Tag Archive for: NAFTA

Will Mexico’s New President Have An Economic Impact on RGV?

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KVEO / Joanna Guzman / 12 November

 

MCALLEN, Texas – Mexico’s president-elect, Andres Manuel Lopez Obrador, plans on canceling the construction of a $13 billion airport project in Mexico City. Officials say this will have an economic impact for both the United States and Mexico.

Duncan Wood, Director for Wilson Center-Mexico Institute says, “We’re seeing that the United States has invested very heavily in Mexico over the past 20 years, since the signing of NAFTA. Mexico is investing increasingly north of the border as well. we see integrated production chains that have been created where by factories in the United States depend upon the input counterparts in Mexico and vice-versa.”

With more than 1.5 million Americans living in Mexico, Woods says the U.S. and Mexico share over $2 million in goods traded every hour. Adding the Rio Grande Valley is a part of the Untied States that depends heavily on the trade between the two countries.

Wood says, “In a place like McAllen which is depending so heavily upon Mexican’s coming north to do their shopping, issues like the border, how easily you can get across the border. Issues like public security in northern Mexico, Mexican’s are more willingly to take the journey from let’s say Monterrey into McAllen to do their shopping. Those are issues which really matter and will have a very important economic impact on these communities.”

One-third of the new international airport in Mexico City is already finished. It is estimated the cost to cancel the project is nearly $5 billion. Lopez Obrador says the country has money set aside for. Meanwhile, Woods says the focus right now is on what the future holds.

“We’re trying to work out exactly what the prospects are for the economy, for security; public security in particular, for migration, and of course the energy sector which matters so much down here in McAllen.” says Wood.

Lopez Obrador says the airport project is corrupt and will end ties between economic and political power. Lopez Obrador will take office on December 1.

 

KVEO / Joanna Guzman / 12 November

 

Mexico, Canada play hardball on trade deal over steel tariffs

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Washington Examiner / Sean Higgins / October 26

 

Juan Carlos Baker, Mexico’s deputy commerce minister, said Friday that his government may not sign the final text of the United States-Mexico-Canada Agreement on trade if the U.S. does not agree to provide exemptions to its tariffs on steel and aluminum.

The Trump administration is balking at that demand, however, as its counter-proposal, a quota system, is getting the cold shoulder from both Mexico and Canada, which is also seeking an exemption from the tariffs.

“We believe we need to solve that issue before the signing takes place,” Baker told reporters in Ottawa. The signing has been tentatively set for the end of November.

It was the toughest threat yet from one of the negotiators over the deal that would replace the North American Free Trade Agreement. Mexico and Canada have lobbied the U.S. to lift exemptions to the tariffs, 25 percent for steel and 10 percent for aluminum, arguing that now that the talks for the USMCA deal are complete, there’s no need to maintain those tariffs.

The U.S. however has resisted providing the exemptions, fearing that doing so would allow China, the main target of the tariffs, to harm the U.S. steel industry.

“The president is reviewing the steel and aluminum tariffs,” said Kelly Craft, U.S. ambassador to Canada, Friday at a forum hosted by the Ontario Chamber of Commerce. “That is not something that is against Canada … It’s just protecting North America from other countries that will be passing raw materials through, and also to protect our steel industry at home.”

The White House initially carved out exceptions for Canada and Mexico to its steel and aluminum tariffs , then revoked them in June as a way to pressure both countries during the talks to replace the North American Free Trade Agreement.

The U.S. has proposed replacing the tariffs with a quota system, similar to what it did for South Korea regarding steel, when in August it allowed a quota of 70 percent of average steel exports to the United States in the years 2015 to 2017. Neither Canada nor Mexico are expressing interest on that, according to an administration official who requested anonymity to discuss ongoing talks. As a consequence, there isn’t much talk going on between the countries to resolve the tariff issue, the official said.

A Canadian government official, speaking anonymously, told the CBC earlier this week, that a quota proposal was a concession that Canada would make. Officials see no reason why they cannot return to status quo on metal imports from before the NAFTA talks. “There is no need for those tariffs to be in place,” Canadian Ambassador David MacNaughton said Friday in Ottawa.

Backers of the administration’s policies say a quota is still the best compromise for all sides. “From a U.S. industry perspective, tariffs are similarly effective to quotas if done right,” said Michael Stumo, chief executive officer of the business-labor Coalition for a Prosperous America. “From Canada’s perspective, they should want quotas rather than tariffs because with a quota, their industry gets the money, but with a tariff, the U.S. government gets the money.”

