MEXICO CITY – Mexico’s Senate ratified on Wednesday a trilateral trade deal meant to supersede the North American Free Trade Agreement (NAFTA), which came into force in 1994.
The senators gave their approval to the United States-Mexico-Canada Agreement (USMCA) by a vote of 114-4 with three abstentions on the second day of an extraordinary session, making the Aztec nation the first of the three partners to ratify the deal.
US President Donald Trump triggered the renegotiation process – launched in August 2017 – by threatening to pull out of NAFTA, which he slammed for destroying American manufacturing jobs and causing large trade deficits with Mexico.
The parties signed the trade deal on Nov. 30, 2018, the last day of former Mexican President Enrique Peña Nieto’s six-year administration.
It still must be ratified by the other two countries’ legislatures before taking effect, with approval by the Democrat-controlled US House of Representatives expected to be the biggest hurdle.
A key change in the USMCA is a requirement that 75 percent of cars be made in North America, up from 62.5 percent under NAFTA.
Additionally, between 40 percent and 45 percent of a vehicle’s content must be produced by workers who earn at least $16 per hour, a stiffer requirement that could lead to more cars being manufactured in the US and Canada as opposed to low-wage Mexico.
The deal also offers US dairy farmers greater access to the Canadian market and includes new provisions regarding e-commerce and intellectual property rights.
In the Mexican Senate, the act to implement the USMCA stated that since NAFTA went into effect 25 years ago Mexico’s trade with North America and with the rest of the world has increased by 5.4 times and 6.8 times, respectively.
It also said Mexico has positioned itself as an attractive destination for foreign direct investment, having received FDI totaling $539.87 billion over the 1999-2018 period.
One of the main achievements of the USMCA, the act read, is that it will “maintain free trade for all goods originating in the region, meaning that Mexican exports of this type will continue to enjoy preferential access and will remain exempt from tariffs in US and Canadian markets.”
The trade deal is subject to review every six years and will be in effect for a renewable 16-year term.
The ratification process in Mexico, which only required a majority vote by the Senate, began on May 30 when leftist President Andres Manuel Lopez Obrador submitted a petition to that effect to the upper house.
At that time, Lopez Obrador said the trade deal should be regarded as separate from the immigration issue and Trump’s desire to build a wall on the US-Mexico border to halt the flow of mostly Central American undocumented migrants.
“They’re two important issues. First, the issue of the treaty, which is what we’re resolving now and I hope will be definitive because it’s in our interests. And the other issue is the migration phenomenon, and on this we’re going to continue insisting on addressing the causes and seeking a bilateral development cooperation agreement,” he said.
But doubt was cast on Mexico’s ratification of the USMCA later that same day, when Trump threatened to impose escalating tariffs on all Mexican exports in the coming months (up to a level of 25 percent by October) if Mexico did not take aggressive steps to halt illegal immigration.
Trump, however, agreed on June 7 to suspend that threat, saying a deal had been reached with Lopez Obrador’s administration that included a series of measures to be carried out by Mexico, including a commitment to deploy 6,000 members of a new National Guard force to its southern border with Guatemala.
Under the terms of the agreement, the results of those migration-reduction measures were to be evaluated after a period of 45 days. If the US concludes that they have not had the desired effect, talks to determine additional steps will then commence.