Debate over the effects and future of the NAFTA trade deal have been but one point of contention between Mexico and the US since President Donald Trump took office.
There are number of potential sticking points and murky details about any NAFTA renegotiation, but it’s becoming more clear when it could actually go down.
“We’re now in the early stages of the TPA process, the Trade Promotion Authority, the so-called fast track,” US Commerce Secretary Wilbur Ross told Bloomberg on March 8.
“And that process, by its own nature, has a couple of months’ starting point before anything very serious happens, so you’re talking the latter part of this year before real negotiations get underway,” he said.
“I think the negotiations, hopefully, won’t take more than a year,” Ross added. “How long it will take to implement them and to get the reductions — that’s a different question.”
Ross appeared to accelerate the timeline on Friday. “We are now in the very early stages” of having talks to change NAFTA, he said during a joint press conference with Mexican Economy Secretary Ildefonso Guajardo.
US law requires the government to tell Congress 90 days prior to signing a new trade agreement. Ross said he wanted to notify Congress “sometime in the next couple weeks.”
Guajardo, who appeared set on the talks being a three-way affair involving Canada, said Mexico would be ready to start talks by the end of May.
For Mexico, the timing and duration of any talks over NAFTA — which could take years — is more than just a logistical matter.
“There is a particularly concerning scenario for Mexico, which is very protracted and long negotiations that would subject Mexico to an extended period of uncertainty, leading to very uncertain outcomes at the end of the tunnel,” Roberto Simon, the lead political analyst for Latin America at FTI Consulting, told Business Insider in February.
“This extended period of uncertainty could even get closer to the 2018 election, and then NAFTA would definitely become a hot topic for the campaign,” Simon said, “and it would certainly shape the negotiations in very detrimental ways, I think, to both countries.”
Trump’s rise to power in the US, with his saber-rattling against Mexico, has roiled the political scene in the US’s southern neighbour.
Enrique Peña Nieto, Mexico’s current president, has seen his popularity fall to historic lows in recent months, as a combination of deep-seated corruption, poor economic performance, and rising violence weigh on the public’s perception of him and his party.
While Mexico’s political classes have responded to Trump’s attacks with some solidarity with their president, Mexican displeasure with Trump and with their government’s responses to him have buoyed the candidacy of Andres Manuel Lopez Obrador, a two-time leftist presidential candidate seen as the most willing to rebuke Trump and defend the interests of Mexicans who haven’t benefited from the leadership of Peña Nieto and his predecessors.
In an early December poll, Lopez Obrador had the highest favorability rating, at 31%, well more than the 19% of Margarita Zavala, PAN candidate and wife of former President Felipe Calderon. Lopez Obrador’s unfavorability was also the highest, at 37%.
Lopez Obrador’s advantage over other possible candidates — including Interior Minister Miguel Osorio Chong and Foreign Minister Luis Videgaray, both of the PRI — has continued in polls conducted this year.
“We’ll have elections in 2018,” Simon told Business Insider. “Lopez Obrador is the front runner, and already polls are showing that Mexicans see him as the best person to confront Donald Trump, but even if he’s not elected what you’ll see is that confrontation with the United States will push even the center parties — center-right or center-left parties, like PRI or PAN — to more extreme positions, because you’ll have to respond to demands from the electorate.”
The possibility of a protracted negotiation presents another challenge for the current Mexican government.
Lopez Obrador’s continuing popularity coupled with the Trump administration’s hardline (“I’ve told the president repeatedly, he’s made my job much easier by softening up the adverse parties,” Ross said) may box Peña Nieto in, leading him to make a bad decision on an imperfect deal.
“There is another risk, which is, let’s say, that Trump gets really tough, and then, in the end, Peña Nieto decides to say, ‘You know what, we’re going to sign a deal with you even though the deal is blatantly detrimental to Mexico’s interests in some points,'” Simon said. “Then the perception inside Mexico that the deal is illegitimate and was signed by a very unpopular president, accused of corruption.”
“So in this sense what could happen is Peña Nieto signs a deal now, and the next president says, ‘Look … this is like a trap for Mexico, and I’m getting out of it,'” he added. “So in a way you don’t end the uncertainty now, and again it fuels antiestablishment feeling inside Mexico, and the uncertainty stays very high.”
Mexican and US negotiators may see eye to eye on some issues whenever those talks get started.
“The Mexicans have indicated that they are open to renegotiating a few things,” said Simon, who noted that there were some in Mexico urging the government not to negotiate rather than risk an “ambush.”
Guajardo, in his interview with Bloomberg, cited the age of the NAFTA deal, saying that the evolution of the energy sector — closed when the deal was first signed but opened to foreign investment in 2013 — and the growth of ecommerce and telecom industries warranted reconsideration.
Ross echoed that sentiment: “Our economy is very different from what it was when that treaty was entered into.”
But, given the uncertainty hanging over the renegotiations, the possibility of recriminations also exists.
Ross, who said the US had “been in a trade war for decades” that led to its deficit with Mexico, said all sides knew they would have to make concessions in the renegotiation but didn’t address retaliatory measures.
Some — including the Mexican foreign minister — have suggested that Mexico could retaliate against US policies like a border-adjusted tax by levying its own tariffs, targeting products from states that supported Trump.
Mexico has also started moving to shore up trade deals with the EU, China, and other countries in Latin America. Though, Simon said, given the immense scale of Mexico’s trade relationship with the US, new trade agreements would do little offset even a small change to NAFTA.
When asked about retaliatory measures, Guajardo demurred, saying, “Let’s wait and hope that this dialogue will be highly constructive for the three countries.”
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