Trudeau following the G-7 summit in June. Trump’s son-in-law Jared Kushner has been in the lead. He is friends with Mexico’s Foreign Minister Luis Videgaray. Two years ago, Kushner organized a lightning visit to Mexico City for Trump as part of his election campaign.

The U.S. president plans to sign the deal at the end of November – before the Mexican president hands over the reins to his successor, Andres Manuel Lopez Obrador. While Trump says his successor has been supportive of the negotiations, apparently the White House doesn’t want to take any chances.

To be able to sign by the end of November, however, Trump needs the U.S. Congress to approve the deal. And again, in order to meet the 90-day deadline for doing so, the treaty must go to Congress by the end of this week. There, apparently little was known about the status of the negotiations with Mexico. Several congressmen – including Republicans – expressed surprise on Monday at the hair-pulling. Several congressmen also urged that Canada – the most important market for many U.S. products – be included at all costs.

Some unions also express concern

Several unions also warned against the rush. "We want an agreement that is good for workers in all three countries," they wrote in a joint statement. The heads of the AFL-CIO, the USW, the UAW and the communications workers are demanding to see the text of the agreement and guarantees that certain rules will be implemented and complied with. However, the deal is causing euphoria among the "big three" – the U.S. automakers GM, Ford and Fiat-Chrysler. Their share prices rose on Monday directly after Trump’s telephone call with Pena Nieto.

Canada, a Nafta member since 1994, has until the end of the week to get in on the deal, if Trump has his way. Canadian Foreign Minister Chrystia Freeland plans to travel to Washington Tuesday. In the event of a failure to reach an agreement, Trump has threatened the northern neighbor with punitive tariffs. He has no objection to going it alone with Mexico. And the Mexican foreign minister – the friend of Trump’s son-in-law – assures that Mexico is also ready to sign alone with the U.S., that is, without a participation of Canada.

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