Critics charge that the systems lead to cronyism. “They empower foreign governments to pick winners and losers by deciding which steel or aluminum companies are allocated part of each country’s quota to export to the United States,” said Bryan Riley, trade policy analyst for the National Taxpayers Union. “That’s one reason quotas may be harder to get rid of than tariffs — they can create a political constituency in foreign countries in support of the quotas.”

Hugo Perezcano Diaz, deputy director of the international law research program at Canada’s Centre for International Governance Innovation and a former NAFTA negotiator, speculates that the quota talk may be leading to an alternate solution, a closed three-country market. “Canada has already adopted a safeguard against imports of steel products from the rest of the world, including Mexico,” he said. “If Mexico were to do something similar and the three countries close the North American market, the U.S. may feel sufficiently protected to eliminate the tariffs.”

 

Washington Examiner / Sean Higgins / October 26

 

 

Comment: Investors keep a watchful eye on Mexico’s new leftist leader

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International Investment / Jonathan Clare / October 22

 

Jonathan Clare recalls the strikingly different Mexico of the 1990s, and looks at the country’s prospects today under a new, left-wing, administration.

The Mexico of today is very different from the country I first experienced in the late 1990s. Back then I was based in Mexico City – the local population was still reeling from a banking crisis and severe recession.

Talking to locals in the fashionable coffee shops you would hear of the steady exodus of the middle class from the sprawling metropolis. There was a sense of gloom that the Institutional Revolutionary Party’s long stranglehold on Mexican politics would never end. Investor confidence was pretty low and lawlessness was a constant worry.

The bleak financial news and security risks preyed on people’s minds, but there were some notable compensations, principally the idyllic beaches and a world-class cuisine. Today, high-levels of crime continue to scar the nation, but the country has undergone an economic transformation – and one that has not been confined to the urban and industrial centres in Mexico City and Monterrey, where gleaming office blocks dominate the skyscape.

Since the PRI lost power in 2000, successive governments have worked hard to forge trading relationships with some 44 countries, as far afield as Israel and Japan. The previous perception of a tourism-and agriculture-based economy no longer holds. The country has diversified to include a variety of sectors from chemical, telecommunications and automotive, to energy to name just a few.

 

Taking the lead
Mexico is recognised as the leading emerging market in Latin America, while top Mexican companies are significant players across the Americas, Europe and Asia through a wave of mergers and acquisitions over the last decade. Increasingly, they are helping to drive growth in these markets. CEOs of top local conglomerates I speak to enthuse about the opportunities they have forged by connecting and partnering with research and development centres and companies in the UK, Germany and Switzerland.

Some question whether the recent economic progress, albeit sluggish of late, can be maintained following the election victory in July of the leftist Andres Manuel Lopez Obrador (popularly known as AMLO, an acronym of his initials). His key campaign theme was curbing corruption, which remains a national scourge. More broadly, though, Mexicans are still trying to gauge what his leadership will mean for the country, in particular its impact on foreign investors in the energy sector.

AMLO has sought to salve business fears over the direction he will take by insisting there will be no nationalisation and promising fiscal discipline. But over time he will come under pressure from his support base of those “left behind” by the country’s revival to introduce populist measures. He has already pledged to double pensions when he officially takes office on 1 December.

Indeed, the business community remains nervous about possible attempts to reverse previous administrations’ reforms, many of which have helped Mexico to make some important advances, not least within the telecommunications and energy sectors. However, his critics’ concerns should be tempered by AMLO’s record in office. As mayor of Mexico City in the early 2000s, he proved to be an effective operator, and one would hope that his penchant for organising disruptive political protests during national election campaigns is now a thing of the past.

Fortunately for AMLO, his tenure begins amid some positive developments. The protracted and thorny re-negotiation of NAFTA has been completed. The parties prudently agreed the successor United States-Mexico-Canada Agreement (USMCA) in advance of the new administration being sworn in at the end of year. And the strong economic outlook in the US can only benefit Mexico, as it will continue to be one of Washington’s most important regional trading partners for the foreseeable future.

The trade war between China and the US may also reap dividends for AMLO’s term as US companies look to their immediate neighbour to fill any supply chain gaps. According to the OECD, the Mexican economy is set to maintain its growth rate of over 2% in 2018. The same is forecast to hold in 2019.

