The unexpected commercial agreement between the US and Mexico

Monday, 3 september 2018 | Brenda Rodríguez López

After a year of negotiations, the USA and Mexico have reached a preliminary agreement within the framework of the negotiations of the North American Free Trade Agreement. The first thing that stands outs in this pact is the fact that it has left Canada behind, which is the third country that originally participated in the treaty. This unexpected commercial understanding between Mexico and the United States has resulted in an intense week of negotiations with the neighbor of the north. Donald Trump established last Friday as the deadline for Ottawa to join the agreement, offering the northernmost country only some days of margin to make a decision. What has been the final result of that intense countdown? What has Canada decided? Will NAFTA transition from being a trilateral agreement into a bilateral one? What are the keys to reading this agreement?

Last monday, the United States and Mexico announced an important progress in the negotiations on the North American Free Trade Agreement (NAFTA), which has been in force since 1994. Both North American countries have reached mutual understanding on key aspects of their commercial relationship. This pact is striking since in order to proceed with its preliminary closure, it has not had the participation of Canada, which is the third country that makes up the current NAFTA.

There are many who suggest that this unexpected agreement reflects the will to exert pressure on Ottawa. The most septentrional country of the subcontinent has only had four days to make a decision on its joining to NAFTA 2.0. The deadline established by the USA was not trivial. It was the only date that allowed to comply with the 90 day-notice period which is necessary to conclude  a new treaty before the change of government takes place in Mexico –on December 1–.

Nonetheless, the day before the decisive date, the president of the USA, Donald Trump, expressed in a public statement in Indiana the possibility of opting for a new alternative: reaching two bilateral agreements to replace the old trilateral NAFTA agreement. Those words paved the way for what ended up happening the next day, Ottawa and Washington were not able to reach an agreement before the end of the countdown. Therefore, Trump decided to formally inform Congress of his intention to sign the trade agreement with Mexico. He did not forget to mention that Canada might join in a future if they so desire.

Although this accelerated and intense first phase of negotiations finished, this does not mean the end of the dialogue between the US and Canada. According to what the US trade representative  reported on a statement, Ottawa and Washington will again try to bring positions closer next Wednesday. To achieve an understanding, it will be necessary to resolve one of the issues that is generating more friction between the two countries: the protection of the Canadian dairy market. For Ottawa, the so-called "Chapter 19", a mechanism that prevents the United States from prosecuting anti-dumping and anti-subsidy cases, is also a clear red line and, so far, Washington is not willing to renounce it. Will they finally reach an agreement? Will Canada end up being part of a NAFTA 2.0? Will the countries enter into new bilateral agreements that replace the trilateral one? For the moment, the only thing that we can confirm is that the treaty between Mexico and the US is on the right path.