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.”
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%.
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.