Mexico looks to Europe and beyond for free-trade allies as NAFTA falters
With President Trump threatening to tear up North America’s 23-year-old free-trade agreement, Mexican officials are in Brussels this week trying to upgrade a deal with Europe to soften the hit.
Mexico is not the only U.S. ally forced to look for new friends. Since Washington shrugged off its role as globalization’s biggest cheerleader, Japan also has worked out an agreement with the European Union that is awaiting a final green light.
And after U.S. trade officials blasted the World Trade Organization at a ministers’ meeting in Buenos Aires last week, other nations seem to be doubling down on a defiant response: The globalized model the Americans once championed will survive without them.
“We hope that over the next few days that we will be able to have a positive outcome on Mexico,” said the top E.U. agriculture official, Phil Hogan, who is to meet with Mexican Economy Minister Ildefonso Guajardo on Wednesday.
Apart from the European Union, Mexico is bargaining with Argentina, Brazil and Asia. Meanwhile, Europe is flirting with Latin America, Australia and New Zealand. The efforts were turbocharged by Trump’s free-trade skepticism after he abandoned the Trans-Pacific Partnership, a pan-Asian deal that was a pet project of the Obama administration and included the E.U., Japan and Mexico.
Officials involved in the negotiations say they have been happy to try to salvage the rubble from Trump’s torpedo.
“The E.U. is left as practically the only big player in the global arena without the U.S., so it’s a necessity to conclude agreements,” said Alessia Mosca, the E.U. lawmaker overseeing the Mexico deal for the European Parliament. “For this reason there has been a speedup to the talks.”
Mexico and the European Union already have a free-trade agreement that went into effect in 2000, but that was at the start of the Internet era, and officials say it is out of date. The new talks seek to expand and modernize the agreement, adding previously excluded items such as grains, meat and dairy.
Mexico’s quest for new trading partners represents an insurance policy against economic harm if the Trump administration decides to end NAFTA, because about 80 percent of Mexican exports go north to the United States. And if new tariffs suddenly boosted the cost of imported corn and car parts, Mexico could turn to South America or Europe.
"The strategy is to have alternative suppliers if the U.S. leaves NAFTA, which is not what we want or hope,” said Luis de la Calle, an economist and one of the original NAFTA negotiators.
De la Calle said Mexico hopes to sell juice, fruits and vegetables to Europe.
“Mexico has already made the decision to independently diversify trade,” he said. “There is an appetite for trade agreements, and Mexico is taking advantage of that appetite.”
For now, the talks are hung up on a few remaining issues, including European insistence about labeling rules for fancy foods such as Parmesan cheese. But officials on both sides say they want to reach a bargain, in part to send a message to Trump.
Still, some analysts caution that there is a limit to trade deals, noting also that the United States is hardly alone in its growing wariness of globalization. Nor did the new skepticism originate with Trump — even his Democratic presidential opponent, Hillary Clinton, dropped her support for the Trans-Pacific Partnership during the 2016 campaign after seeing the political winds were against it.
"We have for the past 10 years been in this strange and difficult situation for many countries that for 50 years broadly followed the leadership of America in global trade policy,” said Fredrik Erixon, director of the European Center for International Political Economy, a Brussels-based think tank.
“Now America isn’t there,” he said. “And many countries, including those in the E.U., have difficulties to figure out what to do now.”
Gabriela Martinez and Joshua Partlow in Mexico City contributed to this report.