Here's How the U.S.-Mexico Trade Deal Would Differ From Nafta

(Bloomberg) -- President Donald Trump wants to sign a new trade agreement with Mexico and toss the name “Nafta” into the dustbin of history.

There’s still lots of work to be done -- the administration is calling the deal with Mexico a “preliminary agreement in principle,” and the U.S. is still hopeful Canada will sign on.

Below we outline a few main ways the U.S.-Mexico agreement would differ from the more than two-decade-old North American Free Trade Agreement.

Cars

Rules for auto content were one of the most important and contentious issues during the talks. Vehicles account for the lion’s share of the U.S. $69-billion trade deficit with Mexico that the Trump administration has made the top priority in shrinking.

The new deal would require that 75 percent of car content be made in the U.S. or Mexico, according to a U.S. fact sheet. Under the current Nafta, the so-called rules of origin set a minimum of 62.5 percent. The new accord also adds a requirement that 40 percent to 45 percent of auto content must be made by workers making at least $16 per hour.

Sunset Clause

The U.S. initially proposed a “sunset clause” that would automatically terminate the deal after five years unless the countries opted back in. But the Trump administration softened its demands in recent weeks. U.S. Trade Representative Robert Lighthizer said Mexico agreed to review the trade deal every six years, and if problems can’t be resolved, the pact can be terminated a decade after the review. If one of the parties refuses to renew, a yearly review would take effect in an effort to address the issues.

Intellectual Property

The deal will strengthen protections for U.S. copyright holders, while allowing “safe harbors” for Internet service providers that inadvertently post pirated material, according to the U.S. The current Nafta, which predates the rise of online giants such as Facebook Inc., doesn’t contain much language on how copyright should be handled in the digital age. The Mexico pact also gives 10 years of data protection for producers of cutting-edge drugs.

Labor

Under the new deal, Mexico committed to “specific legislative actions” to recognize workers’ rights to collective bargaining, according to the U.S. The two countries agreed to create separate chapters for labor and the environment; the current Nafta doesn’t cover those subjects in the main body of the agreement.

Tequila, Whiskey

The two sides agreed to a truce on alcohol. The U.S. will continue recognizing tequila and mezcal as distinctive Mexican products, while Mexico will keep recognizing bourbon and Tennessee whiskey. Mexico agreed not to restrict market access to U.S. cheeses labeled with certain names, according to the U.S. Trade Representative’s office.

To contact the reporter on this story: Andrew Mayeda in Washington at amayeda@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Sarah McGregor

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