U.S. reaches trade deal with Mexico, Canada rejoins talks

The deal with Mexico announced by the White House Monday could mean a boost to N.C.

Mexico's Foreign Minister Luis Videgaray (C), Mexico's Economy Minister Ildefonso Guajardo (3rdR), White House chief economic adviser Larry Kudlow (3rdR-standing) and Jesus Seade (R), Mexico's President-elect Obrador's representative in trade negotiations look on as U.S. President Donald Trump (L) announces a deal to replace the North American Free Trade Agreement (NAFTA) at the White House in Washington, U.S., August 27, 2018. REUTERS/Kevin Lamarque

WASHINGTON, D.C./RALEIGH — Canada’s top trade negotiator joined her Mexican and U.S. counterparts in Washington on Tuesday in a bid to remain part of a trilateral North American trade pact, as U.S. officials expressed optimism a deal could be reached this week.

Ottawa is under pressure to accept new terms on auto trade and dispute settlement rules after White House announced a new trade deal with Mexico that would overhaul the North American Free Trade Agreement (NAFTA). The new deal would require that Mexico buy more agricultural product from the United States and would increase the domestic content of cars assembled in North America.

“More of the parts used here would be made in North America, and that’s important to North Carolina because we are a big, big producer of automotive parts,” said economist Michael Walden of NC State University in an interview on WPTF. “Mexico would also be buying many more agricultural products from the U.S., and that’s also very important for North Carolina because that is our biggest export to Mexico, agriculture products, particularly those based on meat.”

Announcement of the deal put pressure on Canada, which had strong words against President Donald Trump several months ago when he threatened to rip up NAFTA.

Now, Canadian Foreign Minister Chrystia Freeland rejoins the yearlong talks following a hiatus of several weeks as the United States and Mexico ironed out outstanding bilateral disagreements in the renegotiation of the 24-year-old accord.

“The U.S. market and the Canadian markets are very intertwined. It’s important for them to get this deal, and it’s important for us to get this deal,” U.S. Treasury Secretary Steven Mnuchin told CNBC on Tuesday.

Mexican Foreign Minister Luis Videgaray told Mexican television on Tuesday the three sides would work for a three-way deal. “We are now going to devote long hours to the negotiation with Canada,” he said.

Negotiations among the three partners, whose mutual trade totals more than $1 trillion annually, launched last year as NAFTA was criticized by economists, business leaders and the Trump administration. It was negotiated 25 years ago and, at the time, N.C. industry fought it because of its negative impact on the textile industry. Today, agriculture exports to Mexico are a large part of the state economy, and there has been widespread concern over losing that market in renegotiations.

“There is no question that NAFTA, along with the World Trade Organization, which brought in China and other Asian countries, hurt our domestic industries, particularly textiles and apparel. Those aren’t going to come back due to this agreement,” said Walden.

“When the president said he was going to tear up NAFTA, the sentiment in N.C. was largely negative because the economy has changed. Now we are very tied to Mexico,” he added.

Now with a deal in the works, Canada is the holdout. If a deal is not reached with Canada, Mnuchin said the United States would proceed with a separate trade agreement with only Mexico. The Mexican government has also taken that position, even as it says it wants a trilateral deal.

“As I’ve observed the Trump Administration now for two years, I think there’s a pattern here,” said Walden. “I think it’s based on the president’s negotiating style as a private citizen, a businessman, and that is to be very aggressive when you start your negotiations, be aggressive in what you want, what you ask for, be aggressive verbally… We saw that for example in the foreign policy area with North Korea.

“I think the conclusion will based on whether it works, and so far,we have had some preliminary agreements with the European Union on trade, we now have an agreement with Mexico on trade, and I do think Canada will come back in, which is good. I do think that tactic could be working.”

Videgaray said in Washington on Monday that the scope for making changes with Canada to what the United States and Mexico had agreed was “significantly larger” this week.

“It would certainly be much better to have an understanding by the end of the week,” he told reporters. He also said his country was prepared to go it alone without Canada. “We already know that there will still be a deal between Mexico and the United States.”

Freeland’s spokesman said Canada would only sign a new agreement that is good for the country.

If talks with Canada are not wrapped up by the end of this week, Trump plans to notify Congress that he has reached a deal with Mexico but would be open to Canada joining, U.S. Trade Representative Robert Lighthizer told reporters Monday.

The White House said Trump will sign the deal in 90 days. Congress would then have to approve it.