US and Mexico reach new trade agreement

The US and Mexico have agreed to update the North American Free Trade Agreement (Nafta) in what president Donald Trump has hailed a "really good deal".

Trump said the terms of the agreement would make for a treaty that was “much more fair” – image courtesy of Depositphotos. 

The president made the announcement yesterday after previously criticising the existing deal.

Trump had threatened to pull out of Nafta, this resulted in the two countries being in discussions for the past year.

In a statement from the oval office, he said the terms of the agreement would make for a treaty that was “much more fair”. However, Canada – the other member of the trade agreement, is yet to agree to the proposals.

“We’re going to call it the United States-Mexico Trade Agreement,” Trump said, adding that the term Nafta — which he has called the worst trade deal ever — had “a bad connotation” for the US.

Trump has threatened Canada with tariffs on cars, and has said: “We will see whether or not we decide to put up Canada or just do a separate deal with Canada.”

North America and Canada have been at high tensions on a variety of trade matters, including US tariffs on steel and aluminium and Canadian protections for its dairy industry. Will Canada eventually join?

The trade agreement, Nafta

Annual trade for Nafta covers £780bn across the three member states, and the preliminary agreement is proposed to govern intellectual property, digital trade, make differences to the automotive and agriculture sectors and labor unions.

Manufacturing growth slowed over the three months, but export orders remained well above average - image courtesy of Depsoitphotos.
Manufacturing growth slowed over the three months, but export orders remained well above average – image courtesy of Depsoitphotos.

The US and Mexico have agreed that 75% of a product must be made in the two countries to be eligible for tax-free treatment, this figure is higher than the existing deal.

The treaty would last for a total of 16 years, and be reviewed every six years, it will not however carry the concern of an automatic expiration after this period.

With regard to the automotive industry, the countries also agreed on rules that will require 40-45% of each vehicle to be produced by workers earning at least $16 an hour, this is to deter businesses from moving production to Mexico where workers are paid less.

Key negotiators want to reach a deal before Andres Manuel Lopez Obrador, the newly elected Mexican president takes office later this year in December.

However, to meet this approaching deadline, the Trump administration must present Congress with a deal at least 90 days in advance, this means the deadline is this Friday.