 

The benefit of the doubt
In Mexico City and Monterrey it’s business as usual: traffic madness, buoyant trade, and deals still getting done. Looking ahead, there is no doubt there will be a shift in the new government’s approach to ensure the needs of AMLO’s support base are met, but there is likely to be a strong dose of pragmatism and deal-making when addressing the various challenges ahead. In all probability, AMLO will balance the needs of his constituency with keeping the political elite and business community onside.

Critically, the international investment community, for now at least, appears to have given the president-elect the benefit of the doubt, despite all the background noise and fears over the reversal of reforms. Building a consensus is the key going forward, and AMLO will be well advised to maintain close relations with foreign investors, and local business leaders in general, however much his supporters might protest.

The sentiment on the street is that he has shown enough to be trusted to move the economy in the right direction. Nearly twenty years on, in the trendy coffee shops, restaurants and bars of the capital’s upscale districts of Polanco and Roma there is little talk of escaping the city – quite the reverse in fact.

 

International Investment / Jonathan Clare / October 22

 

How President Trump’s Trade Deals Could Lift the US Economy

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Market Realist / Mark O’Hara / October 8

Trade deals

President Donald Trump has long lashed out against existing trade deals, calling them unfair to the United States. The Trump administration has been working to renegotiate several trade deals, and the focus has been on reducing the country’s massive trade deficit by moving its manufacturing onshore.

UMSCA

The Trump administration has used tariffs as well as tariff threats to obtain trade concessions. Less than halfway into his presidential term, Trump has renegotiated NAFTA and KORUS FTA (the United States–Korea Free Trade Agreement).

Under the new NAFTA—renamed USMCA (the United States–Mexico–Canada Agreement)—the United States is expected to gain access to Canada’s historically protected dairy industry. It also calls for more regional content in automotive manufacturing.

Under the new KORUS terms, South Korea relaxed the norms for automotive imports from the United States. It also agreed to a quota to obtain long-term exemptions from the Section 232 steel tariffs in the United States (QQQ).

Section 232 tariffs

Trump’s trade rhetoric has received support as well as opposition. Retail and tech giants such as Walmart (WMT), Alphabet (GOOG), Apple (AAPL), and Amazon (AMZN) are lobbying against these tariffs. However, the new trade deals have allowed the Trump administration to obtain incremental benefits that are expected to support US jobs. We’ve seen plant restarts in the US steel and aluminum industry after the Section 232 tariffs were implemented.

 

Market Realist / Mark O’Hara / October 8

 

USMCA: Who are the winners and losers of the ‘new NAFTA’?

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Washington Post / Heather Long / October 1

Trump and Trudeau can tout this as a major victory ahead of key elections in their countries. It’s a lot less clear whether ‘NAFTA 2.0’ is good for Mexico and U.S. automakers.

The United States, Canada and Mexico finalized a sweeping new trade deal late Sunday, just hours before their Oct. 1 deadline. President Trump was up early Monday tweeting that the agreement is “a great deal for all three countries,” and Prime Minister Justin Trudeau said Sunday night that it was a “good day for Canada.”

The deal is expected to take effect around Jan. 1, 2020. Congress has to approve it, a process that will take months, but confirmation looks likely, given that Republicans are pleased Canada got on board and some Democrats are pleased with the stronger labor provisions.

Here’s a look at who’s smiling — and who’s not — as the world sees this news.

Winners:

President Trump. He got a major trade deal done and will be able to say it’s another “promise kept” to his voters right before the midterm elections. And he won the messaging game — he persuaded Canada and Mexico to ditch the name “NAFTA,” for North American Free Trade Agreement, which he hated, and to instead call the new agreement “USMCA,” for United States-Mexico-Canada Agreement. It’s not a total trade revolution, as Trump promised, but USMCA does make substantial changes to modernize trade rules in effect from 1994 to 2020, and it give some wins to U.S. farmers and blue-collar workers in the auto sector. Trump beat his doubters, and his team can now turn to the No. 1 trade target: China.

