Mexicans can breathe easy as the US Trade Representative’s objectives for the North American Free Trade Agreement renegotiation signal a willingness to continue tariff-free trade across North America.
“This is very positive,” says Carlos Véjar, a trade attorney at Holland & Knight and former general counsel for international trade at Mexico’s Ministry of Economy. “It deals with many of the fears of Mexican officials, particularly on going back to a tariff system between the US, Mexico, and Canada. It’s clear the US does not want to move back to tariffs.”
In the document’s sections on industrial good and agricultural goods, for example, it calls to “maintain existing reciprocal duty-free market access,” writes James Frederick in Mexico City. Véjar says anything else would have been a non-starter for Mexico. In fact, the document specifically calls for integration of North American supply chains.
Véjar sees the document as a fairly straightforward guideline for a free trade agreement and says that this document looks quite similar to the guidelines laid out in the Trans-Pacific Partnership (TPP), which was effectively killed by President Trump in January 2017.
However, the USTR maintains a strong stance on reducing the US trade deficit in NAFTA. This first listed objective is to, “Improve the U.S. trade balance and reduce the trade deficit with the Nafta countries.”
But the document does little else to address this issue.
“The language of reducing the deficit will continue,” says Chris Wilson from the Mexico Institute at the Wilson Center in Washington. “But there’s very little in these objectives that will get straight to addressing the deficit.”
The USTR document also hopes to add several new points to Nafta including digital trade, anti-corruption, energy, and intellectual property. Current side agreements on labour and environment would also be integrated into the core agreement, according to the document.
However, the positive initial reaction does not mean the negotiations will be simple. For example, the US aims to eliminate Chapter 19 of Nafta, the anti-dumping section of the agreement, which would prevent Mexico or Canada from challenging US declarations of dumping.
“As a former negotiator, I can tell you I have never been in a negotiation that is as quick as they want this one to be,” says Véjar.
US officials have previously said they want to finish negotiations by the end of the year. Officials in Mexico have said it is necessary to sign a new deal before Mexican presidential elections in June 2018.
But the long list of objectives from the US side makes it even more unlikely the negotiation happens fast, says Wilson.
“In terms of a balance between a small, fast renegotiation or a longer, more drawn out and complete renegotiation, this document pushes us towards the latter,” he says. “Some of the most complex topics are left rather vague in the document.”
It will be increasingly difficult for Nafta 2.0 to be left out of electoral politics.
Mexico continues public consultations on Nafta until early August. Negotiation can formally begin on August 16, 2017.