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By Kim Mackrael, Santiago Pérez and Jacob M. Schlesinge | Nov 29, 2018

SUMMARY: Mexico made concessions on cars, while Canada made concessions on cheese to pave the way for a new regional trade agreement between the United States, Mexico and Canada. After President Donald Trump's threat to move ahead with a revised agreement with Mexico but without Canada, it left Canada only a few days to negotiate a new trade deal. Canada's key negotiator was given advice by her Mexican counterpart to offer a critical concession to break the logjam with the United States. After presenting detailed plans for easing curbs on American milk and cheese products, Canada and the United States engaged in several days of nearly round-the-clock negotiations to reach Mr. Trump's negotiation deadline. The result was the new U.S.-Mexico-Canada Agreement (USMCA). The member countries recently signed the new pact, but it still requires ratification by legislators in all three countries before it can take effect.

QUESTIONS:

  • What concessions did Mexico and Canada need to offer to reach an agreement with the United States to replace Nafta?
  • What challenges exist for the USMCA to be ratified and go into effect?
  • Should Mexico and Canada have offered the concessions that they did to renegotiate Nafta? Explain your position.
  • The U.S. goal of increasing local content requirement percentages and adding a requirement that a certain amount of content has to be performed by high-cost labor in the automotive industry in USMCA is to bring automotive jobs back to the United States. Do you think these requirements will achieve this goal? Explain your point of view.