Prime Minister Justin Trudeau. There might not be a lot of love lost between Trump and Trudeau, but in the end, Trudeau didn’t cave much on his key issues: dairy and Chapter 19, the treaty’s dispute resolution mechanism. Trudeau held out and got what he wanted: Canada’s dairy supply management system stays mostly intact, and Chapter 19 remains in place, a win for the Canadian lumber sector. On dairy, Canada is mainly giving U.S. farmers more ability to sell milk protein concentrate, skim milk powder and infant formula. On top of the substantive issues, Trump went out of his way to criticize the Canadian negotiating team in the final days of deliberations, which Trudeau can play up as a sign of just how hard his staff fought on this deal.

Labor unions. This agreement stipulates that at least 30 percent of cars (rising to 40 percent by 2023) must be made by workers earning $16 an hour, about three times the typical manufacturing wage in Mexico now. USMCA also stipulates that Mexico must make it easier for workers to form unions. The AFL-CIO is cautiously optimistic that this truly is a better deal for U.S. and Canadian workers in terms of keeping jobs from going to lower-paying Mexico or to Asia, although labor is looking carefully at how the new rules will be enforced. It’s possible this could accelerate automation, but that would take time.

U.S. dairy farmers. They regain some access to the Canadian market, especially for what is known as “Class 7” milk products such as milk powder and milk proteins. The United States used to sell a lot of Class 7 products to Canada, but that changed in recent years when Canada started heavily regulating this new class. USMCA also imposes some restrictions on how much dairy Canada can export, a potential win for U.S. dairy farmers if they are able to capitalize on foreign markets.

Stock market investors. A major worry is over, and the U.S. stock market rallied Monday with the Dow gaining nearly 200 points.

Robert E. Lighthizer. Commerce Secretary Wilbur Ross and Treasury Secretary Steven Mnuchin couldn’t get major trade deals done for the president, but U.S. Trade Representative Lighthizer did. He led negotiations with South Korea on the revamped U.S.-South Korea trade deal (KORUS) that the president just signed, as well as on the “new NAFTA.” Lighthizer is proving to be the trade expert closest to Trump’s ear.

Losers:

China. Trump is emboldened on trade. A senior administration official said Sunday that the U.S.-Canada-Mexico deal “has become a playbook for future trade deals.” The president believes his strategy is working, and he’s now likely to go harder after China because his attention won’t be diverted elsewhere (at least on trade matters).

U.S. car buyers. Economists and auto experts think USMCA is going to cause car prices in the United States to rise and the selection to go down, especially on small cars that used to be produced in Mexico but may not be able to be brought across the border duty-free anymore. It’s unclear how much prices could rise (estimates vary), but automakers can’t rely as heavily on cheap Mexican labor now and there will probably be higher compliance costs.

Canadian steel. Trump’s tariffs on Canadian steel and aluminum remain in place for now, something Trudeau has called “insulting” since the two countries are longtime allies with similar labor standards.

Unclear:

Mexico. America’s southern neighbor kept a trade deal in place, but it had to make a lot of concessions to Trump. It’s possible this could stall some of Mexico’s manufacturing growth, and it’s unclear whether wages really will rise in Mexico because of this agreement. Big energy companies can also still challenge Mexico via Chapter 11, something that could constrain Mexico’s new government as it aims to reform energy policies.

Ford, GM, Chrysler and other big auto companies. There’s relief among auto industry executives that the deal is done, but costs will be high for big car companies: The steel tariffs are still in place on Canada; more car parts have to come from North America (not cheaper Asia); and more car components have to be made at wages of $16 an hour. It remains to be seen how car companies are able to adjust and whether this has long-term ramifications for their bottom lines.

Big business. Many business groups are relieved that Trump got a trilateral deal and didn’t end up tearing up NAFTA entirely, as he had threatened to do. And they like a lot of the trademark and patent provisions. But the details of USMCA include some losses for big business. Some regulatory compliance costs will probably rise, especially for automakers, and big business lost Chapter 11, the investor dispute settlement mechanism that companies have used to sue Canadian and Mexican governments (the one exception is that energy and telecommunications firms still get a modified Chapter 11 with Mexico).

Washington Post / Heather Long / October 1

U.S. turns up pressure on Canada to loosen grip on dairy industry in NAFTA talks

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Calgary Herald / The Canadian Press / September 11

 

WASHINGTON — Canada’s foreign affairs minister says Tuesday’s anniversary of the 9/11 terrorist attacks on the United States should serve as a reminder of the deep ties between the two countries as they haggle over the future of North American free trade.

