Analyzing the tentative US-Mexico trade deal, and the outlook for Canada to sign on ...
President Trump has long criticized NAFTA, so it̢۪s little surprise that he is pursuing an alternative trade deal with Mexico. The tentative agreement reached this week contains provisions for keeping auto manufacturing in North America, ensures workers earn higher wages and addresses new industries. But where do talks stand with Canada? Judy Woodruff speaks with Greg Ip of the Wall Street Journal.
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Judy Woodruff:
Before he was elected, President Trump called NAFTA possibly the worst trade deal ever and said he would consider withdrawing from it entirely.
Well, the U.S. and Mexico actually have been negotiating for months, before a deadline expires this week. The goal? Set a new NAFTA-like agreement in place with Canada and Mexico before the next Mexican government administration takes office.
Well, yesterday, the U.S. and Mexico announced they had reached a deal. To avoid tariffs, automakers would have to produce at least 75 percent of an automobile̢۪s parts and amenities in the U.S. or Mexico. It also requires more workers to earn better wages, at least $16 an hour.
But talks with Canada, America̢۪s second largest trading partner, broke down weeks ago. Today, Canadian Foreign Minister Chrystia Freeland left Europe and joined last minute talks.
Greg Ip, reporter with The Wall Street Journal, is with me now again to walk us through all of this.
S o, Greg, I ticked off a few things that we think are part of this U.S.-Mexico agreement. What more should we know about that?
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Greg Ip:
Well, they have taken the step of actually incorporating in the agreement some of the things that Mexico had previously agreed to, for example, the right of unions to negotiate freely.
That’s â€" those protections have been strengthened in this agreement. There a new areas of trade that have cropped up in the last 25 years that this agreement deals with, stronger protections for copyright for biologic drugs, for example.
There is also some of the weakening of the dispute settlement mechanisms that were part of the original treaty. Under the existing treaty, if investors feel that a government in another country has treated them wrong, taken their property, they can appeal that to a dispute settlement body.
That̢۪s been somewhat narrowed. Also, under the treaty, if like, say, Canada̢۪s hit with the tariffs for subsidizing its exports, it can appeal that U.S. decision to a binational panel. That mechanism is also gone from the agreement.
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Judy Woodruff:
So there are some changes from the current â€" to this U.S.-Mexico treatment.
So, yesterday â€" and I want to play this â€" the president, in talking about this, made it sound as if it’s possible he could go ahead without Canada, in other words, just do U.S.-Mexico. Here’s what the president said.
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President Donald Trump:
Yes, we could have a separate deal, and we could put it into this deal. I like to call this deal the United States-Mexico trade agreement. I think it̢۪s an elegant name. I think NAFTA has a lot of bad connotations for the United States, because it was a ripoff.
We will see whether or not we decide to put up Canada or just do a separate deal with Canada, if they want to make the deal. The simplest deal is more or less already made.
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Judy Woodruff:
So he̢۪s reminding everybody that he did talk about ripping this thing up. He̢۪s saying, if we need to do this without Canada.
But, today, Canada is paying attention.
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Greg Ip:
That̢۪s right.
Canadian officials are now in Washington. The United States has basically given Canada until Friday to come aboard on this agreement that̢۪s been signed with Mexico and therefore make it a true trilateral agreement.
But there̢۪s a lot of issues that are very problematic for Canada. It̢۪s very important that Canada keep this dispute settlement mechanism, so that it doesn̢۪t feel it has no recourse to unfair tariffs imposed on it. It̢۪s not clear that they can accept that.
But they don̢۪t have a ton of leverage. Canada, more than any other country, has thrown its lot in with free trade in the last 30 years. And its economy has become very integrated with the U.S. The American side knows that. And they̢۪re using that dependence as leverage to get Canada to agree to it.
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Judy Woodruff:
So, today, we know, as you mentioned, the Canadian foreign minister, Chrystia Freeland, is in Washington. So what are the Canadians looking for? Do we know?
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Greg Ip:
Well, the Canadians are probably looking for perhaps a little support from the Mexicans, that the Mexicans will want the Canadians to feel comfortable with it before they agree with it.
I think they’re also looking for a little support from Congress. It’s well-known that there are a lot of people, especially Republicans, who are not comfortable with the â€" the very tough tactics the president has pursued on the trade front.
And, today, we heard some key senators say that Trump actually doesn̢۪t have the authority to negotiate a bilateral deal with Mexico. Under the negotiating authority Congress gave him, it has to be trilateral. If it ends up being bilateral, then he has to go back to the drawing board and take more time.
And that pushes the negotiating process past the midterms.
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Judy Woodruff:
So that â€" and that’s something that the administration presumably doesn’t want.
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Greg Ip:
That̢۪s right. There̢۪s a lot of deadlines here.
The administration wants this thing agreed to by everybody by Friday. So that starts a 90-day clock ticking, and still gives Mexico’s current president time to sign it before he leaves off at the end of November. If they miss the Friday deadline, a lot of those â€" a lot of those other events just may not come together.
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Judy Woodruff:
So, Greg, again, this is something the president talked a lot about during the campaign. He frequently said NAFTA is hurting American workers, we need to rip it up, start all over again, do bilateral deals.
I know this process isn̢۪t finished yet, but does it look as if what they̢۪re working toward would be significantly different from the current NAFTA?
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Greg Ip:
It would be different, but, no, I don̢۪t think it would be significantly different.
It would still be a free trade agreement. If you recall, during the campaign, the president often talked about how we wanted to impose tariffs on Mexico. For example, if an American company outsourced cars or air conditioners from Mexico, they would be hit with a 40 percent tariff coming back to the U.S.
The bottom line is that the ability of â€" that the tariffs are still very low in this agreement. It’s still a free trade agreement. But it’s a weaker free trade agreement. It imposes restrictions that didn’t exist before.
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Judy Woodruff:
And if this is worked out, who̢۪s happy with it, who̢۪s not happy with it in the U.S.?
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Greg Ip:
Well, essentially, for Canada and Mexico, who were very happy with the agreement the way it was, this is really a matter of limiting losses.
They really â€" they wanted to basically keep the broad structure the way it was. If they can get away with this with really making minor concessions, for Mexico, for example, on increased American â€" North American content for cars, maybe Canada gives in a little bit on allowing more dairy into their country, I think they walk away saying, that’s a lot better than it could have been.
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Judy Woodruff:
And what about for U.S. consumers?
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Greg Ip:
Well, for U.S. consumers, the goal of the administration has not been so much to lower prices for consumers. It̢۪s to bring more manufacturing work to the United States, to the benefit of certain workers.
This is more â€" this is not the traditional way the United States pursued free trade agreements. But this is kind of the strategy this administration has chosen to pursue.
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Judy Woodruff:
Greg Ip, joining us to explain this complicated story, thank you.
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Greg Ip:
All right. All right. Good to be here.
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