Mexico wants “wins” in NAFTA renegotiation

Mexico wants “wins” in NAFTA renegotiation

Mexico Economy & Policy Corporate & Sovereign Strategy

Mexican Economy Minister Ildefonso Guajardo has urged for a deeper dialogue between the US and Mexico that leads to "certain victories" on both sides of the border.

"Mexico needs to be part of the solution and prove we are not part of the problem," Guajardo said at LatinFinance’s 12th Cumbre Financiera Mexicana in Mexico City on Thursday.

Latin America’s second-largest economy has endured heightened volatility in the financial markets since US President Donald Trump won the election in November. Now, as Mexico and the US face a diplomatic standoff over trade, immigration and a proposed border wall, Guajardo has urged that any changes to the North American Free Trade Agreement (NAFTA) provide "wins" for the three member nations.

"[NAFTA] is three countries with different developments in the production sector," he said. "It is very clear that it is necessary to transform NAFTA to be at the level of global changes within the three economies. NAFTA has to be conducted under a formula where Canada and Mexico both have some wins."

He added, however, that it will not be easy to make changes to NAFTA. The more than 10,000 original rules in the trade agreement could be put forward at the renegotiating table, but the purpose of the talks is to "strengthen the original content."

Guajardo also said Mexico will not enter any discussions on trade without a backup plan. "No negotiator will sit at the table without a Plan B. If you don’t have a [Plan B], you will be damaged, simple," he said. "If there is pressure at the table, it will hurt competitiveness in the region."

The minister has told local press that Mexico's Plan B could involve levying a tax on US imports. Guajardo said he expects the negotiations to begin in the summer and finish by the end of the year.

Until then, the first thing Mexico can do is "mitigate uncertainty," he said. "Time is of the essence... We have to be clear about this process."

Trump has threatened to impose a 20% tax on Mexican imports to the US as a way to fund construction of a border wall. But Guajardo said it is "illogical" to open the "Pandora's box" of trade tariffs, adding that any analysis of US-Mexico trade needs to focus on strengthening NAFTA.

Guajardo also said that "tweets have consequences in the market, even though they are not public policy elements," referring to Trump publicizing policy points on social media platforms like Twitter. 

Mexico sends about 80% of its exports to the US. Bilateral trade between the two countries is worth some $500bn.