Chrystia Freeland underlined the anniversary at the start of another day of trade talks aimed at breaking an impasse on a renewed North American Free Trade Agreement.

The renegotiation of the 24-year-old NAFTA, which also includes Mexico and is integral to the continent’s economy, has dragged on for 13 months.

The in-person, high-level negotiations got back underway as events marking the 17th anniversary of the 2001 attacks took place around the U.S., including at the Pentagon with Vice President Mike Pence, not far from where the trade meetings are taking place.

Freeland said the memorials should help to add some context to the ongoing negotiations on free trade that were started at Trump’s behest.

“Maybe that helps us all put into perspective the negotiations that we’re having — and also put into a little bit of historical perspective the importance and the significance of the relationship between Canada and the United States,” Freeland told reporters outside the offices of her counterpart, U.S. Trade Representative Robert Lighthizer.

“At the end of the day we’re neighbours, and at the end of the day, neighbours help each other when they need help.”

Freeland and Lighthizer left the bargaining table Friday without a deal following two weeks of negotiations. She said she spoke with Lighthizer over the weekend and they agreed it would be useful for them to meet again face to face.

“The conversations over the weekend continued to be constructive and productive,” she said.

Freeland will spend Tuesday in the U.S. capital before she heads to Saskatoon to attend Liberal caucus meetings that begin later in the day and run through Thursday.

Lighthizer spent Monday in Brussels for trade discussions with the European Union — preliminary talks that are scheduled to resume later this fall.

Ottawa and Washington are trying to reach an agreement that could be submitted to the U.S. Congress by month’s end. A deal would see Canada join a preliminary trade agreement the Trump administration struck last month with Mexico.

The two sides have so far been unable to resolve their differences over U.S. access to the Canadian dairy market, a cultural exemption for Canada and the Chapter 19 dispute resolution mechanism.

A Canadian source with knowledge of the NAFTA discussions says an agreement is within reach, but getting there will require flexibility from all sides.

Prime Minister Justin Trudeau said during an interview Tuesday with a Winnipeg radio station, CJOB, that there are certain positions Canada has and remain firm on. But he said the Liberals plan to be flexible on other issues in order to get a deal.

“It’s time to update this deal after 25 years. We’re just going to stay working constructively to get to that win, win, win that we know is there,” he said in the interview.

There is another wild card in Washington: hurricane Florence, a monster Category 4 storm that’s bearing down on the U.S. east coast and is sure to make its presence felt in the national capital area later in the week.

 

Calgary Herald / The Canadian Press / September 11

 

AGRICULTURE, ECONOMY, GDP, INTERNATIONAL TRADE, TRADE WARS Last week in economy: Indian rupee slides while US dollar stabilizes after Trump secures Mexico trade deal

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Qrius / Pavas Gupta / September 3

 

Last week heralded further woes for the Indian economy as the rupee touched its lowest-ever-level of 71 against the dollar. At the same time, GDP forecasts stood at an all-time-high of 8.2% in 2018-19’s Q1. On the other side of the world, the US and China agreed to overhaul the NAFTA deal, bringing relief to the dollar. Read on to know more about what’s been up in the economy, outside and at home:

Indian Rupee slides to record-low at 71 against the greenback

On Friday, the rupee hit an all-time-low at 71 against the US dollar. The primary reason identified behind the drastic drop is persistent demand for the dollar amid rising crude oil prices. This is further reinforced by weak exchange rates of almost all Asian peers of the rupee. Per Forex dealers, the dollar’s strength against its rival currencies on expectations of rising interest rates amid lingering Sino-US trade tensions also weighed on the Indian fiat. To add to all these factors is the growing fear about rising inflation and consistent outflow of foreign funds from the domestic equity market.

“[The] Indian rupee has depreciated around 11 per cent year to date. Higher crude oil prices, demand from defence and oil marketing firms have contributed to the latest bout of weakness. Rupee was overvalued on trade weighted real effective exchange rate. Robust FDI flows in e-commerce companies, healthy forex reserves may limit the downside of the rupee”, said VK Sharma, Head Private Client Group & Capital Market Strategy, HDFC Securities.

US dollar steady post US-Mexico agreement to overhaul trade deal

After the United States and Mexico agreed to overhaul the North American Free Trade Agreement (NAFTA), volatility in the dollar cooled down; the currency is now steady against the euro and a basket of other major currencies. The overhauling of the deal brought optimism amidst global trade tensions.

