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Friday, August 31, 2018

USA and Mexico close a free trade agreement regardless of Canada

Por Rory

The United States and Mexico have reached a principle of agreement after more than 13 months of difficult negotiations, marked by tensions between the two countries, to replace the North American Free Trade Agreement (NAFTA), a framework that also includes Canada and that has been in force for 24 years. Now the conversations begin with the Canadian Government for its possible incorporation, complicated by the evident enmity between Trump and Justin Trudeau. Washington has questioned whether the new framework will be a thing of three again. "We're going to get rid of that name [Nafta]," said Donald Trump proudly Monday at the White House, "we're going to call it the United States-Mexico Trade Agreement."

While waiting for a formal ceremony, the staging of the pact showed that the Peña Nieto government has once again lost the battle of the image with Trump. From the Oval Office, with all the cameras pointing at the tenant of the White House, he called Peña Nieto, who in both the United States and Mexico was only heard through Trump's telephone speaker. The NAFTA is a free trade zone in which 450 million people live and which moves more than a trillion dollars a year.

Trump came to the White House as "worst agreement in history", guilty of the loss of factory bellows in the United States (due to competition with cheaper costs), in a generalized battle against the trade deficit. The negotiations began in August of 2017 under the threat of rupture and full of tension due to the continuous attacks of the US president on his southern neighbor for immigration. In recent months, however, the electoral victory of Andrés Manuel López-Obrador, for whom the Republican expresses an astonishing sympathy, has paved the way for consensus, as has the pressure of American companies, already hard hit by the war with China and worried about the effects of a break in the NAFTA. In November, in addition, the legislative elections are celebrated, to which Trump wants to arrive with one of his stellar promises in way of fulfillment.

The US Trade Representative Office plans to present the letter on the agreement in Congress before the end of this week. After this process, they must spend 90 days, according to the law in the US, so that the Government can sign the agreement and then approved in the House. By then, Canada could have been incorporated.

The main guidelines are based mainly on the automotive sector, on which Washington has achieved much of what it demanded from the beginning: that cars contain 75% of American components so that they can be considered local products (now it is 62%) and that between 40% and 45% is made by workers who earn at least $ 16 an hour, which seeks to protect US and Canadian employment. In addition, the validity of the agreement will be 16 years, extendable to another 16, and it will be reviewed every six years to modernize it and solve possible problems, as sources of the US Administration later specified.

Trudeau will have two options: accept the agreement, with the alterations that may be introduced, or stay out. The gap between two historic allies such as the US and Canada peaked last June, at the G-7 summit, when Trump called the Canadian prime minister "weak" and "dishonest."

The outgoing Mexican president thanked the "political and personal will" of his US counterpart; he celebrated the work of his negotiating team, led by Robert Lightizer and the accompaniment of the White House, in the figure of Jared Kushner, Trump's son-in-law and the Administration's main link with Mexico for his good relationship with the chancellor, Luis Videgaray. While assuming that the negotiations had been "difficult and arduous," Peña Nieto insisted on the need to incorporate the treaty into Canada, with whose prime minister, Justin Trudeau, had spoken moments before his conversation with Trump.

The president of the United States also vowed that his northern neighbor join the pact and reformulate the original agreement. However, he put less enthusiasm than Peña Nieto when adding Canada, giving the impression that he did not care too much about the third NAFTA partner being left out. A spokesman for the Canadian government has celebrated the "progress" in the negotiation between the US and Mexico as a "necessary requirement" for the trilateral agreement, but has clarified that they will only sign an FTA that is "good for Canada and for the middle classes". "Our rubric is indispensable," he recalled. Although the Canadian authorities have been very careful to express it in public, the discontent over having been set aside during these last five weeks of negotiation - in which the talks have become a give and take between Washington and Mexico City - is evident.

Now all the pressure is transferred to Ottawa: or accept some rules in whose negotiations did not participate or will be left out of the new North American commercial framework. Peña Nieto also had words of thanks, but without mentioning it, with the president-elect, Andrés Manuel López Obrador, who appointed a team of advisers, led by Jesús Seade, to join the talks after the victory of the leader of Morena 1 of July. In fact, it has been during the transition of the Government of Mexico when the negotiations have gained a cruising speed. "I'm very impressed with him," Trump said of López Obrador.

Trump did not miss the opportunity to drop what is his main obsession with Mexico, border security, and assured that the trade agreement was an example that both countries can reach agreements on important bilateral issues, such as the southern border. Meanwhile, Peña Nieto, euphoric for having reached an agreement with Trump before his government ends, urged the president of the United States to toast with tequila to celebrate the pact, which received a lukewarm response from Trump, who does not drink: "Well done, Enrique."