NAFTA talks will begin August 16 in Washington. NAFTA negotiations will begin August 16 in Washington.

MX seen as winner of first battle in talks

There is some optimism after US document makes no mention of tariffs

Fears that a push from the United States to renegotiate the terms of the North American Free Trade Agreement (NAFTA) would have a negative effect on Mexican exports and the economy in general might prove to be unfounded.

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In fact, the Mexican Institute of Financial Executives (IMEF) believes that Mexico has won the first battle in looming trade talks with its northern neighbor after the U.S. government announced Monday that it would not seek to introduce protectionist measures such as tariffs or new quotas on industrial and agricultural goods entering the country.

The Office of the United States Trade Representative released an 18-page document entitled Summary of Objectives for the NAFTA Renegotiation in which it outlined its goals across a range of areas from digital trade to energy, the environment to investment and anti-corruption measures to currency, among others.

President of the national economic studies committee of the IMEF, Gabriel Casillas, explained that one of the main points for renegotiation from the U.S. perspective will be the rules of origin, which determine whether a particular product gets preferential treatment under the agreement depending on where it was made or produced.

However, some of the measures proposed will benefit not just the United States but Mexico and Canada as well, giving all three an advantage over competitors from other regions of the world.

“To update and strengthen the rules of origin, as necessary, to ensure that the benefits of NAFTA go to products genuinely made in the United States and North America,” is the objective as stated in the document.

No reference is made in the document to a desire to introduce tariffs on imports from either Canada or Mexico, news that is welcomed in Mexico.

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“That there are no tariffs on the discussion table and a free market is maintained is a 50% win for Mexico. It’s probable that in the renegotiation process there will be bumps along the way but in the end it will arrive at a good place,” Casillas remarked.

There are currently more than 16,000 clauses in the 23-year-old agreement, each one dealing with a specific product.

Another objective is “to ensure that the rules of origin incentivize the sourcing of goods and materials from the United States and North America.”

Mechanisms already exist in the agreement that stipulate what percentage of the constituent parts of a product need to be sourced from the North American market in order for protectionist mechanisms not to apply, but the U.S. is seeking to make the rules stricter.

“If you want to make a car in Mexico and export it to the United States we need it to have at least 62.5% of its parts from the neighboring country so that it can pass free of tariffs. On this matter, they want to increase the origin content measures on some products for the benefit of the U.S.,” Casillas explained.

Objectives related to tackling corruption and making labor laws central to a renegotiated NAFTA are also outlined in the document.

Casillas conceded that introducing the changes in those areas might be complicated but that they are not necessarily bad for Mexico.

“They can be seen as a straitjacket to achieve good things, above all on corruption issues,” he said.

IMEF president Adriana Berrocal commented that it would be preferable for NAFTA renegotiations to conclude before Mexico’s presidential election and the United States midterms, both to be held in 2018.

“Both administrations are very conscious of that and are doing what is possible to meet [the requirements] on time. If for any reason it is delayed and it carries over to the next government, there’s not much to forecast now,” Berrocal remarked.

The United States has a trade deficit with Mexico that reached $63 billion last year and the stated objective to “reduce the trade deficit with the NAFTA countries” is seen as a priority for the U.S. in the upcoming talks.

Still, both members of the IMEF remain confident that an agreement that benefits all three members of NAFTA will be reached despite President Donald Trump’s occasional rhetoric and Twitter tirades that suggest otherwise.

A trade attorney and former counsel for international trade at the Economy Secretariat described the document as “very positive.”

“It deals with many of the fears of Mexican officials, particularly on going back to a tariff system . . . . It’s clear the U.S. does not want to move back to tariffs,” Carlos Véjar said in a report by the Financial Times.

U.S. Trade Representative Robert Lighthizer today announced that the first round of negotiations will be held August 16-20 in Washington, D.C. He said John Melle, assistant trade representative for the western hemisphere, will be the U.S.’ chief negotiator.

Source: El Economista (sp), Financial Times (en)

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  • owl905

    The optimism is over-rated. There’s a teeny demand by the US that the current trade dispute resolution be eliminated. They were reviewed and settled by an arbitration process under NAFTA.
    Here’s the key difference, and it looks small. Under NAFTA, imposed tariffs that were rejected by arbitration were rewarded to the aggrieved party. With the US demands, the tariffs will not be rewarded to the aggrieved party. This opens the door to Washington lobbies disrupting trade by getting punitive tariffs enacted – there is no longer a penalty for their behavior.

    • pedrochapala

      what about the WTO? are there similar penalties in their regulations?

      • owl905

        The relapse to no compensation is WTO-level rules. hth.
        The deal is that nearly all the NAFTA complaints trace back to lobbies in Washington getting political knee-jerk complaints. Removing the compensation mechanism for rejected claims will only add to the fire.

        • pedrochapala

          so what else is new. canada has won umpteen times under NAFTA and WTO rulings on softwood lumber and durham wheat and the fucking excited states simply ignores it and does whatever the fuck they want anyway. started their shit again on softwood penalties because of the 19th century efficient lumber lobby in DC. where’s the stupid yanqui consumer and construction lobbies there because that translates into at least another $3000 to build a house to protect a few obsolete yanqui lumber mills. ironically most of the modern plants in canada are owned by yanqui companies and shareholders.-SNORK! around around we go again.

          • owl905

            Interesting point about the extra cost of the house with the punitive tariff on lumber. Do you have a source for that? There was mention of complaints from the US building groups, but they didn’t have a number.
            The place were this hits Mx is in a possible trade war centered on corn and sugar.

          • pedrochapala

            when the shit hit the fan again this time i read it in either the financial or national post which i subscribe to. the same figure was mentioned in a lot of reporting by the canadian media in the previous go round as well.

          • owl905

            So no link.

          • Eric N Schweitzer

            Tell me, do you actually eat with that mouth. Out of disgust I have blocked you. No class.

        • daniel pugh

          Dispute resolution, by an international tribunal, was a deal breaker when NAFTA was first negotiated. Canada was prepared to walk unless that was included. The US caved on that and NAFTA was approved. I expect a similar “demand” this time around.

          • owl905

            This review is from a cdn source and gives a pretty good outline of the position. It would be helpful if someone had some examples of disputes with Mexico and Chapter 19, eh:
            “http://globalnews.ca/news/3608784/nafta-chapter-19-dispute/”

  • TioDon

    “…the Mexican Institute of Financial Executives (IMEF) believes that Mexico has won the first battle in looming trade talks with its northern neighbor”…hahahaha, yeah, you keep believing that.

    • Eric N Schweitzer

      Apparently you get off on Trolling and acting like a 2 y/o. Grow up.

      • TioDon

        Did your Mommy teach you the word “troll”? You seem to like using it. It’s what liberals say when they don’t have an interesting or understandable response.

        • AGGdeQ

          @tioDon, your commentary doesn’t add a single thing to the conversation. As a matter of fact it doesn’t deserve “interesting or understandable response”. IMEF, believes that Mexico won because they were expecting Tariffs, which will be a deal-beaker for Mexico. It shouldn’t be so hard to understand for most people.

  • Proud_Deplorable

    mexico is much less of a threat to the interests of americans than are the libfascist traitors undermining trump and his policies from within his own administration, the congress, and the judiciary.

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