Sat. Aug 24th, 2019

Mexico close to deal with U.S. to lift tariffs; waiting for Canada

3 min read

Mexico is close to a deal with the United States to lift tariffs on steel on aluminum without imposing any quotas on exports, but the country has paused to give Canada an opportunity to work on its own deal with Washington, the chief Mexican negotiator told The Globe and Mail.

The Mexican agreement is largely based on provisions for monitoring and tracking steel and aluminum from other countries to prevent them bypassing U.S. tariffs by shipping products through Mexico, according to Jesus Seade, the country’s chief negotiator on North American trade and its point person on steel talks. He said he’s optimistic Canada can work out a deal with Washington along similar lines.

“I think we are very close to coming to an agreement – which we decided to freeze for a moment to see where Canada is,” Mr. Seade said in an interview with The Globe and Mail in Ottawa.

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Foreign Minister Chrystia Freeland travelled to Washington on Wednesday for Canada’s own talks on steel tariffs with U.S. Trade Representative Robert Lighthizer, as Canadian officials downplayed the prospects of an imminent deal.

Mr. Seade said he discussed the parameters of Mexico’s potential agreement with the U.S. with Ms. Freeland on Tuesday, and he is optimistic Canada can work on a similar track.

“I’m delighted to say that everything that I said seemed to be fine for her, or good for her,” Mr. Seade said. “So I hope there will be a quick negotiation between Canada and the United States.

Crucially, the deal on the table includes no quotas that would restrict Mexican exports of steel or aluminum after tariffs are lifted – a key condition for Canada. The Administration of U.S. President Donald Trump had in past talks suggested that the 10-per-cent tariffs could be lifted if Mexico and Canada agreed to cap their exports at certain levels.

Mr. Seade, Mexico’s undersecretary of foreign affairs for North America, stated unequivocally that Mexico’s working-agreement with the U.S. includes no quotas, with a flat “No.”

He described a deal that seems aimed at easing U.S. concerns in another way, by creating tracking mechanisms for imports of steel for other countries, to determine if other countries – China is presumably the unnamed target – are trying to ship products to the U.S. via Canada and Mexico.

“It means things like establishing a monitoring system. You need to have some kind of follow-up, so there’s some assurance for everyone that things are not going to go haywire all of a sudden,” he said. It would include “a commitment to make sure you don’t get a flood of unfair steel from elsewhere,” he added.

Those provisions are likely to seem particularly attractive to the U.S. now, as its tariff-driven trade war with China heats up – and perhaps explains why the U.S. appears willing to deal now.

It was Mexico that launched a new round of intense talks three weeks ago, and Mr. Seade has met several times with Mr. Lighthizer since, but Mr. Seade said the country decided to pause to check in with Canada. That is partly because Mexico “did not want to repeat the dynamic of the late stages of NAFTA talks last year, he said.

In those talks, Mexico began bilateral talks with the U.S. that essentially hammered out a near agreement – leaving Canada to scramble to settle its issues quickly.

This time, the ratification of the USMCA, the successor to the NAFTA, is a key issue. Both Mexico and Canada have insisted they will not ratify the agreement, concluded last September, until the steel tariffs are lifted. So while Mexico could make its own agreement with Washington to lift the steel tariffs, the ratification of the USMCA would still wait until Canada had a deal.

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