Guajardo, left: NAFTA roller coaster. Guajardo, left: NAFTA roller coaster.

Given NAFTA threats, MX will have plan B

Economy secretary sees high risk that Donald Trump will pull out of NAFTA

Mexico is preparing a plan B in case NAFTA renegotiations break down, the federal economy secretary said yesterday, describing talks to update the agreement as a “roller coaster.”

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Ildefonso Guajardo told a meeting of Institutional Revolutionary Party (PRI) senators said that the possibility of an impasse in negotiations of the North American Free Trade Agreement should not be ruled out, and asked the Senate to consider an alternative plan for that eventuality.

He told senators that the back-up plan should look at legal reforms that would guarantee access to markets at preferential tariff rates, give certainty and confidence to investors and ensure the defense of rights under World Trade Organization (WTO)  tariff agreements.

Guajardo said that while Mexico had maintained a constructive approach at the negotiating table and that he considered the first round of talks a success, he had taken into account the prospect that a deal might not be made.

“Nobody sits down to negotiate without having a possible exit in mind in the face of an insurmountable challenge because that way you wouldn’t be negotiating. If you don’t have an alternative, an additional plan, there is no way to sit down to negotiate.”

He asserted that a scenario without NAFTA should neither be overstated nor underestimated but rather carefully analyzed and prepared for. Without the agreement, Mexico could export half its goods to the U.S. without triggering tariffs, he explained.

The other half would face tariffs of 3% given Mexico’s favored-nation status although taxes on some vehicles could go as high as 25%.

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The announcement that Mexico is preparing an alternative trade plan comes after President Donald Trump’s declaration on social media that NAFTA is the “worst trade deal ever made” and the U.S. “may have to terminate [it].” He has threatened three times this week to abandon the agreement.

Guajardo made a lightly-veiled attack on Trump’s propensity to use Twitter to air his views.

“I’ve said it a thousand and one times, this is not going to be easy. The start of the negotiations will be like a roller coaster, there will be good days, bad days and worse ones [but] fortunately the Mexican economy has understood that a negotiation is not settled in 140 characters.”

It follows a Foreign Affairs Secretariat statement on Monday that Mexico would not conduct trade negotiations through social networks.

Guajardo told the business newspaper El Economista this week that “there is a risk, and it’s high” that Trump’s government would ditch NAFTA.

Mexico is hosting trade talks this week with Brazil and there will be additional trade meetings with Australia and New Zealand.

Some Mexican experts believe this country’s trade with the U.S. would survive should NAFTA be terminated, Reuters reported. “I don’t think it’s going to make that much of a difference in terms of the trading relationship,” said Andres Rozental, a former deputy foreign affairs secretary. “If we have to go to WTO tariffs, for us it’s fairly straightforward.”

The second round of NAFTA talks will commence Friday in Mexico City.

Source: Milenio (sp), Reuters (en)

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  • DeplorableVI

    We need to expand nafta and Mexico knows it. We have other neighbors other than Mexico and Canada.

    • Gerald R Meyers

      So does Mexico, they are loved by most south American countries, can’t say that for the usa

    • john

      That was the TPP agreement that is in limbo with Trump.

    • Mexico has free trade agreements with the European Union and 45 other countries. The US is more vulnerable than Mexico. If NAFTA is abandoned, the GATT will kick in.

      • DeplorableVI

        Being the country with the lowest cost of labor is a poor economic model.

        • Correct. This was exactly what those of us who were opposed to NAFTA before it took effect were saying. Mexico, instead of being industrialized, will be come an outsource for cheap labor that will have the effect of suppressing and maintaining suppressed wages in the entire country. Foreign maquiladoras had a better deal before NAFTA – they could import any raw materials from anywhere without duty or IVA conditioned on the final export of the product. They could not compete in the Mexican market, but the program allowed them import from anywhere and not just the 3 NAFTA countries. Remember there were very high tariffs on any product from the US into Mexico – the Mexican market was essentially closed to the US for 4 decades. While NAFTA gave legal certainty to investors and business people on both sides of the border through its dispute resolution and arbitration elements, it did not adequately restrict the US from subsidizing agriculture which cause severe damage to the Mexican agricultural industry. We will see what happens in the 2018 election, if Lopez Obrador wins NAFTA will either be eliminated or the US will find a much tougher government to bargain with. The actions the Mexican government is taking now will have a lasting effect on trade with the US. By signing agreements to purchase grains, corn, rice, soy from Brazil and Argentina and the new trade agreements with the TPP partners and the modifications to the free trade agreements or new agreements with the EU, Israel, Australia and the UK, Russia and China, Mexico will be able to take a more historic posture with the US. One thing that should be clear to Mexico from the history between the two nations is that the US has never been a reliable friend to Mexico and has more often than not been an adversary. The US invaded Mexico 14 times and took half of its territory – it is time to bring that history to play in any treaty or agreement.

  • Bob in exile

    Looking at this from another direction, Many farmers in Mexico have went bankrupt because of NAFTA and migrated to the USA in search of jobs to support their families. Big Farm operators are the winners in NAFTA. When the USA gets produce from them they INSIST that it be Primo #1 condition and the best, no seconds or misfits. The results are higher prices for Mexican citizens in their own markets. So if Trump terminates NAFTA prices will inflate in the states and drop (at least for the average citizen) in Mexico. Already Mexico is looking to buy rice in Brazil and other South American countries. Trump is going to cut off his nose because he doesnt like his own face.
    Maybe China will start supplying goods to the USA… oh !! they’re already doing that.
    By the way… who is going to reconstruct Houston??

    • iskinder

      About two months ago Mexico bought corn from Brazil and sold most fo wour avocado harvest to japans and many other countries (a real success story)……….Why would MX deal with a hostil rude partner when there is a whole world out there will to deal with Mexico? … Have Trump’s friends reconstruct Houston.

    • You are correct – when the Mexican market was opened to US agriculture products, Mexican farmers could not and cannot compete with the subsidized US industrial farms. Corn, Soy, and other grains could no longer be produced at competitive prices only labor intensive crops can compete. Mexico by signing agreements with Argentina and Brazil to purchase corn and soy will put Mexico in a better position if NAFTA is abandoned. The amount of grains produced will increase each year until the US can be eliminated as a supplier.

      • Bob in exile

        I agree, I’ve lived in Mexico for 49 years, am now a citizen and I saw this coming, hopefully Mexico can break away from being so dependent on the USA.
        Nice to see someone with a brain.
        I live in Apizaco, Tlaxcala. If you ever get down this way look me up. My wife and I are accredited toutist guides here. Bob Cox

        • google me, I have dual nationality and am a Mexican attorney

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