Mexico braced for confrontation with Trump team

By: Jude Webber

1/25/2017

Battle lines have been drawn as Mexico and the US kick off what promise to be tough negotiations on the future of the two-decades old North American Free Trade Agreement, which both sides have threatened to kill off if they do not get their way.

Pressure from US president Donald Trump has already cowed US corporate investors operating in Mexico. President Enrique Peña Nieto has vowed to stand up to pressure from the White House, but with Nafta as the backbone of Mexico’s export-oriented economy, he has most to lose from the talks.

“If there are no clear benefits, there’s no point staying,” Ildefonso Guajardo, Mexico’s economy secretary, told a television interviewer. A worse deal for Mexico made no sense, he said.

Mr Guajardo and foreign secretary Luis Videgaray travel to Washington on Wednesday for meetings with officials including Reince Priebus, White House chief-of-staff, Peter Navarro, national trade council head, and Jared Kushner, Mr Trump’s son-in-law and top adviser.

The two presidents are scheduled to meet at the White House on January 31.

Using similar rhetoric to the “America First” language of the Trump administration, Mr Videgaray said on Tuesday that Mexico would put its interests first in the talks.

“We are a sovereign nation and nothing can come above the interests of Mexico and the Mexicans.” he said. “Any agreement that is proposed that infringes or endangers Mexico’s social and economic interests and which harm the dignity of our nation will be unacceptable.”

Companies Mexico faces battle over auto industry Play video Nafta, in force between the US, Mexico and Canada since 1994 when Mexico was emerging as a market economy, has intertwined relations via cross-border supply chains and increased trade, investment and jobs that one former official said were now difficult to unscramble.

Mexico sends about 80 per cent of its exports north of the border but those goods contain as much as 40 per cent US content, helping support nearly 5m jobs in the US.

All that could be at risk if, as Mr Trump has warned, the US does not achieve what it considers a “fair deal” for American workers and decides to pull out — as he has already done from the 12-nation Trans-Pacific Partnership that Mexico saw as a way to equip Nafta for the 21st century.

On Monday Mr Peña Nieto said everything, not just trade, was on the table. “The solution is dialogue and negotiation,” he said, to applause from an audience of officials and business leaders who earlier heard Juan Pablo Castañón, head of business lobby CCE, call for a “Mexico First” philosophy.

Complicating things for Mexico is the uncertainty surrounding Mr Trump’s plans, beyond his vow to enact big border taxes if US companies persist in shifting manufacturing to lower cost Mexico. That stick has already persuaded some, such as carmaker Ford, to bend to his will. Ford scrapped a $1.6bn plant in Mexico earlier this month after Mr Trump’s threats.

“A border tax is a declaration of war,” Jaime Zabludovsky, a Mexican Nafta negotiator, told the Financial Times, noting it could violate Nafta and World Trade Organisation rules.

"With the benefit of hindsight, [Nafta negotiations] were relatively easy because the three parties shared the same end goal. The main problem today is still that we don’t know what they [the US] want,” he added.

Mexico, however, will be banking on some US goodwill: Mr Videgaray and Mr Kushner orchestrated Mr Trump’s visit to Mexico last August, a PR gift to the property magnate that bolstered his image as statesman, though it shredded Mr Peña Nieto’s.

The Mexican president whose rigid formality is the antithesis of Mr Trump’s bluster, named priorities including commitment to upholding free trade, protecting investment flows, safeguarding about $26bn in annual remittances from Mexicans in the US and fighting terror threats and the illicit trade in arms, drugs and cash.

“We need agreement from the US to look for a win-win,” said Antonio Ortiz Mena, a member of Mexico’s Nafta team and head of economy at the Mexican embassy in the US for eight years.

But he added: “Mexico needs a credible threat . . . I don’t see why Mexico should accept more restricted access to the US than it already has.”