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U.S., Mexico Reach Partial Agreement to Resolve Trade Conflict, a Step Toward NAFTA Deal

Trump administration officials reached a partial accord with Mexico on the terms of a new North American trade deal, including a provision that would require more auto manufacturing in high-wage factories, according to three people briefed on the agreement.

The deal is the most significant step toward a new agreement since talks with Mexico and Canada began one year ago. But negotiators remain far from finishing their work.

Trump, in a Twitter post on Monday, wrote that a major accord with Mexico could be imminent, writing, “A big deal looking good with Mexico!”

The president was due to make an announcement from the Oval Office on Monday morning. Trump has held formal announcements for incomplete trade deals before.

“We’ve reached an agreement on all the key issues,” one official briefed on the talks said.

But the agreement left unresolved a number of contentious U.S. demands, and Canada, which has not participated in the deliberations for five weeks, must sign on before a new North American trade deal is complete.

As U.S. negotiators turn to bringing Canada back into the talks, Canadian Foreign Minister Chrystia Freeland is expected to arrive in Washington later Monday or Tuesday morning. The aim is to have a “handshake deal” among the three countries by the close of business Friday, an official familiar with the talks said.

A spokesman for Freeland said Canada was “encouraged by the continued optimism shown by our negotiating partners” but made clear that a final agreement would require careful review and more discussions.

“We will only sign a new NAFTA that is good for Canada and good for the middle class,” the spokesman said. “Canada’s signature is required.”

If Canada doesn’t sign off, it is unclear what Trump might do, as he has threatened to try to cancel the entire trade pact.

But if Canada does agree to a new deal, it would allow Trump to officially notify Congress that a deal had been reached, starting a 90-day clock under the rules governing the American president’s trade negotiating authority and allowing Mexican President Enrique Peña Nieto to sign the deal before his successor, Andrés Manuel López Obrador, takes office Dec. 1.

López Obrador has been supportive of the negotiations but would be likely to seek changes if the treaty is not completed before he assumes the presidency. His concerns about cementing Mexico’s energy privatization in a new NAFTA were among the final sticking points in the talks.

With only five days remaining for the United States and Canada to iron out their differences, negotiators realize they have exhausted all their wiggle room. “Realistically, it’s certainly tight,” the official said.

Larry Herman, a Toronto trade lawyer and former Canadian trade negotiator, said Canada has “every right” to examine the details of what was agreed to between Mexico and the United States and will then decide how to proceed.

“I think it’s appalling that Canada has been kept at arm’s length from these talks over the past number of weeks,” Herman said.

While Herman said he would expect Canada to resume participation in the talks, “there’s no way a NAFTA agreement can be ready for signature by the end of this month. It’s not going to happen.”

White House officials had insisted that the new NAFTA deal would have to expire after five years, a sunset demand that both Canada and Mexico had rejected in recent weeks. It could not be learned whether Trump administration officials had backed down from this demand or whether it would be part of the final discussions.

Trump has made renegotiating NAFTA a centerpiece of his economic and foreign policy agenda, arguing that the aging trade deal disadvantages American workers by luring U.S. jobs and companies overseas.

This approach has alarmed many Republicans, who support NAFTA’s free trade roots and worried about how Trump’s approach would impact farmers. But Democrats have mostly been split, as some agreed with Trump’s focus on manufacturing jobs but others worried about Trump’s take-it-or-leave-it negotiating style.

Even if Trump cuts a final deal with Mexico and Canada, Congress will likely have to vote to approve any changes.

In an effort to force both Mexico and Canada to agree to a new deal, Trump has imposed tariffs on all steel and aluminum imports from their countries and suggested that he would waive these tariffs only if they make concessions as part of a new trade deal.

Talks have dragged on for months, at times becoming quite personal, particularly when Trump hurled a series of insults at Canada’s prime minister, Justin Trudeau, leading many to believe that a deal would ultimately prove out of reach.

But it was Mexico that offered Trump the best opening in recent weeks.

In recent days, U.S. and Mexican diplomats reached agreement on key elements of a new treaty, including an increase in the percentage of each car — to 75 percent from the current 62.5 percent — that must be made in North America to qualify for duty-free treatment.

The two sides agreed to a provision that would require a significant portion of each vehicle to be made in high-wage factories, a measure aimed at discouraging factory jobs from leaving the United States for Mexico.

