Latin America Alert | August.29.2018
The United States and Mexico reached a preliminary agreement on revisions to the North American Free Trade Agreement on Monday, ending months of political uncertainty and threats of harsh international trade policies between the two countries. There is no deal reached yet with Canada, but yesterday Canada's trade negotiators rejoined negotiations with the U.S. and Mexico in Washington. Most commentators and analysts expect Canada to accept most of the terms agreed upon by Mexico and the U.S. in their bilateral discussions.
On the Mexican side, the Mexican negotiators have expressed the need to have the deal approved by President Trump and President Peña Nieto before the latter leaves office on December 1. To that end, U.S. Trade Representative Robert Lighthizer noted during the press conference that, depending on the progress with Canada, he could provide the required notice to the U.S. Congress about an updated NAFTA as soon as this week.
While President Trump said he intends to rename NAFTA as "The United States/Mexico Free Trade Agreement," the agreement reached with Mexico is a revised version of NAFTA, with updates to certain provisions related to digital trade, local content of auto parts and automobiles, agriculture, and labor. For the most part, American and Mexican companies will continue to trade without tariffs. While the final text of the new agreement has not been released yet, the following is a summary of some of its key terms:
Overall, this looks like a good agreement, and we expect an uptick in cross-border transactions between both the U.S. and Mexico as a result of it. A fog of uncertainty as to the legal regime applicable to cross-border production chains is now lifted, which should unlock opportunities across the manufacturing sector that were previously put on hold due to the harsh rhetoric and political uncertainty about the life of NAFTA.