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Mexico could leave the North American Free Trade Agreement (NAFTA) if talks on renegotiating it are unsatisfactory, officials said on Tuesday ahead of scheduled meetings in Washington with the administration of US President Donald Trump. Mexican Secretary of the Economy Ildefonso Guajardo suggested in comments to the Televisa network that Mexico would be in a weak negotiating position unless it makes clear it will not accept just anything to preserve the three-nation trade pact.
Guajardo said “it would be impossible to sell something here at home unless it has clear benefits for Mexico.” “If we are going to go for something that is less than what we have, it makes no sense to stay,” Guajardo said. “We are not going to accept just any negotiation,” Mexican Secretary of Foreign Affairs Luis Videgaray said later, after meeting with the Mexican Senate political coordination committee. “There always exists the possibility of abandoning the treaty and governing commerce between Mexico and the United States based on the rules of the World Trade Organization.” “That will not be our initial proposal ... but naturally it is an option,” Videgaray said. Guajardo and Videgary were to travel to the US for talks yesterday and today.
Trump has pledged to renegotiate the pact between the US, Mexico and Canada and slap tariffs on imports. While Mexico runs a trade surplus with the US, many sectors in the country also want greater restrictions on US imports, particularly farm products that many say have helped impoverish Mexican farmers. Guajardo reiterated Mexico’s insistence that it will not pay for a border wall that Trump has promised to build and said it would not accept any tax or restrictions on the money sent home by Mexican migrants. He also said that “in the case that there are deportations [of Mexican migrants], as there have been, they have to be orderly and clearly defined.” Trump said during his campaign that he would step up deportations of migrants living illegally in the US.
Remittances to Mexico amount to about US$25 billion annually and have become a major source of foreign revenue for the country. Trump has suggested that the US might retain some of that money to help pay for a wall between the countries. Trump on Monday spoke of upcoming meetings scheduled with Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto, saying: “We’re going to start some negotiations having to do with NAFTA.” Pena Nieto on the same day said that he is ready to negotiate at a meeting with Trump on Tuesday next week and sought to chart a middle course: “Neither confrontation nor submission. Dialogue is the solution.”
Mexico officials threaten NAFTA exit - Taipei Times
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The Mexican peso was down by 0.8% at 19.0611 per US dollar at 2:19 p.m. ET after being down by as much as 1.0% about a half hour earlier. "Renewed fears that NAFTA re-negotiation talks may break down, causing the agreement to collapse, have taken a toll on the Mexican peso in recent weeks," Oliver Jones, assistant economist at Capital Economics, said in a note to clients. "These falls have come despite a pick-up in oil prices, which usually supports the peso," he added. The currency has fallen by over 4% against the dollar since the start of October.
Mexico's Finance Minister Jose Antonio Meade commented on the peso at an event in Mexico City on Monday, noting that the currency's exchange rate reflects "concern surrounding the [NAFTA] trade agreement," as well as questions about how quickly the Fed will hike rates. The Trump administration came in strong last week for the fourth round of NAFTA re-negotiations, much to the chagrin of Mexico and Canada. The US presented a number of tough proposals, reportedly including raising the auto rules of origin to 85%, up from the current 62.5%, and adding a sunset clause, which would lead to NAFTA expiring every five years unless all three countries agree to extended it.
One trade official told reporters Saturday "the atmosphere is complicated," and added that his fears about some "pretty harsh, pretty horrible" demands from the US were coming true. If the US, Canada, and Mexico can't reach a new deal, trade among the three countries could go back to WTO rules, which would see "most favored nation" tariffs applied on Mexico's exports to the US, according to Jones. Sources told Reuters, however, that neither Canada nor Mexico will walk away from the talks.
NAFTA is a trade deal among the US, Mexico, and Canada that eliminates most tariffs on imports, exports, and traded goods among the three nations. Trade ballooned among the three countries since its implementation in 1994, but concentrated pockets of manufacturing workers in the US lost their jobs. US President Donald Trump has fixated on the effects of trade deals like NAFTA, but manufacturing employment has also been affected by other factors like automation.
The Mexican peso is tumbling as the US comes out with tough NAFTA demands
