The News
Friday 24 of May 2024

Pre-NAFTA Jitters

Mexican Economy Secretary Ildefonso Guajardo,photo: Cuartoscuro/Galo Cañas
Mexican Economy Secretary Ildefonso Guajardo,photo: Cuartoscuro/Galo Cañas
The Canadian Prime Minister said that if the U.S. negotiators manage to impose the elimination of Chapter 19, Canada would not hesitate on pulling out of NAFTA altogether

Mexicans are keenly aware not to take anything for granted. There are many cute rhyming phrases denoting this situation and two of them are: “From the bowl to the mouth you can drop the soup “and “A bird in hand is better than a hundred in flight”. (“Del plato a la boca se cae la sopa” – “Vale más pájaro en mano que un ciento volando”.)

This is the situation prevailing prior to the beginning of the renegotiations of the North American Free Trade Agreement (NAFTA) even if in the opinion of most experts there’s nothing to keep it from coming to a successful fruition that will continue trade in the Canada-United States-Mexico region flowing and growing.

Last July 19 U.S. Trade Representative Robert Lighthizer issued a document with the intent of renegotiation and suddenly the sky was as clear as blue as to which way Mexico could go. Yet, there are issues on the upcoming agenda that make Mexicans nervous. One of them is the duration of the potentially difficult negotiations and second three of the issues.

The first round of renegotiation will start next Aug. 16-20 and it will continue for at least seven more rounds with three week preparation lull between each round which, of course, will include different issues regarding the 22 chapters.

Elections both in Mexico and the United States may be a stumbling block. For the President Enrique Peña Nieto Administration there is no such thing as “mañana” and would like to see the dealing over ASAP. The sooner, the better as presidential election as well as for both houses of Congress will come on June 3. In the renegotiation are not ready for this date, there will be a new president and a new Congress that might just want to undo what Peña Nieto’s negotiators wrought.

Also in the United States, by November the House of Representatives will be renewed as well as part of the Senate and a shift in partisan power may just be a stumbling block.

Canada, by the way, will not face this kind of pressure and they would be willing to go along with the timing its southern neighbors come up with when they deem renegotiations over.

Out of the Mexican and United States situation you can come up at this time with all sorts of potential combinations in terms of results but since nothing is written as to what will go on at the negotiating tables whatever combination of timing results is a fruitless effort at this very moment. Like life itself, results will be gauged on a one day at a time basis. But the rush is there any way to avoid whatever the electoral campaigns may bring about.

On the real issues, from the Robert Lighthizer letter of renegotiations intent there are three themes that might be of some concern. Not unsolvable, but that may push negotiations into the shove arena.
One will be the demand that U.S. negotiators deliver results to the demand made by President Donald Trump that the trade deficit the United States has with Mexico be cut down. Of course Trump could sign an executive order to have it done, yet commerce is not political and cutting down the deficit may prove even harmful to the United States. For instance, it the United States reduces imports from Mexico, the immediate effect would be that prices of those products would go up creating an unwanted inflationary bubble. This demand may just not be met and whimsical Trump has already forecast how he would react to economic reality.

But we’ll see.

The second difficult renegotiation would definitely be the desire shown by Lighthizer to eliminate Chapter 19 of the current NAFTA. This is the chapter that establishes the conflict solving panels on hot issues such as dumping and antidumping, tariffs and merchandise quotas.

Eliminating Chapter 19 would be a hard blow both for Canada and Mexico because under NAFTA conflict resolution has been relatively easy because the five-person panels that have dealt with each of the conflicts of interest presented by affected companies have had a speedy solution. Without Chapter 19, conflicts would have to be taken to the World Trade Organization where the United States is a heavyweight and Canada and Mexico would end up fighting in the lightweight category which would be on a total uneven playing field.

In fact, on Tuesday the Canadian Prime Minister said that if the U.S. negotiators manage to impose the elimination of Chapter 19, Canada would not hesitate on pulling out of NAFTA altogether. That would leave Mexico and the United States on a bilateral treaty out of which Mexico could also opt for pulling out.

A third issue is adjusting labor practices with Mexico. They are different in Canada and the United States and surely this would be a discussion that could easily lead to preserving the status quo as raising wages in Mexico suddenly could lead once again, as it did in the 1980s, to uncontrolled inflation.

Surely these are issues in the minds of the upcoming negotiators to be headed by Mexican Economy Secretary Ildefonso Guajardo and not have the soup fall from the plate to the mouth, and safely keep the one bird Mexico has in hand because even if Mexico boasts 46 different trade agreements with as many nation, none has been as good and productive for the nation as NAFTA is nowadays.

But still, there are butterflies in Mexico’s stomach.