Negotiators also resolved a dispute over how to treat cars and trucks produced in Mexican plants that do not comply with the new treaty’s content rules. American companies importing those vehicles will pay a 2.5 percent tariff.

“What most of us are focused on now is: what happens next?” said Dan Ujczo, a trade attorney with Dickinson Wright.

Having resolved their major sticking points with Mexico, the Trumpadministration is now expected to press Canada to accept quickly the consensus terms. But Trudeau, whom Trump criticized in harsh terms following the Group of Seven summit in Quebec in June, does not want to be viewed at home as conceding to the unpopular American president.

“Can we actually get a deal done with Canada when they’re negotiating with a gun to their head and a ticking clock?” Ujczo said. “Canada’s got some choices to make.”

Trump has beencritical of Canada’s dairy management system,which restricts imports of poultry, eggs and dairy products to provide Canadian farmers high prices.

Another long-standing point of contention was the U.S. demand that the treaty sunset every five years unless explicitly reauthorized by the three governments. Business leaders complain such language would make it too difficult to plan future investments.

“The competitiveness of North America will be diminished if companies fear the rules are at risk of constant change,” the Information Technology Industry Council said Friday. “These potential provisions risk jeopardizing the incentives for businesses to innovate, invest, hire, and produce across North America.”

The NAFTA renegotiation has been a rocky one. The president over the past year repeatedly lambasted the original 1994 treaty, calling it a “bad joke” and blaming it for the loss of millions of American factory jobs.

One year ago, U.S. Trade Representative Robert E. Lighthizer kicked off the negotiations by calling for a major overhaul of trade rules to take account of nearly a quarter-century of economic changes and to rectify the imbalance in trade between the United States and its southern neighbor.

Trump, he said, was “not interested in a mere tweaking of a few provisions.”

Though trade deals are complex affairs that typically require years of glacial bargaining, administration officials initially hoped to finish the job by the end of 2017. They failed to meet that ambitious timetable and also blew through revised deadlines for the end of March and late May.

This time, the deadline may be real, given a congressional requirement for 90 days notice of an impending trade deal. If the administration doesn’t formally notify Congress that it has reached agreement with both Canada and Mexico by the end of August, Peña Nieto, the outgoing Mexican president, will not be able to sign it.

Negotiators want to get a deal wrapped up before López Obrador, who might demand additional changes, takes office.

Alan Freeman in Ottawa contributed to this report.

Author:  DAVID J. LYNCH AND DAMIAN PALETTA, THE WASHINGTON POST

Reaction to Monday’s NAFTA Deal

The following are comments from local, state and national leaders, and groups regarding Monday morning’s North American Free Trade Agreement (NAFTA) preliminary agreement.

Cornyn Statement on U.S.-Mexico Trade Announcement

‘Millions of jobs in Texas depend on an updated NAFTA, and it’s important that we get this right.’

WASHINGTON – U.S. Senator John Cornyn (R-TX) released the following statement after the President announced a preliminary agreement between the United States and Mexico to update the North America Free Trade Agreement (NAFTA):

“This is a positive step, and now we need to ensure the final agreement brings Canada in to the fold and has bipartisan support. A trilateral agreement is the best path forward, and any modernized agreement should do no harm to states like Texas whose economy has seen the benefits of cross-border commerce. Millions of jobs in Texas depend on an updated NAFTA, and it’s important that we get this right.”

***

Rep Beto O’Rourke – Congressman / US Senate Candidate (via Twitter)

“Terminating NAFTA will have a real life, long lasting impact on farmers, ranchers, manufacturers, energy producers, small business owners in Texas. It generates $112 billion in exports for our state annually with 1 million jobs in our state connected to trade with Mexico alone.”

***

Texas Farm Bureau statement on trade deal with Mexico

The following statement regarding the announcement of trade progress with Mexico can be attributed to Texas Farm Bureau President Russell Boening.

“Today’s announcement is the type of news that Texas farmers and ranchers have been waiting to hear. Texas Farm Bureau is encouraged by the news of a new trade deal between the U.S. and Mexico.

“Our state’s trading relationship with Mexico is very important to Texas agriculture and to the overall health of our Texas economy. While we await details of the new trade agreement with Mexico, we’re pleased to see progress on actual trade agreements and not the escalating nature of retaliatory tariffs.

“The North American Free Trade Agreement has benefitted U.S. agriculture, and we hope this new deal promotes even more trade with our neighbor to the south. We hope Canada comes to the table soon and joins this agreement or enters into a new agreement with the U.S. on its own.”

