US, Mexico reach preliminary deal to update NAFTA

27 August 2018 19:43 Source:ICIS News

HOUSTON (ICIS)--The US and Mexico have reached a preliminary agreement to update NAFTA, the US Trade Representative (USTR) said on Monday.

NAFTA is the 24-year-old free-trade agreement that includes the US, Mexico and Canada. US President Donald Trump had called for renegotiating the agreement after taking office.

The preliminary agreement covers just the US and Mexico, and it still needs to be implemented.

Some of the most significant updates cover rules or origin.

The update will require that 75% of auto content be made in the US and Mexico, the USTR said.

Another part of the preliminary agreement would set tariffs on agricultural products at zero, the USTR said.

Other updates address the following topics, according to the USTR:

- Intellectual property

- Digital trade

-De minimis shipping values

- Financial services

- Labour

- Environment

The new chapter on intellectual property coverts patent protection, copyrights and trademarks as well as protection for pharmaceuticals and agriculture, the USTR said.

Under the de minimus section, it raises the shipment values to $100 from $50, the USTR said. Shipment values up to $100 would enter Mexico without customs duties or taxes and with minimal formal entry procedures.

The labour chapter calls for the US and Mexico to adopt and maintain rights that are recognised by the International Labor Organization, the USTR said. In addition, 40-45% of automobile content has to be made by workers making at least $16/hour.

The USTR made no indications that the preliminary agreement would take into account the recent energy reforms adopted by Mexico, which opened up the sector to outside participation. Prior to the reforms, only state producer Pemex was allowed to produce crude, natural gas and oil products.

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By Al Greenwood