One day after discussing again with the Mexican Senate parameters for negotiations with the U.S., Foreign Minister Videgaray made a previously unannounced trip to Washington, where he met with presidential assistants Jared Kushner and Gary Cohn. At a press conference at the Mexican embassy afterwards, Videgaray reiterated his optimistic timetable for trade talks with the U.S.:
“I want to be precise. Based on conversations today at the White House … both countries will be able to formally start a dialogue on trade issues at the end of June or, perhaps, at the beginning of July.”
This is a far more aggressive timetable than Wilbur Ross had suggested one day earlier, and would require the U.S. administration to send to Congress the required 90-day notice under the TPA no later than the beginning of April.
Writing in Americas Quarterly, Shannon O’Neil of the Council of Foreign Relations has come up with the punchiest statement on the costs of ditching NAFTA: “China wins if NAFTA dies.”
The often cited statistic that 40 cents of every Mexican export dollar north is created by U.S. workers is real, as thousands of companies have invested tens of billions in both nations, creating North American supply chains to make cars, computers, TVs, planes, washing machines, MRIs, defibrillators, and a whole host of other products. And even as some jobs in America’s rust belt have disappeared, many others have stayed or been created precisely because of these investments to the south. By spanning the border, factories make products they can sell globally – increasing the overall economic pie then shared between companies and workers in both countries.
As the United States pushes forward with its renegotiation, it shouldn’t lose the larger guiding philosophy behind NAFTA, namely the recognition that a stable and prosperous North America helps all three nations.
In his first commentary since being confirmed as Commerce Secretary, Wilbur Ross said on Bloomberg TV that formal negotiations with Mexico on NAFTA would not start until “the latter part of this year” and could be expected to take “substantially longer than a year.” Both Videgaray and Guajardo have been pushing for talks to begin in June and to be completed before the end of 2017.
Foreign Minister Videgaray testimony in the Senate 2/28 included several red lines and must-haves.
U.S. immigration law and enforcement
- A strictly U.S. domestic issue, and Mexico will not get involved in an internal U.S. debate, BUT:
- Mexico will not accept any non-Mexican deportees.
- Mexico will protect the human rights of Mexicans in the U.S., and pursue any violations in international forums
- There needs to be continued cooperation and coordination on border security matters; threats and insults need to cease
- No militarization of the border
- Mexicans leaving the U.S. (both voluntarily and involuntarily) must keep their rights to Social Security earned
- U.S. and Mexico need to cooperate on Central America
We will not negotiate the Free Trade Agreement from the defendant’s dock. Any negotiation between the parties must start from the premise that this has been an agreement that has generated important benefits for all three parties.
- Mexico will undertake the trade negotiations, “without pause, but without haste”
- No tariffs or quotas.
- Negotiation should include mechanisms to support rising wages for Mexican workers, so the “production model” isn’t based on cheap labor.
- Construction of the wall is a hostile act, and Mexico will not collaborate in any way; but it is a sovereign matter for the U.S.
- Mexico will pursue any violation of international law in international forums.
U.S. Tax regime
- Mexico must be prepared to change its own tax regime if changes to US tax law affect Mexican interests or the economic competitiveness.
Drug trafficking / cartels
- U.S. must assume its responsibility to reduce demand, and stop the flow of guns and money.
- No measures that restrict the flow of remittances or increase their cost.
Foreign Minister Luis Videgaray appeared before the full Senate to present outline the government’s posture on the negotiations with the U.S. across the full range of issues. He and the Senate agreed that they would prepare a document “to regulate and delimit” the negotiations, to be signed by both the administration and the Senate. The Senate leadership said they would have a draft to discuss when Videgaray returns on 3/7.
The principal points Videgaray made are here.
The major question is whether Mexico is willing to negotiate trade issues on a stand-alone basis, or will insist on an all-or-nothing “integral” negotiation, where trade, migration, the border, cooperation on security, and drug trafficking are all on the table. The former offers the prospect of a revised NAFTA in less than a year. The latter would ensure that nothing gets resolved before both countries move into full election mode in 2018.
The Mexican government is operating on the assumption that NAFTA negotiations will begin in June, although the Trump administration has not yet given the required 90-day notice to Congress.
Guillermo Ortiz, former finance secretary and Central Bank governor, writing in the Financial Times:
It would be the ultimate historical irony if, by destabilising Mexico, the US created incentives for renewed illegal immigration, increased Mexico’s trade surplus with the US due to currency depreciation and encouraged the resurgence of a populist regime antagonistic to its own national interests.
After a long hiatus, I’ve decided to restart this blog on Mexican politics.
Why now? The current moment in Mexico is the most critical in decades:
- Weak, lame-duck President without a game plan for final two years of his term;
- Political fragmentation, with the next president likely to be elected with under 30% of the vote;
- Inability of the political system to address drug violence and public corruption;
- Country’s (and government’s) financial position still solid, but slipping;
- Chronic slow economic growth;
And, of course,
- Donald Trump’s repeated attacks on NAFTA, Mexican migrants in the U.S., and—indeed—the dignity of the Mexican people.
While I am an optimist at heart about Mexico, today for the first time in many years the risk exists that the country will take a sharp turn in the wrong direction, putting at risk decades of progress in economic modernization and integration into the world economy, tens of billions of dollars of investment, the advent of democratic governance, and close, constructive relations with the United States.