The tentative new U.S. trade deal with Mexico is a win for both countries, U.S. Trade Representative Robert Lighthizer believes, creating more jobs for workers and farmers alike.
Final details have yet to be worked out in the trade deal announced Monday, and Canada could join it yet in a broad revision of the 1994 North American Free Trade Agreement. But some of the specific terms in the U.S.-Mexican agreement are aimed at boosting the manufacture of cars in the two countries to curb the import of vehicles from Asia, especially from China.
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, wages for some auto workers in Mexico are likely to climb sharply, with the agreement decreeing that 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.
Trump spoke Monday with Canadian Prime Minister Justin Trudeau about trade negotiations between the two countries. Canadian Foreign Minister Chrystia Freeland headed to Washington to open new trade talks with Lighthizer, but it was uncertain whether the two countries could quickly resolve long-standing disputes over duties on autos and dairy products that for months have kept them from a NAFTA revision.
