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Guajardo sees 40% chance for NAFTA before election, 80% before US midterms

Tariff threat won't change negotiating strategy

Economy Secretary Ildefonso Guajardo said today there is a 40% chance of achieving an updated North American Free Trade Agreement (NAFTA) before the July 1 presidential election.

“We have a chance of concluding it before the election if the United States understands that this requires balance and flexibility,” he said in a television interview.

“There is a 40% chance of being able to achieve it. After July 1 and before the United States [midterm] elections [in November], I’d raise the probability by approximately another 40%,” Guajardo added.

It’s the second time that the economy secretary has cited an 80% chance of concluding a new deal before a certain date.

Last month, he said that there was an 80% probability that an agreement-in-principle would be struck by the first week of May, also citing flexibility as a key requirement.

Guajardo also rejected the suggestion that there is a rift between him and Foreign Secretary Luis Videgaray over NAFTA.

His denial followed media reports that said Videgaray was pushing for a quick deal while he was holding out for one that is more favorable to Mexico.

Questioned about the United States’ probe into vehicle imports that could lead to new tariffs, Guajardo described the investigation as a “firework” but said that Mexico’s negotiating strategy would not change because of it.

“Whether you believe the threat or not, the negotiation [strategy] is planned for the coming days and [the auto tariff probe] shouldn’t have an influence on that strategy,” he said.

A White House official said yesterday that the move to initiate the probe was partly aimed at pressuring Mexico and Canada to make concessions in order to make a NAFTA deal.

Canadian Prime Minister Justin Trudeau agreed, adding that the investigation’s national security grounds were based on flimsy logic.

However, he told the news agency Reuters that while United States President Donald Trump had floated the idea of greater protectionism, there is no guarantee tariffs will be imposed.

Meanwhile, two sources familiar with the negotiations to update the 24-year-old trilateral trade treaty have revealed details about a proposal Mexico made to the United States in recent weeks in exchange for the withdrawal of some of its toughest demands.

One person told the news agency Bloomberg that Mexican negotiators have made an offer to the U.S. that at least 20% of a car’s value would come from higher paid workers.

President Trump has blamed low wages in Mexican auto plants as a primary cause of auto-sector job losses to Mexico. United States negotiators have been pushing for 40% of Mexican-made light-duty cars and 45% of trucks to be manufactured at US $16-per-hour wages.

Making any commitment on wages through NAFTA was previously thought impossible from a Mexican perspective and the private sector has opposed such a move.

In exchange, the sources said, Mexico is asking the U.S. to withdraw proposals such as limits to its government procurement market, barriers on seasonal exports of Mexican agricultural products and a so-called sunset clause that would force renegotiations of NAFTA every five years.

According to Bloomberg, Mexico’s proposal gives United States Trade Representative Robert Lighthizer “a pathway of potential tradeoffs” in order to reach an agreement.

However, one of the sources said that it is still unclear whether the U.S. is willing to accept it.

Mexican Undersecretary of Foreign Trade Juan Carlos Baker met with Lighthizer’s chief of staff, Jamieson Greer, in Washington Wednesday to discuss ways that an updated deal could be reached, one source said.

Both Lighthizer’s and Guajardo’s offices declined to make any comment about the outcome of the meeting.

A statement issued by the Mexican president’s office said that Enrique Peña Nieto spoke with Prime Minister Trudeau yesterday about NAFTA negotiations and that “he remains optimistic about achieving a free trade agreement that benefits the three countries.”

However, presidential spokesman Eduardo Sánchez told a press conference that Mexico would not be pressured into signing an unfavorable deal.

“Let it be very clear: Mexico is not going to negotiate on the basis of pressure. Mexico is very clear about what works and what doesn’t work for us,” he said.

“If an agreement is reached, it will be one that truly benefits Mexico. If these conditions don’t exist, Mexico will not move forward.”

Source: Milenio (sp), El Financiero (sp), Reuters (en)

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