With the eighth round of the NAFTA renegotiations scheduled to take place in Washington from April 8th to April 18th, Donald Trump dropped a bomb by way of another Tweet on Easter Sunday: “ Mexico is doing very little, if not NOTHING, at stopping people from flowing into Mexico through their Southern Border, and then into the U.S. They laugh at our dumb immigration laws. They must stop the big drug and people flows, or I will kill Mexico’s cash cow, NAFTA. NEED WALL!” This he followed up on Tuesday, April third with yet another Tweet: “The big caravan of People from Honduras, now coming across Mexico and heading to our “Weak Laws” Border, had better be stopped before it gets there. Cash Cow NAFTA is in play, as is foreign aid to Honduras and the countries that allow this to happen.”
Not satisfied with just that, he poured more gasoline on the fire by insisting that the negotiation teams of Mexico, Canada and the U.S. present him with an agreement in principle, ready for publication by April 13th or 14th during the Cumbre de las Américas, which is set to begin this week, accepting all of his demands. As will be recalled, these demands, uniformly rejected by our government as well as that of Canada, include: Bringing minimum salaries up to U.S. levels, linking the Peso exchange rate to the value of the U.S. Dollar, elimination of the NAFTA conflict resolution panels in favor of the U.S. Federal Courts, renegotiating the NAFTA Agreement every 5 years and changing the rules of origin for the automotive sector to force Mexico and Canada to source 85% of all components in the U.S.
With increasing regularity, Trump has gotten more aggressive in negotiating tactics clearly intended to sabotage NAFTA. On several occasions, he has now hinted at trying to force Mexico to pay for the proposed border wall through a so-called “Border Adjustment Tax” – in other words: a punitive customs duty – clearly illegal under Article 303 of the NAFTA Agreement and rejected by Mexico as well as Canada. One more factor, designed to de-rail the eighth round of renegotiation will be introduced by Trump’s team in the coming days: a plan which stipulates that a certain amount of automotive production must be carried out in those countries that are paying the highest salaries. In detail, that would imply the following: Mexico must increase wages to match those of the NAFTA region at least in the automotive sector, but that is not so easy since our country already had a labor reform at the end of Felipe Calderón's six-year term; in case there are no equitable wage conditions then USA and Canada would have to take their investments from this industry but it would also provoke another type of commercial war with automakers from Europe and Asia since these have arrived in our country to export their products to the market of USA and Canada. However, something that Mr. Trump probably has not clearly thought is that this measure is causing the rupture of the supply chain in North America that has been built for 25 years and we believe that the business groups will not agree with it.
On the other hand, is not the only threat that Trump has launched in recent days as yesterday marts April 3, Trump chatted with his secretary of defense to start on Thursday, April 5, the militarization of the border and use this measure to toughen your negotiation strategy and give in to your requests in relation to NAFTA. This point greatly intimidated Mexican officials and asked for clarification as to exactly what the militarization of the southern border meant. Perhaps the US asked us for an explanation about the militarization of our northern border for aspects related to organized crime? It's just a question.
By: Dr. Juan Carlos Botello and Dr. Werner G.C. Voigt (Independent External Contributor)
