27-Aug-2018: U.S., Mexico reach NAFTA deal, increases pressure on Canada

United States and Mexico has agreed to overhaul the North American Free Trade Agreement (NAFTA), putting pressure on Canada to agree to new terms on auto trade and dispute settlement rules to remain part of the three-nation pact. If talks with Canada are not wrapped up by the end of this week, Trump plans to notify Congress that he has reached a deal with Mexico, but would be open to Canada joining.

Highlights of the new deal:

• The deal would require 75% of auto content to be made in the NAFTA region, up from the current level of 62.5%. A fact sheet describing the bilateral agreement specified the content would be made in the United States and Mexico.
• The deal improves labour provisions, in part by requiring 40% to 45% of auto content to be made by workers earning at least $16 per hour. That measure could move some production back to the United States from Mexico and should lift Mexican wages.
• The United States relented on its demand for an automatic expiration for the deal, known as a “sunset clause.” Instead, the United States and Mexico agreed to a 16-year lifespan for the deal, with a review every six years that can extend the pact for 16 years.
• Mexico agreed to eliminate dispute settlement panels for certain anti-dumping cases, a move that could complicate talks with Canada, which had insisted on the panels.