Los Angeles Times

WASHINGTON —The Trump administration has reached a deal with Mexico on a rewrite of the North American Free Trade Agreement, but the two sides now need a quick buy-in from Canada, which still has significant issues with some of President Donald Trump’s demands.

The preliminary agreement with Mexico, which includes a tightening of auto rules to increase production in North America, was struck after several weeks of talks and a marathon session over the weekend in Washington.

Trump announced the deal in the White House, and in front of reporters, called Mexico’s outgoing president, Enrique Pena Nieto, to congratulate him on the agreement. Trump, putting Pena Nieto on a speaker in the Oval Office, said the agreement “makes it a much more fair bill.” He suggested renaming NAFTA as the U.S.-Mexico Trade Agreement.

Though Trump characterized the agreement as a bilateral deal that will proceed with or without Canada, Pena Nieto said repeatedly he hoped and expected Canada would come on board. Pena Nieto said on Twitter that he had spoken with Canadian Prime Minister Justin Trudeau and had “expressed the importance of (Trudeau’s) re-joining the process, with the goal of concluding a trilateral negotiation this week.”

Luis Videgaray, Meixco’s foreign minister, said at a press conference at the Mexican Embassy in Washington that while Mexico wants Canada incorporated into the talks, the terms of the U.S.-Mexico deal would stand if for some reason Canada and the U.S. can’t work out an agreement.

In Ottawa, Adam Austen, a spokesman for Canada’s Minister of Foreign Affairs Chrystia Freeland, said in a statement: “Given the encouraging announcement today of further bilateral progress between the U.S. and Mexico, Minister Freeland will travel to Washington, D.C., tomorrow to continue negotiations. We will only sign a new NAFTA that is good for Canada and good for the middle class. Canada’s signature is required.”

Experts said Mexico might be reluctant to move ahead without Canada. “There definitely seems to be a little bit of a gap in terms of how the two countries are talking about this,” said Christopher Wilson, an economist at the Washington-based Wilson Center think tank. “The big conflict he’s creating is with Canada.”

Still, Wilson described the preliminary accord as “important progress.”

He said both countries appeared to have made significant concessions. Most notable was Mexico’s agreement that vehicles made by car makers benefiting from NAFTA include a higher percentage of raw materials originating in North America. “The auto rules of origin was a stumbling block and they’ve found a way to agree on that,” Wilson said.

Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, said the preliminary agreement is more a victory for Trump because it allows him to declare a win on trade ahead of the November midterm elections. “It gives Trump the headlines he wants,” Hufbauer said.

In his call with Trump, Pena Nieto thanked Trump’s chief trade official, Robert Lighthizer, and Jared Kushner, the president’s assistant and son-in-law, who has been interceding during what at times have been strained bilateral relations, in part because of Trump’s insistence that Mexico pay for a wall along the U.S.-Mexico border to curb illegal immigration.

Trump said the U.S. would be negotiating with Canada “pretty much immediately.” But the president, sticking with his playbook of hardball tactics, suggested that if Ottawa doesn’t bend to American demands, he would hit Canada with tariffs on autos.

“It will either be a tariff on cars, or it will be a negotiated deal,” Trump said. “And frankly, a tariff on cars is a much easier way to go. But perhaps the other would be much better for Canada.”

The United States still has significant unresolved issues with Canada, including Trump’s insistence that Canada open up its dairy market. Referring to Canadian tariffs on dairy, Trump said, “We’re not going to stand for that.”

Overall, the U.S. had a trade surplus with Canada in 2017, including goods and services.

Time is of the essence to bring Canada into the deal.

Mexico and the United States want to have a three-way agreement by the end of this month to allow enough time for Mexico’s parliament to ratify a revamped NAFTA before its new president takes office on Dec. 1. That means a three-way understanding must be reached by Friday.

“It will be difficult, but not impossible, to clear all of these hurdles in a week’s time,” said Daniel Ujczo, a trade lawyer at Dickinson Wright who has been closely monitoring the talks. “It is likely that the three NAFTA parties will reach a ‘handshake’ this week that will start the 90-day procedural countdown required before signing the deal.”

With various procedural requirements, the earliest U.S. lawmakers could vote on the deal would be next year, when a new Congress is seated.

U.S. lawmakers reacted cautiously. Sen. Sherrod Brown, D-Ohio, whom Lighthizer has consulted regularly, said that he needed to review the text of the agreement with Mexico. “We still have a lot of work to do to bring Canada on board and write the legislation needed to make any deal a reality,” Brown said in a statement.

Still, a handshake with Mexico was a welcome development after a year of difficult negotiations and repeated threats from Trump to withdraw from the pact. Stocks rose upon news of the agreement.

Canada has said it is open to resuming talks once the U.S. and Mexico have settled their differences, although Trudeau also has noted that Canada would not rush to make a deal that was not in its interest.

Monday’s announcement was widely seen in Mexico as a crucial development in stabilizing the nation’s sluggish economy as the country prepares for a change in leadership.

Still many expressed skepticism about any agreement with Trump, who is an extremely unpopular figure there because of his comments disparaging Mexico and Mexicans.

President-elect Andres Manuel Lopez Obrador, who won a landslide election on July 1, is scheduled to take office on Dec. 1.

Despite his leftist pedigree, Lopez Obrador had said throughout the campaign that he supported the trade pact and would work for its successful renegotiation.

Mexico’s president-elect has signaled that he would like to have the matter largely settled by the time he takes office in December so that he can concentrate on his wide-ranging agenda of domestic “transformation” of the country. The new president clearly did not want to inherit open, contentious negotiations on the matter.

The timing remains tight to put a new deal in place by Dec. 1, pending Canada’s re-entry into the talks and the requirement that Trump give a 90-day notice to Congress.