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WASHINGTON — The U.S. and Mexico struck a trade deal designed to supplant the North American Free Trade Agreement, President Donald Trump said in the Oval Office Monday.
Trump and other administration officials hope that Canada, the third party to NAFTA, will sign on to the agreement, which still must be ratified by Congress. But Canada and the U.S. have been at loggerheads over trade policy, and negotiations among the three countries were paused so that the U.S. could talk directly with Mexico.
"It’s a big day for trade, a big day for our country,” Trump said. "We'll get rid of the name NAFTA."
Enrique Peña Nieto, the outgoing president of Mexico, tweeted Monday, saying, "I have spoken with the President @realDonaldTrump. Mexico and the United States have reached a commercial understanding. We want Canada's re-incorporation into talks to achieve a successful trilateral negotiation of NAFTA this week."
Trump's son-in-law and adviser Jared Kushner, who worked on the pact, called it a "win-win transaction" for the U.S. and Mexico.
While many of the details have not been discussed by administration officials publicly, Robert Lighthizer, the U.S. trade representative, said it would modernize the trade relationship between the two countries in the areas of intellectual property and financial services, benefit businesses on both sides of the border and enshrine new labor protections.
Ultimately, the deal represents a small step in the direction of Trump's promise to use American leverage to force its trading partners across the globe to make new concessions.
It could benefit U.S. energy, agricultural and automotive sectors, Doug Holtz-Eakin, a former chief economist for President George W. Bush's Council of Economic Advisers, said on MSNBC shortly before Trump's announcement.
"If they have a deal that can actually be agreed to by Canada and can be ratified by the Congress, that’s an enormous accomplishment — it represents the first time that the president’s strategy of using tariffs as a strategic weapon in a trade negotiation actually yielded a result," Holtz-Eakin said, emphasizing that he had said "if."
Already, some Republicans in Congress have expressed concern that the agreement will have little utility if Canada can't be included in it.
"Preserving and improving NAFTA will ensure that American families will continue to benefit from lower prices, better jobs and increased productivity, while also ensuring that the 25-year-old agreement maintains the leadership of American businesses, manufacturers, farmers and ranchers," Sen. Orrin Hatch, R-Utah, said in a statement. "To achieve that goal, a final agreement should include Canada."
Adam Austen, a spokesman for Canadian Foreign Minister Chrystia Freeland told reporters that discussions are ongoing.
"We will only sign a new NAFTA that is good for Canada and good for the middle class," he said.
The agreement would last for 16 years, according to a senior administration official, who said that it would be up for review, and possible revision, in six years. If renewed at that time, it would be extended for 16 years from that point. If not, the parties would negotiate every year for the final decade of the agreement until they could reach a new 16-year window.
That complicated mechanism was designed to both put a time limit on the pact and assuage the fears of businesses worried that a shorter sunset provision could lead to instability in their sectors.