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Trump’s Damocles Sword Keeps Swinging


U.S. President Donald J. Trump. Photo: Flickr

By RICARDO CASTILLO    

Despite the fact that U.S. President Donald Trump keeps swinging his Damocles sword over the trilateral talks, aimed particularly at Mexico and Canada, the sixth round of negotiations in Montreal officially kicked off on Sunday, Jan. 21, and will extend through Jan. 29.

U.S. Trade Representative Robert Lighthizer keeps repeating what he has been saying all along since the North American Free Trade Agreement (NAFTA) renegotiations started last year: He wants to deliver a document to his president  he will approve. And, of course, “losing patience” has been one of the constants of the U.S. negotiators.

Naturally, though the negotiations are taking place right now, it will come as no surprise if, during this coming week, U.S. President Donald Trump explodes in frustration, given the short-lived but tedious U.S. government shutdown wrought by the Democrats. And, surely, he will vent this frustration through swings at his favorite punching bag, NAFTA.

The punch will be thrown as the negotiating ministers of Mexico, Ildefonso Guajardo, and Canada, Chrystia Freeland, meet with Lighthizer, who will expect Mexico and Canada to ease down their rhetoric and adapt less stringent positions. One potential new posture – seen in Mexico as a real possibility – would be for Guajardo to accept an increase of U.S. participation in auto parts, and though it is not expected to be the 80-plus percent The Donald wants, it would be considerably higher than what it is now.

We have no figures at this point because the negotiations are being kept secret until the three nations come up with a definite agreement, particularly on the prickly issue of Rules of Origin, which is – according to hearsay – being left for future negotiations.

Last Friday, the U.S. bank J.P. Morgan issued a statement saying “Mexico, the week ahead: Next week should prove quite eventful.” The institution claims were issued without any further specifics.

J.P. Morgan, however, also stated that negotiations are now heading “in the right direction,” but the “leading risk” (a whim by Donald Trump) “will probably remain very high.”

Another speculation Mexican economists are tossing around is that inflation will finally begin to ease downwards, dropping from 6.8 percent at the end of 2017 to 5.5 percent by the end of January. Again, this is all spec.

Also, the peso-dollar currency exchange dropped down markedly to 18.58 pesos per greenback and it appears to be in a definite downward trend, which certainly helps negotiators.

The reason why inflation will drop down significantly is that the Mexican President Enrique Peña Nieto administration did not slap gasoline and diesel prices with further taxes at the start of 2018, the way it did a year ago, provoking a very scary – for the government – violent reaction all over the nation. And, indeed, protesters were correct because that price increase – taxes up to 40 percent – proved to be inflationary.

But for now, the negotiators are dealing with the softer issues on the agenda, such as energy (which was not discussed in the first NAFTA accord), investment, financial services and agriculture, among others.

A significant upward sign in the negotiations was that the sixth round was slated to start on Jan. 21, but backroom wheeling and dealing began last Friday. This shows that negotiators are eager to come up with and deliver positive results to the three negotiating ministers, who will meet on Monday, Jan. 29, for final discussions of the negotiating round.

Another threat that looms over the negotiations is the ongoing electoral year in Mexico in which the nation will choose a new president. Some of the candidates are calling for stopping the NAFTA negotiations and putting them on hold until after election day on July 1. But, of course, that’s an issue that’s not having an immediate response from the current administration, since Economy Secretary Ildefonso Guajardo wants to wrap negotiations up and leave them ready for the next president.

Whatever happens between now and the end of negotiations has yet to be seen as, again, all results in the 25 different chapters of the treaty are being kept top secret until they are made public for approval by the congresses of the three different nations.

Until then, the only certainty is that Trump’s Damocles sword will keep on swinging over NAFTA, even if some people in Mexico claim things are looking good.

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Categories: Finance, Mexico, Mexico-U.S. relations, OpinionTags: , , , , , , , , , , , ,

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