As the authors correctly predicted in May of this year, on the basis of a leaked confidential memorandum: U.S. President Donald Trump wants a complete major overhaul of the North American Free Trade Agreement to “replace the deal that has fundamentally failed most Americans” U.S. Trade Representative, Robert Lighthizer, said on Wednesday as renegotiation talks formally opened in Washington. With that, Lighthizer set the stage as well as the tone for comprehensive and potentially very lengthy, tortured negotiations by sending a brutal message that Trump is demanding fundamental changes to the 23-year-old NAFTA agreement with the overriding goal of eliminating Mexico’s trade surplus now estimated at 74 billion Dollars for the year 2017. “I want to be clear that President Trump is not interested in a mere tweaking of a few provisions and a couple of updated chapters” Lighthizer said during opening statements for ministerial discussions. “We feel that NAFTA has fundamentally failed many, many Americans and needs major improvement!” With that, we can disregard the repeated reassurances of our Secretary Ildefonso Guajardo that the upcoming process is one of modernization through incremental adjustments only. Building barriers – both physical and economic – to harm Mexico has been Trump’s stated goal since he began running for president. Now that he is president, President Peña Nieto is in a tight spot. He is facing domestic pressure to stand up to Washington, but he also has to avoid terminally alienating our most important trading partner and being shut out of a new North American trade regime that could potentially be bilateral between the U.S. and Canada – excluding Mexico entirely.
Major problems for Mexico in the coming weeks then, will present themselves in the form of a catastrophic reduction in our trade surplus by being forced to harmonize our minimum wage with that prevalent in the U.S., being forced to institute astronomically expensive environmental protection measures which could make our exports largely non-competitive and being forced to link the exchange rate of the Peso to the value of the Dollar – ostensibly to prevent unfair competition through currency manipulation. Perhaps the most odious of Lighthizer’s initial threats affects our automotive industry: He wants the regional integration content of the automotive industry's products to be renegotiated to increase the percentage of US input integration and as a result deliver Donald Trump's campaign pledges but this will take more than 4 months!!!. On the other hand, Lighthizer has also said that there are sectors that need to be protected such as agriculture, intellectual property and the energy market. In other words, the opening speech for the NAFTA renegotiation of the US trade representative has shown that the talks that Mexican officials will have will be complicated. What is worrying for our country is that Mexican officials focus more on meeting a political agenda rather than meeting a trade agenda. Mexico´s economic and commercial future is a bet!!.