***

Borderplex Alliance CEO Statement on Preliminary NAFTA Deal 

Borderplex Alliance CEO Jon Barela released the following statement today in reaction to the United States and Mexico reaching a preliminary agreement to revise NAFTA:

“NAFTA has been an unqualified success for the U.S., Mexico, and the Borderplex region. More than 5 million American jobs depend on trade with Mexico. In Texas, an estimated 380,000 jobs depend on trade with Mexico. In New Mexico, 36,200 jobs, and in the Borderplex region, nearly 1 in 4 jobs depend on cross-border trade with Mexico. A successful ratification of a new NAFTA will solidify the Borderplex region as the 4th largest manufacturing hub in North America. NAFTA is essential to the economic competitiveness of North America, the dynamism of our region, and economic growth for our three great nations. As we await details on the terms of the deal, I remain cautiously optimistic about the prospects for modernized and strengthened NAFTA.”

***

Trump Administration Will Aid Farmers Hurt by Trade War. Some Texas Lawmakers Call it Welfare

The Trump administration on Tuesday announced up to $12 billion in emergency aid for farmers impacted by the president’s trade war — which came as welcome relief for Texas farmers who were afraid the tariffs would hurt their business. But some Texas lawmakers have criticized the move and called on the president to end the tariffs.

President Donald Trump issued a slew of tariffs on Chinese goods earlier this month, prompting China to respond with tariffs on $34 billion worth of U.S. goods. The Chinese tariffs threatened to deal a serious blow to Texas agriculture, which provides nearly half of U.S. cotton exports to China.

China purchased $16 billion worth of Texas goods in 2017, making it the third largest recipient of the state’s international exports.

The tariffs came as the U.S. agricultural sector was already in a state of decline, said Gene Hall, spokesman for the Texas Farm Bureau. Just before the tariffs went into effect, farm-related income was about half of its 2013 value, according to the U.S. Department of Agriculture.

“Our crop is poor, and then you put a poor price on top of that, and myself included and many of my neighbors, we’re going to struggle to make ends meet on our grain sorghum crop this year,” said Scott Frazier, a sorghum and cotton farmer south of Corpus Christi. “So for us any little bit of help to get past this trade war issue is going to be significant.”

Farmers will be able to sign up for the aid in September, and it will be funded by the Commodity Credit Corporation, a federal program that provides relief for farmers by buying their crops, often after natural disasters or other crises. This will be the first time the program has been used to alleviate the effects of a trade conflict.

Arlan Suderman, chief commodities economist at financial advising firm INTL FCStone, said the tariffs are unlikely to last long because China won’t be able to pay higher prices for U.S. goods indefinitely and alternative partners like Brazil won’t be able to keep up with Chinese demand.

Suderman said he believes the federal aid to farmers is politically motivated. Trump garnered wide support in rural areas and with the midterm elections less than four months away, he needs to shore up support from farmers harmed by the tariffs, he said.

Hall said the tariffs and the federal aid are only temporary measures as the administration tries to force China to the negotiating table to end what they call predatory practices — such as restrictions on allowing new U.S. commodities into the Chinese market.

Frazier said he and his neighbors will have a hard time paying their bills under the current tariffs. But he and Hall said Trump’s moves haven’t soured their opinion of the president, who revealed his protectionist stances during his campaign. Frazier said the aid package showed Trump’s commitment to helping U.S. agriculture.

But not everyone is so positive. Casey Guernsey, spokesman for Americans for Farmers and Families, said he would much rather see the administration makingbetter trade deals instead of launching tariffs, which he said have not been effective in the past.

“Ninety-five percent of the world’s consumers live outside the U.S. Those are our customers,” Guernsey said. “We don’t need aid from Washington to not only survive, but prosper.”

Trump’s $12 billion plan met with mixed reviews on Capitol Hill. U.S. Rep. Mike Conaway, a Midland Republican who chairs the U.S. House Agriculture Committee, defended the tariffs and the aid package.

“The president’s efforts to stand up on behalf of American producers and not allow the Chinese to use them as a weapon against us I think is the right thing to do,” he said. “It is the president’s attempt to try to not let China use our producers as leverage.”

But providing payments to farmers is not viable long-term, he added.

“Trade is the long-term solution. But in the meantime, we’ve got to have China agree to abide by their agreements they’ve agreed to, and that’s what this is all about,” he said.