The agreement to overhaul NAFTA exerted pressure on Canada to consent to new terms with the aim of preserving a three-nation pact.

“[The deal] would be positive for the Canadian dollar, Mexican peso, these currencies that have been sold on the back of higher trade tensions,”, said Shusuke Yamada, currency and equity strategist at Bank of America Merrill Lynch in Tokyo. “Overall, that would be negative for the Japanese yen and the US dollar. That’s positive for the risk assets in general,” he added.

On Tuesday, following two sessions of losses, the dollar index, which gauges the fiat’s performance against six other currencies, fell nearly flat. Later, it edged 0.05% higher to 94.834, making up for the earlier losses.

Ever since it hit a high on August 15, the dollar has fallen more than 2%. This comes amidst US President Trump’s criticism of the Federal Reserve for raising interest rates while the US government attempted to boost the economy.

India poised to become world’s fifth-largest economy in 2019

Finance Minister Arun Jaitley, on Thursday, said that India is expected to outstrip Britain to don the title of the world’s fifth-largest economy in 2019.

“This year, in terms of size, we have overtaken France. Next year we are likely to overtake Britain. Therefore, we will be the fifth largest [economy],” he asserted. Further, he said that the other economies of the world were growing at a much slower rate, adding that India had the potential to rank among the top three economies of the world within a span of 10-20 years.

India’s GDP growth at 8.2% in Q1 of 2018-19

In the first quarter of the 2018-19 fiscal year, ending June 30, India’s economy performed at an impressive rate of 8.2%. This marks India’s highest growth rate since the first quarter of 2016. Gross Domestic Product (GDP) growth was backed by a strong core performance and a healthy base.

These growth figures will be factored in by the monetary policy committee at its next review, which is scheduled for October 3-5.

The sectors of the economy that registered a growth of over 7% include ‘manufacturing, electricity, gas, water supply and other utility services’, ‘construction’, and ‘public administration, defence and other services’.

Foodgrain output to reach new heights in 2017-18

Foodgrain production in India is expected to grown to an all-time-high of 284.83 million tonnes in the 2017-18 crop year, which ended in June. According to the Agriculture Ministry, this burst in output is fuelled by record production of wheat, rice, coarse cereals and pulses after a normal monsoon cycle.

The previous record was pegged at 275.11 million tonnes, in the 2016-17 crop year.

In the Ministry’s fourth advance estimate released on Tuesday, it revised, in the upward direction, the total foodgrain production by 5.3 million tonnes from the earlier projection of 279.51 million tonnes for the current crop year.

“As a result of near normal rainfall during monsoon 2017 and various policy initiatives taken by the government, the country has witnessed record foodgrain production in 2017-18,” the ministry said in a statement.

 

Qrius / Pavas Gupta / September 3

 

Oil industry encouraged by Trump’s trade deal with Mexico

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Washington Examiner/ John Siciliano / August 27

 

President Trump’s announcement with Mexico on Monday is being taken as an encouraging sign by the U.S. oil and natural gas industry.

“We are encouraged that negotiators have reached a preliminary agreement to modernize our trade relationships,” said Mike Sommers, the new president and CEO of the American Petroleum Institute, the oil industry’s top lobbyist in Washington.

“America’s natural gas and oil industry depends on trade to continue to grow U.S. jobs and our economy, and deliver for consumers,” he added.

Trump announced Monday morning that progress had been made toward a deal with Mexico on renegotiating the North American Free Trade Agreement. Negotiations with Canada, the final piece in the agreement, are still ongoing.

Trump called it a “big day for trade” and the nation in an Oval Office announcement in which he teleconferenced with outgoing Mexican President Enrique Pena Nieto.

Energy has been a key aspect of the negotiations on a revamped version of NAFTA. However, no announcement on energy trade was made on Monday. The agreement with Mexico centered on ensuring that a higher percentage of automobiles sold in North America are made with parts produced on the continent.

Negotiations on an update to the free trade agreement had stalled in recent months amid disagreements over, among other things, provisions related to the automotive and energy industries. U.S. and Mexican negotiators, however, had made breakthroughs on those issues ahead of Monday’s announcement.

Jesus Seade, the incoming Mexican government’s chief NAFTA negotiator, said Sunday the energy issues have been “ironed out,” without going into detail, Reuters reported.

