OPINION

Photo: U.S. Department of Labor Bureau of International Labor Affairs

By KELIN DILLON

After a continued period of tension between Mexico, Canada and the United States over Mexican President Andrés Manuel López Obrador’s (AMLO) controversial energy policies, which directly violate portions of the free-trade United States-Mexico-Canada Agreement (USMCA), and his continued public rhetoric against foreign and private investment, López Obrador has now publicly floated the idea of Mexico reneging on the USMCA – an action which, according to sector experts and analysts, could spell disaster for the Mexican economy in the future.

The news comes after López Obrador was reportedly informed by Secretary of Economy Tatiana Clouthier and Secretary of Foreign Relations Marcelo Ebrard about the anticipated results of August 20’s upcoming consultation on Mexico’s purported violations of the USMCA, in which both the United States and Mexico will state their cases and which is expected to end in the favor of the United States.

AMLO then reportedly told U.S. Ambassador to Mexico Ken Salazar that, while he would not break commercial ties with the United States, he would potentially pull Mexico out of the USMCA – something that would, in spite of López Obrador’s perception of the situation, undeniably alter the trade relationship between Mexico and the United States.

López Obrador’s route follows the same path taken by former U.S. President Donald Trump, who previously threatened to withdraw the United States from the North American Free Trade Agreement (NAFTA) if Congress did not approve the USMCA.

According to the United States and Canada, Mexico has violated multiple terms of the USMCA underneath the López Obrador administration, including tangible commitments not to reverse the energy sector, as well as not to treat the United States as a “second-class” partner throughout Mexican policy development and by trying to change already-agreed upon provisions of the multinational treaty.

In turn, López Obrador has cited the USMCA’s Chapter 8 provision, which states that Mexico’s sovereignty of its natural resources is safeguarded.

“López Obrador believes that it is possible to play a gambit with the threat because the United States would be greatly affected in agricultural, industrial and technological matters, as well as in supply chains that have been a priority issue in bilateral talks for more than a year,” said daily Mexican newspaper El Financiero’s Raymundo Riva Palacio.

“The pressure, which can also be interpreted as blackmail, is inspired by Trump’s actions, although López Obrador may be misthinking his strategy,” continued Riva Palacio. “If Trump had to make good on his threat, it would be a serious blow to the United States, indeed, but it would still be the world’s leading economy. If (Joe) Biden does not play the bluff of López Obrador, which is what it seems to be in the background, the Mexican productive apparatus would be disconnected from the North American and would lose the locomotive that gave it growth, wellbeing and stability since 1994.”

Political commentator Enrique Quintana said that AMLO, given his demonstrated resolve to maintain his state-forward energy policies as the status quo without outside intervention, will likely not budge from his perspective, even in the face of the United States’ anticipated victory in arbitration. 

Quintana went on to point out that the United States decision to proceed directly from an informal complaint to a consultation shows the United States has become exhausted in its attempts to resolve the issues between the neighboring countries informally.

According to general director of Integralia Consultores Luis Carlos Ugalde, if AMLO’s rhetoric against private investment and free-trade provisions of the USMCA continues forward, the United States and Canada could respond by placing harsh economic sanctions on Mexico, including increased tariffs and quotas on Mexican exports.

“If the sanctions reach the sums that some experts have estimated, tens of billions of dollars, it is not impossible that López Obrador will consider that this trade agreement is unsustainable because it implies restrictions on our sovereignty,” echoed Quintana. “Under this argument, it is not inconceivable that he would threaten to remove Mexico from the USMCA in case the U.S. government wants to impose tariffs.”

Quintana went on to say: “I do not know if the president is aware of the disastrous impact that this event could have on the economic and financial environment. But, having indirectly suggested that it is a possibility, he suggests that he is not.”