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In Nafta Rewrite, Canada Took Cue From Mexico: Make a Big Concession; As Trump's deadline for the negotiation neared, Canadian negotiators struggled to make the U.S. give ground Kim Mackrael; Santiago Pérez; Jacob M. Schlesinger . Wall Street Journal (Online) ; New York, N.Y. [New York, N.Y]29 Nov 2018: n/a. ProQuest document link FULL TEXT Canadian Foreign Minister Chrystia Freeland was frustrated as the deadline approached for renegotiating the North American Free Trade Agreement. Meeting her Mexican counterpart at the Lexington Hotel in midtown Manhattan, she told him things weren't moving forward as she had hoped, with the U.S. refusing to bend on Canada's key demands with just four days to go. It didn't help that President Trump said of Canada at a press conference that day, Sept. 26, "We don't like their representative very much ." Mexican Economy Minister Ildefonso Guajardo offered advice: Make a key concession to the U.S. to break the logjam. Mexico had bent to U.S. pressure on policies aimed at shifting auto production from Mexico back north, opening the way for Mexico and the U.S. to strike a broader dea l a month earlier. "They know that they will not get everything, but within their priorities you have to give them a clear signal," Mr. Guajardo told her, according to a Mexican official. For Canada, the equivalent of Mexican cars was dairy . Canadian negotiators had already been thinking along the same lines, and the next day, Canada sent the U.S. a document that included detailed plans for easing curbs on American milk and cheese products, a Canadian official said. That triggered three days of near-round-the-clock talks , paving the way for an agreement announced barely an hour before the midnight Sept. 30 deadline set by the Trump administration for moving ahead with a new Nafta that excluded Canada. This Friday morning, Mr. Guajardo, Ms. Freeland, and their American counterpart, U.S. Trade Representative Robert Lighthizer, are scheduled to reunite to sign that pact, rebranded the U.S.-Mexico-Canada Agreement. The ceremony--to be held in Buenos Aires on the sidelines of the Group of 20 summit of advanced and developing economies--is a signature achievement for Mr. Trump, whose claims that the pact was unfair to the U.S. were a central theme of his campaign. It also proved acceptable to Canada and Mexico, who, despite concessions, feared it could have been much worse: Mr. Trump had repeatedly threatened to withdraw from the quarter-century-old pact, which would have left almost every aspect of the roughly $1 trillion in commerce between the three nations in disarray. This account of how Canada and Mexico came to terms with the Trump administration's demands and clinched a deal is based on interviews with Mexican and Canadian officials involved in the talks, as well as people in all three countries who were briefed on their contents. Two sectors drew outsize attention in the talks--auto and dairy--that came to be dubbed by some the "cars and cows" negotiations. The path to the deal had plenty of twists and gambits that backfired over the 13 months of meetings, as Mexico and Canada at times accused each other of betraying their early oath to present a united front. PDF GENERATED BY SEARCH.PROQUEST.COM Page 1 of 4 The tone for the Nafta talks was set in October 2017, when Mr. Lighthizer made a number of controversial demands that would recast the pact, such as injecting a "sunset clause" making it easier for a country to terminate the pact and weakening the mechanisms allowing challenges to American trade penalties. Among the most controversial proposals was one requiring that half the content of cars built in North America come from the U.S. Both Canada and Mexico quickly rejected that as incompatible with the core principles of an agreement designed to tighten integration of a continentwide bloc. But behind the scenes, Canadian officials thought they could work with the idea. They asked a longtime trade bureaucrat to find a creative way to satisfy U.S. goals without capitulating to U.S. demands. He put together a plan that would change the criteria for what qualifies as "North American content," in a way that would emphasize higher-value input such as software. That would effectively result in more production in either the U.S. or Canada, where more software development happens, but without stating it explicitly. The Canadians laid out the proposal in Montreal in January, with a PowerPoint featuring an image from the Jetsons--the 1960s cartoon show envisioning a futuristic life with flying cars--to show they were defining the 21stcentury auto industry, a Canadian official said. Some U.S. officials felt the pitch made light of their demands. But two months later, the U.S. came back with a variant of the Canadian concept, stating that a certain portion of cars had to be made with high-wage labor--at rates well above the level paid to Mexican workers. Canada saw a deal emerging. In mid-May two top aides to Prime Minister Justin Trudeau went to Washington to pitch a final agreement incorporating the plan. That session didn't include Mexican officials--though Canadians insist they kept their Mexican counterparts in the loop. "We are down to a point where there is a good deal on the table," Mr. Trudeau said that day in a speech. Mr. Guajardo tweeted congratulations, but added: "A clarification is necessary: Any renegotiated #NAFTA that implies losses of existing Mexican jobs is unacceptable." Mexico's July 1 presidential election changed the dynamic. The victor, leftist Andrés Manuel López Obrador, was enthusiastic about changes to Nafta aimed at boosting wages and bolstering labor rights--changes Trump officials saw as vital to boosting U.S. manufacturing jobs. The incumbent president, Enrique Peña Nieto, meantime, wanted to seal an agreement before his term ended Nov. 30. Aides to Mexico's departing and incoming presidents headed to Washington together in August. "It became clear at that stage that Lighthizer wasn't going to give us anything at all until he knew the outcome of negotiations for the auto sector," said one Mexican official. The morning after the Mexicans made an offer accepting new rules for auto production, the U.S. team dropped other demands the Mexicans had rejected. At the end of August, Messrs. Trump and Peña Nieto announced a deal that included the requirement that 40% to 45% of North American auto content be made by workers paid at least $16 an hour. They said they planned to reach a final agreement with the Canadians over the next month--or move ahead without them. Now it was Canada's turn to be upset. Ottawa had problems with about 20 different issues in the U.S.-Mexico text that seemed to have settled many Canada-specific issues without Canadians at the table. Canada's influential and heavily protected dairy industry was furious that the draft text provided by the U.S. made sweeping changes to their sector. Though the Nafta dairy market is worth a fraction of the auto industry--and the U.S. runs a dairy surplus with Canada--it became an important issue for Mr. Trump after he got an earful during an April 2017 visit to Wisconsin. The president made Canadian dairy a staple of stump speeches and tweets complaining about how Canada took advantage of the U.S. At a meeting at the Canadian embassy in Washington on Aug. 28, the day after the U.S.-Mexico deal was announced, Canadian negotiators confronted Mr. Guajardo and his team, saying they thought they had an understanding Mexico wouldn't throw Canada under the bus. He reminded them of their May attempt to cut a deal with the U.S. affecting the Mexican auto industry. Canadian negotiators were confident they would be able to strip out the offending provisions Mexicans had PDF GENERATED BY SEARCH.PROQUEST.COM Page 2 of 4 accepted. But their portion of the talks with the U.S. proceeded in fits and starts through September, and appeared to have broken down completely the week before the Sept. 30 deadline. On the morning of Sept. 27, Mr. Lighthizer told lawmakers that a Canada deal was highly unlikely. Late that afternoon, an aide to Ms. Freeland scurried across Manhattan to track down an assistant to Jared Kushner, Mr. Trump's son-in-law and senior White House adviser. Both were in New York for the United Nations General Assembly, but both were also focused on Nafta. Mr. Kushner had come to play a behind-the-scenes role in the Nafta talks, and Canada's negotiators wanted him to see right away a document that included Canada's formal offer on dairy. The key concession had been made and the U.S. soon responded by giving in to some of Canada's key demands. Three days later after that concession, the U.S. and Canada announced the deal the three parties will sign Friday. Write to Kim Mackrael at kim.mackrael@wsj.com , Santiago Pérez at santiago.perez@wsj.com and Jacob M. Schlesinger at jacob.schlesinger@wsj.com Credit: Kim Mackrael, Santiago Pérez, Jacob M. Schlesinger DETAILS Subject: Automobile industry; Canadians; Economic summit conferences; Dairy industry Location: Mexico Wisconsin Montreal Quebec Canada United States--US New York Canada North America People: Lighthizer, Robert Trump, Donald J Kushner, Jared Trudeau, Justin Freeland, Chrystia Guajardo, Ildefonso Company / organization: Name: United Nations--UN; NAICS: 928120; Name: Group of Twenty; NAICS: 926110 Publication title: Wall Street Journal (Online); New York, N.Y. Pages: n/a Publication year: 2018 Publication date: Nov 29, 2018 column: Canada News Section: World Publisher: Dow Jones &Company Inc Place of publication: New York, N.Y. Country of publication: United States, New York, N.Y. Publication subject: Business And Economics Source type: Newspapers Language of publication: English PDF GENERATED BY SEARCH.PROQUEST.COM Page 3 of 4 Document type: News ProQuest document ID: 2139157455 Document URL: https://jwupvdz.idm.oclc.org/login?url=https://search.proquest.com/docview/21391 57455?accountid=1363 Copyright: (c) 2018 Dow Jones &Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission. Last updated: 2018-11-30 Database: The Wall Street Journal LINKS Check for full text via OCLC Link Resolver Database copyright  2018 ProQuest LLC. All rights reserved. Terms and Conditions Contact ProQuest PDF GENERATED BY SEARCH.PROQUEST.COM Page 4 of 4
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