NAFTA demise would not be devastating, Mexico says

MEXICO CITY, (Reuters) – Mexico’s economy minister said yesterday he did not agree with statements made by U.S. Commerce Secretary Wilbur Ross that it would be devastating for Mexico if the United States pulls out of the North American Free Trade Agreement (NAFTA).

“No, I don’t think so,” Ildefonso Guajardo said in a television interview when asked if he agreed with Ross.

“Without a doubt, Mexico could face a short-term impact because the market is very sensitive to marketing, branding … Our ability to adjust, and the manner in which we do it, is what will allow us to resist any potential change.”

In an interview with The Wall Street Journal CEO Council on Tuesday, Ross said that it “would be devastating to the Mexican economy” if the United States were to pull out of NAFTA.

Mexico is preparing a package of macroeconomic measures to help withstand a short-term shock if the United States pulls out of the pact, Foreign Minister Luis Videgaray said earlier in the week.

Guajardo said that if NAFTA talks, which are currently in their fifth round in Mexico City, do end up stretching into March, the United States must ask itself if it wants the trade talks to influence Mexico’s July 2018 election.

The fifth round of NAFTA talks entered their second day on Thursday, proceeding under the shadow of tough U.S. demands and without the presence of trade ministers who agreed to sit out the discussions.

A schedule seen by Reuters showed that negotiators will discuss one of the most contentious issues over the four final days, beginning Saturday.

In October, the United States proposed that a revamped NAFTA should set a 50 percent minimum U.S. content requirement for autos, as well as raise regional content to 85 percent from the current 62.5 percent.

The four days of talks on rules or origin compare to three in the initial schedule for the previous round in Washington.

Labor, and cross-border trade in services (CBTS) will both be discussed for three days in this round, compared to two days in the prior round, according to the schedules.

On Wednesday, Guajardo said that Mexican negotiators will propose that NAFTA be rigorously reviewed every five years to counter a U.S. “sunset clause” proposal that would kill the deal if it is not renegotiated after five years, an idea widely criticized as undermining long-term investments.

Guajardo emphasized that the counterproposal would not let the trade agreement automatically expire and said he thought it is unlikely that U.S. President Donald Trump would trigger the existing deal’s termination clause later this year.

But the minister, who served as part of Mexico’s NAFTA negotiating team in the early 1990s, added he could not rule out the possibility that Trump would decide to trigger a U.S. withdrawal from the 23-year-old accord in the first quarter of 2018.