Mexico has become a large importer of U.S. natural gas and oil in recent years. Energy Secretary Rick Perry had visited Mexico ahead of Monday’s announcement. He was there to discuss “how the U.S. and Mexico can continue to work together to make North America a world-wide leader in energy production and exports,” Perry said last week in a tweet.

 

Washington Examiner/ John Siciliano / August 27

 

Trump deal with Mexico eases fears of trade wars, offers template to end other conflicts

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Market Watch / Jeffry Barthash / August 27

 

That sound of ice thawing? It’s the Trump administration’s tentative deal with Mexico to rewrite the controversial Nafta free-trade pact, the first clear evidence the White House is willing to compromise on its hardline demands and avert ruinous trade wars.

News of the deal sent U.S. markets surging Monday. The Nasdaq Composite IndexCOMP, +0.17%  topped 8,000 points and the S&P 500 SPX, +0.06%  index almost hit 2,900, both touching record highs. The Dow Jones Industrial AverageDJIA, +0.15%   jumped nearly 260 points to surpass 26,000.

Details of the pending agreement are sketchy for now. Senior White House officials suggested the new pact would result in more new cars and trucks being made in the U.S. using steel and other materials produced in North America. That was one of President Donald Trump’s chief goals.

Other key provisions could lead to higher wages for Mexican auto workers and even give them greater rights to unionize, moves meant to reduce the incentive for U.S. automakers to shift operations south of the border due to lower labor costs.

The new agreement also puts greater emphasis on crafting rules to govern the “digital economy” and protect copyrights and intellectual-property rights, areas in which the U.S. is a global leader.

“I think this is an extremely historic time,” said Robert Lighthizer, the chief U.S. trade negotiator, in a call with reporters. “We had a Nafta agreement that got seriously out of whack … and needed modern updating.”

A deal is far from done, of course. Canada is the third country that was party to the original North American Free Trade Agreement signed in 1994, but negotiations have been at a standstill. The White House hopes Canada will now rejoin the talks and quickly join with the U.S. and Mexico to ratify a successor agreement to Nafta.

“We hope that Canada can join in now,” Lighthizer told reporters Monday. Talks are expected to resume soon, and at this point, it’s unlikely that any Nafta successor would be voted upon until the next Congress convenes in early 2019.

The Canadians and no doubt the Europeans and Chinese are likely to comb over the details of the agreement. The U.S. is sure to use the deal with Mexico as a template for negotiations in talks with other countries to update trade rules that Trump has long complained are unfair.

What the Mexico deal also shows, though, is the Trump administration is ready to compromise on some of its toughest demands. The U.S., for instance, dropped its insistence on a hard “sunset” clause that would cause the trade deal to expire after a certain number of years.

“Despite the Trump administration’s intransigence over trade disputes in recent months, it is willing to negotiate in good faith and accept a compromise, which will be welcomed in both China and Europe,” contended Paul Ashworth, chief U.S. economist at Capital Economics.

The new pact calls for the U.S. and Mexico to review an updated North American free-trade deal six years into a 16-year window. The countries could extend the pact another 16 years at any point after that six-year period.

The U.S. also appears to have softened its demand for an end to an arbitration process for determining if a country was violating the trade agreement. Industries in the U.S. mostly support the current process for resolving problems and lobbied the White House to back off.

Yet even if the agreement is not entirely what the White House wanted, the deal with Mexico allows Trump to claim partial victory for his “America First” policy.

What’s more, the deal will go a long way in easing tensions on Wall Street and in Washington that Trump’s tough talk on trade would ignite a conflagration damaging to economies all around the world.

Major industry lobbying group and trade experts were cautiously optimistic after the White House deal.

It’s “a victory for rationality over rhetoric,” said Steve Nelson, a partner at the law firm Dorsey & Whitney and a former state department lawyer.

 

Market Watch / Jeffry Barthash / August 27

 

 

Mexico’s outgoing President Peña Nieto and President-elect Lopez Obrador vow to work together despite differences

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Los Angeles Times / Patrick J. McDonnell / August 20

Mexican President Enrique Peña Nieto and his once-fierce rival, President-elect Andres Manuel Lopez Obrador, on Monday pledged cooperation in confronting the nation’s challenges despite differences on issues such as education reform and a controversial airport project.

