As discussed yesterday, a key outstanding question over the future of global trade may be about to get an answer: after five weeks of negotiations on trade issues between the administrations of Trump and Enrique Pena Nieto, the U.S. and Mexico are close to resolving bilateral differences on Nafta and may wrap up as soon as Monday, "clearing the way for Canada to possibly return to talks to update the three-nation trade pact."
As Bloomberg reports, "the nations achieved significant breakthroughs in the past several days on the critical issues of automobiles and energy, according to the people, who asked not to be named discussing private talks. Talks are expected to continue Sunday."
In recent weeks, the U.S. and Mexico had been focused on the thorny issue of car manufacturing amid a push by the Trump administration for a deal that would boost factory jobs in America. Specifically, the U.S. has proposed tightening regional content requirements for car production and having a certain percentage of a car manufactured by higher-paid workers.
And while a U.S. proposal to increase tariffs on cars imported from Mexico that don’t meet stricter new content rules was a sticking point as recently as last week, that issue appeared to be resolved by Thursday according to Bloomberg sources.
The U.S. agreed to keep the 2.5 percent tariff currently applied under World Trade Organization rules if the cars are made at factories that already exist, according to two people familiar with the plans, who asked not to be named discussing private negotiations.
That would leave open the possibility that cars that don’t meet the rules and are built at new plants could face tariffs of 20 percent to 25 percent, pending the results of a Section 232 national security investigation that Trump ordered in May, the people said.
The latest breakthrough follows a report from the WSJ yesterday, according to which a key sticking point in the Nafta negotiations between the U.S., Mexico and Canada - namely Trump's desire to remove a provision known as investor-state dispute settlement, or ISDS, in which companies can bring claims to an international tribunal when they believe their overseas investments were unfairly treated by an action from another Nafta government - was on the verge of resolution.
On Saturday, Bloomberg also reported that the "thorny issue of rules for the energy industry seems to be resolved." The envoy from incoming Mexican leader Andres Manuel Lopez Obrador, Jesus Seade, arrived at a meeting with U.S. Trade Representative Robert Lighthizer saying the nations have resolved concerns that the deal had too many restrictions on how the next government can treat foreign oil companies investing in Mexico.
The clearest sign that a deal may be imminent came from none other than President Trump, who on Saturday sounded optimistic, and said on Twitter that the U.S. could have a “big Trade Agreement” with its southern neighbor soon.
Our relationship with Mexico is getting closer by the hour. Some really good people within both the new and old government, and all working closely together....A big Trade Agreement with Mexico could be happening soon!— Donald J. Trump (@realDonaldTrump) August 25, 2018
Commenting on the possible imminent breakthrough, Bloomberg's Jennifer Jacobs said that if a deal is completed, and if Trump signs off, "watch for him to trumpet this week how the deals on automaking will help the U.S."
SCOOP: The U.S. and Mexico may wrap up as soon as *Monday* with negotiations for a trade pact.— Jennifer Jacobs (@JenniferJJacobs) August 26, 2018
If Trump signs off, watch for him to trumpet this week how the deals on automaking will help the U.S.
Story by @EMPosts and me. https://t.co/y0oudauxir
The U.S. and Mexico have been pushing against the clock, hoping to finalize an agreement this month that would give the countries time to sign the pact before Mexico’s President-elect Andres Manuel Lopez Obrador takes office in December.
On Saturday, with the clock ticking, Lopez Obrador’s envoy Jesus Seade told reporters upon arrival at a meeting with Lighthizer in Washington that he expected Saturday to be an “important day” for the negotiations. Neither Seade or Guajardo commented when they emerged from the talks some hours later.
And while a deal on bilateral issues may be imminent, it is still unclear if one will be formally announced due to the insistence of Mexican Economy Minister Ildefonso Guajardo that the nation won’t make an announcement on Nafta until Canada also signs on to a new deal.
While Trump has floated the idea of negotiating bilateral trade accords - finalizing one with Mexico before moving on to Canada - Bloomberg notes that both Mexico and Canada have said they want to keep a three-nation deal.