Fresh from dodging Donald Trump’s threatened tariffs on its exports, Mexico on Wednesday ratified the USMCA free trade deal designed to succeed Nafta even though the US and Canada have yet to do the same.
The update to the North American Free Trade Agreement whistled through the Mexican Senate, where it was approved by 114 votes to four, with three abstentions.
The agreement, when ratified by all three countries, will update the terms of trade to regulate sectors, such as ecommerce, that did not exist when Nafta was agreed in 1994, and to address Mr Trump’s campaign promise that he would exit a deal he blamed for eroding US manufacturing jobs.
The US president had regularly blasted Nafta as the worst trade deal ever and touted the US-Mexico-Canada Agreement as a vast improvement. The new deal is particularly important to the auto industry, since it lifts the proportion of components that have to be made in the region for a vehicle to qualify for duty-free access to 75 per cent from 62.5 per cent. Some inputs must also be made in areas where the average wage is a relatively high $16 an hour.
There is also a “sunset clause” whereby it will run out after 16 years unless it is renegotiated. Originally, the US had demanded five years.
Mexico’s biggest business lobby group, the CCE, hailed the overwhelming approval as “an important step to generate investor certainty”.
But others pointed out that Mr Trump’s threat this month to impose tariffs on Mexico unless it did more to curb illegal migration from Central America showed he is still willing to upend trade arrangements in order to press his domestic agenda.
Armando Ortega, president of the Canadian Chamber of Commerce in Mexico and a former Nafta negotiator, called it a “risky move” for Mexico City to ratify the agreement first without a clear thumbs up from the US Congress, where previous trade deals have been held up under previous presidents.
Democrats control one of the two houses of Congress and may be unwilling to hand Mr Trump a legislative victory at the start of his re-election race.
“It would have been wiser to have a vigilant eye on developments at US Congress and fine-tune Mexico’s Senate ratification timing,” Mr Ortega said.
Juan Carlos Baker, former deputy foreign trade secretary and a key player in the USMCA negotiations, also noted that South Korea had been forced to reopen a free trade agreement with the US which it had ratified.
The Trump administration is hoping for a compromise with Nancy Pelosi, the Democratic speaker of the US House of Representatives, to enable ratification before the August recess and has started the clock on USMCA ratification by sending a “draft statement of administrative action” to Congress.
Ms Pelosi has named a task force of House Democrats to discuss concerns over labour standards, environmental provisions, drug pricing and enforcement with the White House.
In congressional testimony this week, Robert Lighthizer, the US trade representative, appealed for lawmakers to move quickly to approve the deal.
“This is a truly great agreement, and I look forward to working with members to make it even better and to write implementing legislation which will earn large, bipartisan support — and that’s my objective,” he said.
Democrats are much more cagey about its prospects. “The opportunity we have right now to improve Nafta is too important not to get right. We have a chance to set the American economy and American workers on a better course,” said Richard Neal, the Massachusetts Democrat who chairs the powerful House ways and means committee. “All of this is too important to rush.”
Meanwhile, Ron Kind, a Democrat from Wisconsin, warned that the discussions between the USTR and Congress on USMCA were “stuck” with each side waiting for the other to make a move.
A big fear is that Mr Trump could lose patience and threaten to withdraw the US from Nafta altogether if he cannot get enough support from the Democrats. Even though Mexico averted this month’s threatened tariffs by launching a crackdown on migrants at its southern border, Mr Trump has dangled the threat of tariffs in future if progress is insufficient.
Mr Trump is due to host Justin Trudeau, Canada’s prime minister, in Washington on Thursday. Canada has yet to set a date for ratification but the process there is expected to be smoother.
- KKR wins race to buy German payments group for €600m 34 views | posted on August 4, 2019 | under Finance
- WeWork tests tolerance for its ‘gov-lite’ structure 14 views | posted on August 15, 2019 | under Finance
- Divi theme Complete eCommerce WordPress Website Build Tutorial 8 views | posted on July 25, 2019 | under Videos
- How JR Builds Simple $4,000 Per Month WordPress Website Business 6 views | posted on July 28, 2019 | under Videos
- Trump’s new trade strategy targets the Fed 6 views | posted on August 7, 2019 | under Finance