Peña Nieto and Lopez Obrador — along with many current Cabinet members and the president-elect’s designated ministers — appeared together at the National Palace downtown and stressed themes of mutual respect.

It was the latest in a series of gestures meant to demonstrate stability and continuity as leftist Lopez Obrador prepares to assume power amid pledges for a far-reaching “transformation” of Mexican society. Peña Nieto has faced widespread unpopularity and the perception that he has been an ineffective leader.

“It is an institutional transition but it is also a respectful transition because we have received help without conditions from the constitutional president, Enrique Peña Nieto,” said Lopez Obrador, who won the presidency after losing in the two previous national elections, in 2012 and 2006.

Peña Nieto, in turn, vowed to do all he could to ensure that “the next government begins its term in a successful fashion.”

Lopez Obrador, elected July 1 in a landslide, is scheduled to take office Dec. 1 for a single six-year term. Peña Nieto was not a candidate in the election as Mexican law bars reelection of presidents.

The two men Monday answered a half dozen questions from the press but didn’t veer from differences on a number of contentious issues — notably national education reform and a planned new multibillion dollar airport for Mexico City.

Lopez Obrador reiterated his vow to review the controversial airport plan — critics say it is too expensive and not needed — and to rescind the current administration’s education overhaul blueprint. The president-elect has said he will seek out views from all sectors on how to improve the nation’s moribund public education system and what to do about the airport proposal.

Education reform was a centerpiece of Peña Nieto’s administration, but it drew fierce criticism from teachers opposed to revised rules to evaluate teacher performance. The new airport, already under construction, was the major infrastructure project of the outgoing administration.

Lopez Obrador and Peña Nieto met July 3, two days after the election, but that was a one-on-one meeting before Lopez Obrador had been legally declared president-elect.

Despite many preelection fears of an economic slide after a Lopez Obrador victory, Mexico’s economy has remained stable and the peso has retained its value against the U.S. dollar and other currencies. The incoming president has vowed to revitalize the sluggish Mexican economy, but has provided few specifics beyond a broad anti-corruption push.

Since election day, Lopez Obrador has generally toned down his often fiery rhetoric— he campaigned relentlessly against what he labeled “mafia of power,” including Peña Nieto’s administration — and has met repeatedly with investors and business interests.

The president-elect has also reached out to Washington and said he would invite President Trump to his inauguration.

U.S.-Mexico relations have experienced turbulence since Trump took office and repeatedly criticized Mexico and Mexicans.

Negotiations are continuing between the United States, Mexico and Canada in crafting a new North American Free Trade Agreement, the three-nation accord that has governed commerce on the continent for almost a quarter century. Trump has assailed the pact as unfair to U.S. interests.

The free-trade regimen is a cornerstone of the Mexican economy. Almost 80% of the nation’s exports go to the United States. Peña Nieto and Lopez Obrador have voiced support for a new trade accord.

Lopez Obrador, who ran on a leftist populist campaign vowing fundamental change, won 53% of the vote, defeating his nearest challenger by more than 30 percentage points. He has vowed to increase social-welfare payments to the poor, make higher education available to all and eliminate deep-rooted corruption.

Lopez Obrador is the first Mexican president to take office with a majority vote since 1988, during the days of dominance by the country’s Institutional Revolutionary Party, known as the PRI.

The PRI’s more than seven-decade hold on the presidency ended in 2000, with the election of Vicente Fox of the right-of-center National Action Party. But Lopez Obrador is the first avowed leftist and first contender from a non-traditional party to be elected president in the 21st century.

Peña Nieto is the current standard-bearer for the PRI, which suffered a humiliating defeat in the July 1 elections.

Lopez Obrador is among a number of left-leaning politicians who abandoned the PRI starting in the late 1980s. Lopez Obrador ran under the banner of his own party, the National Regeneration Movement, known as Morena, which is 4 years old.

Morena — which includes many defectors from the PRI and other traditional parties— not only won the presidency, but garnered major majorities in both chambers of the national legislature.

Despite his party’s newfound dominance at the federal level, Lopez Obrador has repeatedly vowed to run a democratic administration and to reach out to all sectors.

“This government is going to represent all Mexicans,” Lopez Obrador said Monday. “No one will be on the margins of the law or above the law.”

Cecilia Sanchez of The Times’ Mexico City bureau contributed to this report.

Los Angeles Times / Patrick J. McDonnell / August 20