Several Republican lawmakers from Texas who typically fall in line behind Trump spoke out against the plan — an indication that the tariffs are driving a wedge between the president and congressional allies from rural states.

U.S. Sen. Ted Cruz, R-Texas, denounced the financial assistance as “a mistake” on the Chad Hasty Radio Show. “The answer should not be government aid. It should be allowing farmers and ranchers to sell their goods,” he said.

The most biting rebuke came from U.S. Rep. Jeb Hensarling, R-Dallas, a staunch free market advocate who told CNBC he thinks Trump has overstepped his authority.

“I think that Donald Trump has too much power, and I think that Congress needs to reassert their authority,” he said. “And last I read the Constitution, it’s Congress that has authority over tariffs, it’s Congress that has authority over trade, and we ought to take some of that back.”

He added: “We have a policy now that is taxing the American consumer and then bailing out U.S. farmers with welfare. I don’t get it. I don’t agree with it.”

Trump fired back at critical lawmakers on Twitter Wednesday morning, calling them “weak.”

Disclosure: The Texas Farm Bureau has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.

Authors:  MATTHEW CHOI AND CLAIRE PARKER – The Texas Tribune

Administration Announces Aid to Help Farmers Hurt by Tariffs

Texas farmers and ranchers impacted by retaliatory tariffs welcomed the temporary relief measures announced Tuesday by the U.S. Department of Agriculture (USDA).

A robust trade market, however, is still the ultimate goal, according to the president of the state’s largest farm and ranch organization.

“This short-term funding will help farmers and ranchers who rely on export markets stay in business as the administration works to develop and obtain new markets,” Texas Farm Bureau President Russell Boening said.

USDA outlined $12 billion in relief funding for three programs to help farmers and ranchers hurt by market disruptions. The relief funding correlates to the estimated $11 billion impact current trade tensions have on U.S. agriculture.

The funding will be split between three USDA programs: Market Facilitation, Food Purchase and Distribution and Trade Promotion. The relief package is expected to be operational by September 3.

“We appreciate the administration and USDA taking this action to support American agriculture, but certainly, farmers and ranchers would rather sell their products to domestic and export markets through good trade relationships,” Boening said.

“We support the administration’s continued talks with our trading partners and look forward to both new and improved markets.”

Abbott to Trump: Steel and Aluminum Tariffs Will Harm Texas Oil and Gas

Gov. Greg Abbott urged President Donald Trump in a letter Thursday to reconsider his tariffs on foreign steel and aluminum, arguing the imported metals are vital to the growth of Texas’ economy.

In the letter, Abbott praised his fellow Republican for guiding the country to a time of increased job creation and thriving agriculture, technology and energy sectors by “modernizing our nation’s trade policies” to work in the United States’ favor. But Abbott also emphasized the necessity of foreign steel and aluminum to the continued growth of American oil and gas, which have an enormous footprint in Texas.

“Our country’s steel and aluminum workers are a vital part of the national workforce, and creating jobs in that industry must be a top priority,” said the letter. “But attempting to protect these jobs through the new tariffs could jeopardize the livelihoods of hundreds of thousands of Texans and other Americans employed in the oil and gas industry.”

Trump announced the steel and aluminum tariffs earlier this year, targeting some of the United States’ closest allies, such as the European Union, Canada and Mexico. The tariffs are designed to boost the domestic steel and aluminum industries, but critics have expressed worry about trade wars and other ripple effects.

The president has also repeatedly argued against free trade agreements like the North American Free Trade Agreement, which he says unfairly benefits the United States’ partners at its expense.

Abbott, a vocal supporter of Trump, has also spoken in the past about NAFTA’s necessity in advancing the economy of Texas. The state’s trade with Mexico surpassed $187 billion in 2017. Abbott wrote a letter on April 4 to a top administration official arguing that elements of NAFTA were vital to Texas.

The state accounted for more than $8.3 billion in steel and aluminum imports in 2017, more than twice any other state, according to the letter. Abbott said increasing the costs of imported steel and aluminum would hinder the U.S. oil and gas industry from surpassing its competitors and that Texas oil and gas accounts for more than twice as many jobs as the national steel and aluminum industry.

Protecting steel and aluminum jobs has been a large talking point for Trump since he first announced his candidacy.

“Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world,” Trump tweeted in March. “We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!”

Read related Tribune coverage:

Author: MATTHEW CHOI – The Texas Tribune

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