USMCA deal close to approval, says Mexico trade negotiator
March 27, 2019
Treaty to pave way for huge investment in Mexico, says Seade
Mexico’s chief negotiator for North American trade said a new agreement for the region is on track to win approval in the coming months by lawmakers in the region’s capitals, despite mounting concerns over the pact’s fate in the bitterly divided US Congress.
Speaking at a LatinFinance conference in Beijing Tuesday, Jesus Seade, Mexico’s undersecretary of foreign affairs, said he expected USMCA – as the revised NAFTA accord is known – to get passed by the US Congress “pretty soon,” adding that he believed the treaty had “broad bi-partisan support.”
“I think this deal is going to pass and pretty soon,” Seade told an audience of Chinese investors at LatinFinance’s Latin America China Investors Forum. He also stressed that Mexico is poised to win big in foreign investment once the new deal is ratified.
After signing the trade deal on Nov. 30 last year, Trump said he would give formal notice to Congress to terminate NAFTA. He also gave lawmakers six months to approve USMCA.
Democrats, who now control the House, have indicated they won’t vote for the agreement. But Seade says he has pressed the case in support of the agreement with US lawmakers on both sides of Congress and suggested the balance was tilting in favor of ratification.
“I am honestly confident that the treaty will go through. You have almost every single major corporation in the US in support of the treaty,” he said. “Failing to pass the treaty would be very politically costly for the those opposing [USMCA].”
He added that a rejection of USMCA wouldn’t result in the end of NAFTA but likely a continuation of the status quo “for some years to come,” despite Trump’s revived threats last week to scrap the prior accord altogether if the new treaty didn’t get ratified.
“If it doesn’t [pass US congress] I think we will simply see the continuation of NAFTA,” Seade said.
Seade said that Mexico was set to benefit from a surge in foreign investment into the manufacturing sector as a result of the treaty’s new rules that call for at least 75% of products, including automobiles, to be made in North America with “enormous limitations” on the remaining 25%. While the rules were intended to shift investment to the US, Seade said it would have a “balanced result” among the three parties. The agreement’s high wage rule, meanwhile, would encourage manufacturers to shift engineering jobs to Mexico.
“The conclusion that companies will have to draw is that they have to invest more in North America,” Seade said. The new agreement – which Seade described as “a piece of negotiating alchemy” – is “less of a trade-oriented agreement and more of an investment-oriented agreement. It’s a pro-investment trade treaty.”
The pact’s new rules of origin that encourage foreign investment in North America reflects the reality of international commerce in today’s world, where investment flows are gaining ground, while free trade is losing out, Seade said.
“[USMCA] is consistent with what I see in the world: trade as the number one element in globalization is running its course,” he said. “It’s never going to reverse. But the dynamic element in the coming years will be trade driven by investment. That’s exactly what the new NAFTA is trying to do.”
Seade told Chinese investors at the LatinFinance forum that their country’s growing focus on outbound investment – especially in Latin America – squared conveniently with USMCA’s main thrust of encouraging investment.
He said that the agreement’s rules of origin give a boost to investment in Mexican manufacturing and should benefit Chinese foreign direct investment in Mexico.
“Mexico should be [a target for Chinese investment], particularly equipped with this new treaty that is rewarding investment in a big way and questioning the potential for the continued expansion of trade as such.”