Executive Intelligence Review


NAFTA Ended, ‘United States-Mexico Trade Agreement’ Replaces Free Trade

Aug. 27, 2018 (EIRNS)—Presidents Donald Trump and Enrique Peña Nieto announced in a public phone call today that their negotiators had concluded a trade agreement “terminating NAFTA,” in Trump’s words, and replacing it with what he called “the United States-Mexico Trade Agreement.” He called it “a really good deal for both countries” and “something that’s very special for our manufacturers and for our farmers from both countries, for all of the people that work for jobs.” It could raise both auto/machine tool manufacturing employment in the United States, and auto wages in Mexico.

The negotiations took just over one year.

The outlines of the agreement are known although the details have not yet been published. Its primary known elements have to do with the auto industry, and with the investor-state dispute settlement mechanism (ISDS), beloved by Wall Street and City of London banks, which enabled multinationals to ignore nations’ laws when operating under “free trade” deals like NAFTA or the Trans Pacific Partnership (TPP).

The North America-made components content of motor vehicles finally assembled in the United States will be raised by the new agreement from 45% to 75%; and the portion of auto industry workers working in “high-wage areas” will be raised to a comparable extent, lifting prevailing wages in significant sections of Mexico’s auto industry to $16/hour or above.

The United States had proposed complete elimination of the ISDS, and Mexico had agreed. But the Wall Street Journal reported that after a lobbying blitz by the Business Roundtable (for Wall Street) and the U.S. Chamber of Commerce, ISDS was retained for major sectors—oil, gas, infrastructure and transport.

During the call with Peña Nieto, Trump clearly indicated his intention to negotiate trade separately now with Canada, although allowing “maybe we’ll include them into this deal”—as Mexico clearly wants to do—but likely on very different issues.

There is enough time for Peña Nieto to sign the deal before leaving office Dec. 1, as both he and President-elect Andrés Manuel López Obrador wanted.