NAFTA Enters into Last Leg of Renegotiations


Photo: hurd.house.gov

By RICARDO CASTILLO    

A critical stretch of the North American Free Trade Agreement (NAFTA) renegotiations between Canada, the United States and Mexico begins today, May 7, and may or may not last long.

According to U.S. Trade Representative Robert Lighthizer, if negotiators don’t come to a deal in the upcoming three weeks, talks will certainly come to a standstill until the smoke from the upcoming elections in Mexico clear up on July 1 and on November in the United States. In fact, the Mexican Congress stopped meeting last April 30 and the U.S. Congress will come to a standstill on June. This is bad news for the renegotiations since, in the end, an agreement would have to be approved by both congresses as well as the Canadian Parliament.

Mexico’s top negotiator Economy Secretary Ildefonso Guajardo held a press conference last May 1 – Labor Day in Mexico – and he did not sound too upbeat in claiming that a fix is near.

Guajardo said that “if we are creative and flexible enough, we may probably be successful, but that will depend on what’s coming up. I don’t own a crystal ball to know if this set of conditions will align in time. I can’t discard the possibility, but I can’t assure it will come about either.”

In short: Maybe yes, maybe not, maybe who knows.

The biggest sandtrap in the negotiations is the U.S. participation regarding Washington’s input on car-manufacturing demanded by U.S. President Donald Trump, which has been rejected by Mexican automobile assemblies as well as the Mexican Association of the Auto Industry (AMIA). Trump says that the 75 percent rule of origin of U.S. input in auto parts is an unsurmountable stumbling block.

Also, there is the demand that 65 to 70 percent of steel and aluminum be sourced in North America. On these metals, President Trump is still pending a decision – to be made on June 1 – on whether he’s going to slap a countervailing duty on Canada and Mexico. Should Trump do this, it’d would for surely kill the renegotiation process, which a growing number of American businessmen do not want since NAFTA has proved profitable for the three nations, regardless of Mr. Trump’s opinion that it was “the worst negotiated deal” in U.S. history.

According to AMIA president and key “room-next-door” negotiator Eduardo Solís, the U.S. demands mean “locks locking locks.”

Secretary Guajardo said during his press conference that the negotiating team he is leading is preparing new proposals to be made in Washington, but beyond that, the outcome of the negotiations remains a mystery for now.

Of course, ever since the renegotiations started, it was clear that the rule of origin on the auto industry would be a tough hurdle to overcome. It does have to do with the abysmal wage differentials among the three nations, but it is precisely in this differential that negotiators see a potential agreement.

Other potential issues of disagreement besides rules of origin are the seasonal tariffs on agricultural produce, labor wages and the so-called “sunset clause,” that would force an automatic “extinction” of NAFTA every five years.

The good news is that, during the press conference, Guajardo did have some positive comments. One was the “in principle” Free Trade Agreement with the European Union. slated to go into effect in 2019, and the definite acceptance by the Mexican Congress of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP.)

But then, it’s not all milk and honey. Though the Mexican Congress was the first nation to approve CPTPP, there was reticence from the Mexican textile and garment manufacturing sectors, which fear their exports would be damaged by dumping prices due to overproduction in nations like Vietnam and Malaysia. CPTPP will go into effect when it is ratified by six of the 11 participating nations.

No doubt the success of the European accord and CPTPP will depend very heavily on whatever comes out of NAFTA.

And on that, for now, not just Secretary Guajardo but all of the negotiating teams have no crystal ball to foresee what will happen in the upcoming two or three weeks.

Categories: Mexican politics, Mexico, Mexico-U.S. relations, OpinionTags: , , , , , , , , , , , , , , , , , , , ,

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