US, Canada Holding Trade Talks Following US-Mexico Pact

Negotiators from Canada and the United States are holding detailed trade negotiations in Washington as they seek to work out a replacement for the North American Free Trade Agreement.

The talks come after the United States and Mexico agreed to a bilateral trade deal this week while leaving the door open for Canada to join and preserve what has been a trilateral trade relationship for more than 20 years.

Canadian Foreign Minister Chrystia Freeland met with U.S. Trade Representative Robert Lighthizer on Tuesday for what she said were “very constructive” initial talks before more specific negotiations between the two sides on Wednesday.

Freeland said some of the details of the U.S.-Mexico agreement, particularly what she called “significant concessions” by Mexico on rules regarding automotive labor and parts origin, have given Canada optimism about the talks in Washington.

“The fact that Mexico was able to do something that I think must have been quite difficult for Mexico and make those concessions does really set the stage for some productive conversations for us here this week.”

It is unclear if the United States and Canada will resolve their long-standing disputes over duties on automobiles and dairy products that have persisted through months of NAFTA negotiations.

Freeland was also due to meet with Mexican trade officials who were still in Washington.

Final details of the U.S.-Mexico deal have yet to be worked out, but Lighthizer said he believes the tentative agreement is a win for both countries that creates more jobs for farmers and other workers.

To escape tariffs, the deal calls for 75 percent of “auto content” – parts and amenities – to be made in either the U.S. or Mexico, up from the current 62.5 percent North American content. In addition, 40 to 45 percent of the auto content must be produced by workers earning $16 or more an hour.

The average hourly pay for U.S. auto workers is more than $22 an hour, but in Mexico it is now less than $3.50 an hour. With the increase in labor costs, it likely will boost the cost of buying a vehicle.

“I think it’s going to modernize the way we do automobile trade, and I think it’s going to set the rules for the future at the highest standards in any agreement yet negotiated by any two nations for things like intellectual property, and digital trade, and financial services trade, and all of the things that we think of as the modernizing, cutting-edge places that our economy is going,” Lighthizer said.

“So this is great for business,” he said. “It’s great for labor. It has terrific labor provisions in it. Stronger and more enforceable labor provisions than have ever been in an agreement by a mile. Not even close.” 

However, lawmakers in both countries still need to approve the pact in the coming months.

Some of the agreement mirrors elements contained in the Trans-Pacific Partnership, the 12-nation Pacific Rim trade pact that Mexico and the U.S. both agreed to, before President Donald Trump withdrew the United States. It requires Mexico to allow more collective bargaining for workers and calls for more stringent air quality and marine life protections.

The accord is set to last for six years, at which point the United States and Mexico will review it, and if both sides agree, they would extend it for 16 more years.

But the agreement does not end steel and aluminum tariffs Trump imposed on Mexico earlier this year, leading to Mexican levies on U.S. imports. 

Trade between the U.S. and Mexico totaled an estimated $615.9 billion in 2017, with the U.S. exporting $63.6 billion more in goods and services than it imported.

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