U.S., Mexico Agree On Preliminary Trade Agreement
The U.S. and Mexico announced a preliminary agreement in principle on Monday that may replace or update the nearly 25-year-old North American Free Trade Agreement (NAFTA). It must still be approved by Congress, and Canada is expected to join the talks once the bilateral issues between Mexico and the U.S. are resolved.
The agreement primarily focuses on manufacturing, agriculture and 21st-century issues like intellectual property, digital trade and financial services, among other areas. The new rules on textiles are most likely to be of interest to the promotional product industry. The Office of the U.S. Trade Representative (USTR) says that the deal’s provisions “incentivize greater United States and Mexican production in textiles and apparel trade, strengthen customs enforcement, and facilitate broader consultation and cooperation on issues related to textiles and apparel trade.”
The trade agreement is expected to promote greater use of made-in-the-USA fibers, yarns and fabrics by limiting rules that allow for some use of non-NAFTA inputs in textile and apparel trade, and by requiring that sewing thread, pocketing fabric, narrow elastic bands and coated fabric, when incorporated in apparel and other finished products, be made in the region for those finished products to qualify for trade benefits.
The agreement also establishes a textiles chapter for United States–Mexico trade, including textile-specific verification and customs cooperation provisions that provide new tools for strengthening customs enforcement and preventing fraud and circumvention in the sector. The textiles chapter provisions are stronger than those in the original NAFTA agreement with respect to both enforcement and incentivizing North American production of textiles.
The trade agreement, if approved by Congress, would last for 16 years and be reviewed every six years. It does not affect the steel and aluminum tariffs already in place on imports from Mexico.