Trump sets stage for Nafta overhaul with US-Mexico 'understanding'

U.S. and Mexico make NAFTA breakthrough, increasing chances of final deal

WASHINGTON-In a major advance in NAFTA negotiations, the US and Mexico have come to a preliminary deal on new North American rules for automotive manufacturing and on other key issues, USA news outlets reported on Monday. On a midday call with reporters, he said administration officials "hope Canada can join" and predicted the - for now - two-country deal would lead to a "rebalancing" of the U.S. -Mexico trade relationship. Progress between Mexico and the United States is a necessary requirement for any renewed NAFTA agreement.

In the Oval office Monday, Trump says he will be "terminating" NAFTA to pursue a deal with Mexico, and said he would call Canadian Prime Minister Justin Trudeau "very soon" to negotiate a new trade deal.

Both the U.S. president and the Mexican president, Enrique Peña Nieto, said they had an understanding and thanked each other during a phone call listened into by reporters.

The breakthrough between the US and Mexico involved an agreement on the amount of North American content a vehicle must have in orderto pass duty-free across borders. He also said talks with Canada have yet to begin. Rather, it would be a sub-deal that will now be folded into the ongoing three-country talks over the future of NAFTA.

"I told him it was important that (Canada) rejoin the process, with the goal of concluding trilateral negotiations this week".

He added that "given the encouraging announcement today of further bilateral progress between the USA and Mexico, [Foreign Affairs] Minister [Chrystia] Freeland will travel to Washington, D.C., tomorrow to continue negotiations".

Freeland's spokesman Adam Austen said, "We will only sign a new NAFTA that is good for Canada and good for the middle class".

The plan would not contain an automatic expiration for NAFTA as proposed in the prior US demand for a "sunset clause". Both Canada and Mexico, as well as many in the US business community, reject that idea.

Some experts interpreted the administration's signaling about a possible bilateral deal as an attempt to pressure Canada into a swift agreement on revising NAFTA, which the United States administration denied. Asked about whether Mexico would be willing to sign a deal without Canada, a senior Administration official demurred, offering arguments for why the country might want to without saying that it would.

But after a year of intense negotiations to salvage NAFTA, US and Mexican negotiators are keen to seal a new deal before Pena Nieto hands power to President-elect Andres Manuel Lopez Obrador on December 1.

Although the deal will not be finalized immediately, the progress in negotiations comes as a relief to US businesses that find themselves in the middle of trade wars with Mexico, Canada, China and the European Union, The New York Times reported.

The president indicated his administration and Mexican officials will try to sell their Canadian counterparts on the details, but left open the door to one-on-one deals with both countries.

Trump indicated he would take a tough line with Ottawa on autos and dairy tariffs, long a source of tension between the neighboring countries. Canada has not been involved in the negotiations for several months. He previously called it a "terrible deal".

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