Guajardo: five-year NAFTA review proposed. Guajardo: five-year NAFTA review proposed.

US withdrawal would not be devastating

Economy secretary disputes claim by US secretary of commerce

Economy Secretary Ildefonso Guajardo has rejected a claim by the United States commerce secretary that a U.S. pull-out from the North American Free Trade Agreement (NAFTA) would be devastating for the Mexican economy.

Wilbur Ross made the claim during an interview with the Wall Street Journal CEO Council on Tuesday.

When asked whether he agreed with the comment in an interview broadcast on Televisa this morning, Guajardo replied, “No, I don’t think so.”

However, he did concede that “Mexico could face a short-term impact” if the U.S withdrew from the 23-year-old deal but added that the country’s “ability to adjust, and the manner in which we do it . . . will allow us to resist any potential change.”

Four rounds of NAFTA renegotiation talks have already taken place and officials from the United States, Canada and Mexico are meeting again in Mexico City this week. The chief negotiators from each country agreed not to attend the fifth round after meeting on the sidelines at the Asia Pacific Economic Cooperation (APEC) forum in Vietnam last week.

The renegotiation process has been characterized by clashes on contentious issues including rules of origin — especially as they apply to the automotive industry — an anti-dumping dispute resolution mechanism and labor laws.

The United States is pushing for greater U.S.-specific and NAFTA country content in order for vehicles to remain tariff-free while both U.S. President Donald Trump and Trade Representative Robert Lighthizer have stressed the need to reverse a US $64 billion trade deficit the country has with Mexico.

Trump has also made repeated threats to leave the agreement if it cannot be renegotiated on terms that are more favorable to the U.S., while Mexico has said that if he initiated the withdrawal process, it would walk away from the negotiating table.

If the talks stretch into March 2018, Guajardo said, the United States must consider whether it wanted the renegotiation process to have an impact on Mexico’s presidential election, to be held on July 1.

Many analysts believe that continuing uncertainty surrounding NAFTA would play into the hands of left-wing Morena Party candidate Andrés Manuel López Obrador, who is currently ahead in polls and seen as the presidential aspirant most likely to stand up to the United States.

Perhaps with that in mind, Guajardo announced one partial concession to U.S. demands yesterday.

He said Mexican negotiators would recommend that NAFTA be rigorously reviewed every five years, although he pointed out that the proposal differed from the so-called sunset clause the U.S. is pushing because it would not automatically kill off the deal if agreement on an updated treaty could not be reached.

The U.S. wants NAFTA to automatically expire if renewed consensus is not reached at the end of each five-year period.

Many in the Mexican business sector believe that the U.S. proposal is bad for trade because it creates uncertainty that could undermine long-term investment and may also clash with domestic electoral processes, leading to decisions being influenced by political expediency.

Guajardo also said that Wilbur Ross’s assessment that the United States is much more important for Mexico than Mexico is for the United States is incorrect.

“I would suggest to the Secretary of Commerce that he ask our friends in Iowa how important their yellow corn or fructose sales in Mexico are, or that he ask our friends in Seattle, Washington, how important it is that Mexico is their biggest buyer of red apples, or that he ask our friends in Detroit how important Mexico is for the purchase and demand of auto parts,” he said.

Source: Reuters (en), El Economista (sp)

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