Mexico urged to seek ambitious Nafta upgrade

Mexico urged to seek ambitious Nafta upgrade

Negotiators told to think big in talks with US over rebooted trade agreement

July 3 2017

Mexico’s government is being urged to push for an ambitious upgrade of the North American Free Trade Agreement ahead of a meeting between Presidents Donald Trump and Enrique Peña Nieto at this week’s G20 summit in Hamburg.

Any Nafta 2.0 should position Mexico as the export platform for a North American bloc in which not only manufacturing but also energy, transport and infrastructure are integrated to boost competitiveness with Asia and Europe, said Luis de la Calle, one of the negotiators of the landmark 1994 accord between the US, Mexico and Canada.

“What objectives should we have? A more competitive North America,” he said. “We can’t confine ourselves to a marginal renegotiation.”

Talks on modernising the accord, which could start as early as mid-August, are the catalyst to “think big”, concurred Luis Rubio, president of the Mexican Council on International Affairs (Comexi). “We must not limit ourselves to what already exists. We have to take advantage of the current situation to do something different,” he said.

Mr Trump, who points to the $64bn US trade deficit with Mexico as proof that Nafta is the worst trade deal ever, came within a whisker of pulling out on his first 100 days in office, but was persuaded to give negotiations on upgrading the $1.1tn trilateral trade relationship a shot.

But time constraints, because of Mexican presidential and US legislative elections next year, have fuelled expectations that negotiations will be confined to just a few changes. They include amendments to the so-called rules of origin — that is, how much of a manufactured article must come from the region to qualify for duty-free access — as well as the inclusion of ecommerce which did not exist in 1994, and beefed up intellectual property rights.

“All the attention in the last weeks has been on what the US wants,” said Mr de la Calle at the presentation of a Comexi study written by respected academics and former officials, on Nafta and future bilateral relations. “Now it’s time to think what should Mexico and Canada want?” 

Mexico has made its red lines clear — no tariffs, for instance — but has so far played its negotiating cards close to its chest, saying only it would rather no deal and a fallback to World Trade Organisation rules than a bad one.

“Mexico is entirely in defensive mode . . . they are looking for a fast deal that reconfirms the status quo,” said Eric Miller, a Washington-based trade adviser and former Canadian diplomat who heads the Rideau Potomac Strategy Group.

The US is required by law to spell out details of its objectives a month before the start of talks — potentially as early as mid-July. “Mexico and Canada are being very smart . . . you don’t want to negotiate . . . until you know where the US is coming from and the full scope,” he said.

Mr Peña Nieto scrapped a planned summit in Washington in January after a Trump twitter outburst. The dynamic between the leaders at their next Hamburg meeting will be highly scrutinised so soon before the two sides’ Nafta Sherpas get down to work.

Mexican officials are resigned to the fact that the US president will trumpet any Nafta upgrade as a triumph for his America First agenda, at Mexico’s expense. But Mexico is the second-biggest market for US goods and will be the biggest within five years, said Mr de la Calle. “It’s very difficult to hurt Mexico without hurting the US,” added another senior government figure. 

Mexico and Canada have both been lobbying hard in the US, but Mexico has more work to do yet, said Agustín Barrios Gómez, who co-ordinated the Comexi study.

“Mexico is much more important to the US now. We were pygmies and now we’re giants, and we’re not taking advantage of this strength,” he said.

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