[CTC] Mexico will stay the course in NAFTA, AMLO’s chief negotiator says

[Arthur Stamoulis]

Mexico will stay the course in NAFTA, AMLO’s chief negotiator says
Inside US Trade
July 02, 2018
 
Mexican President-elect Andrés Manuel López Obrador does not plan to call for major changes to Mexico’s position in the renegotiation of the North American Free Trade Agreement, Jesús Seade, AMLO’s chief negotiator, said Monday.
 
“I still have to discuss with the government further, and with the current NAFTA team, [Economy Minister Ildefonso] Guajardo and so on, I have to see what they have in their pocket or whatever, but as far as I’m concerned now I don’t have any specific new demands,” Seade said in a phone interview with Inside U.S. Trade. “I do have ideas on things to explore to try to find a movement that’s maybe satisfactory to both sides, but not new demands, I mean not bringing in new issues … that would be very disruptive and it’s not in our interest.”
 
“No new demands and the flip side of that -- no rejections of positions taken up [until] now by the Mexican side,” he added.
 
Holding a commanding lead in the polls ahead of Sunday’s election <https://insidetrade.com/node/163534>, AMLO and his Morena party swept to victory on July 1 fueled by voters fed up with corruption and crime.
 
“There’s this feeling for many, many people here in Mexico that this is the beginning of a bright new dawn,” Duncan Wood, the director of the Wilson Center’s Mexico Institute, told reporters on Monday, describing scenes of jubilation after AMLO’s historic win.
 
But the promises of change do not extend to NAFTA, Seade said, rejecting concerns that AMLO would reverse Mexico’s economic liberalization.
 
“He’s not a Hugo Chavez,” Seade said. “Not at all, the complete opposite, he is an absolute pragmatist who believes in the market, wants to have the market work -- because that’s the way to develop wealth and income -- with a social agenda. And on the external affront, his main point of reference is having a friendly relationship with the United States, that’s why he wants to have a NAFTA, he wants NAFTA to continue to be there.”
 
AMLO will take office in December, and Seade said he would be working with the current administration over the five-month transition period “very much in the spirit of supporting them and trying to contribute to a new impetus to the negotiation.”
 
Seade said he hoped the negotiations could wrap up during the transition period itself. He said he planned to meet with Guajardo in the next two weeks and “as soon as that happens I hope that we can propose to take it to [U.S. Trade Representative Robert] Lighthizer.”
 
Trump, however, said on Sunday that he wants to wait until after the midterm election to sign a NAFTA deal.
 
An industry source told Inside U.S. Trade that Lighthizer will "make a run for it" before the midterm,” but NAFTA is "likely not coming back for a bit." Another source did not expect more technical rounds to take place, and added that USTR has shown a preference for finishing work at the ministerial level.
 
Seade said that Mexico would continue to oppose the U.S. demand for a sunset clause in NAFTA, calling it an “ingenious way to kill the treaty, cause then it’s not a treaty, it’s a temporary understanding.”
 
Lighthizer told Republican lawmakers last week that he did not plan to drop the demand for a sunset <https://insidetrade.com/node/163528>. At the G7 summit in Canada, President Trump also said a sunset clause will be in the final deal <https://insidetrade.com/node/163338>, while Canadian Prime Minister Justin Trudeau maintained that Canada would never sign an agreement that included such a clause.
 
Seade declined to comment on his position on investor-state dispute settlement saying he needed to consult further with the Mexican and U.S. government.
 
“I think that in dispute settlement in general, I really would like to discuss very carefully, very in-depth with my friends in the present government and then with my friends in [the U.S.] government because I happen to know the teams on both sides,” he said. “So I look forward to exploring that, that’s one area that I don’t want to say that there are things I want to propose, but that’s an area I want to have in detail.”
 
President Trump on Monday said he had spoken to López Obrador, including about NAFTA and the possibility of a U.S.-Mexico bilateral deal.
 
“We had a great conversation about a half an hour long,” Trump said. “We talked about border security. We talked about trade. We talked about NAFTA. We talked about a separate deal, just Mexico and the United States. We had a lot of good conversation. I think the relationship will be a very good one. We'll see what happens, but I really do believe it's going to be a very good one.”
 
In a tweet <https://twitter.com/lopezobrador_/status/1013852241604689920>, López Obrador said he had spoken to Trump and “proposed to explore a comprehensive agreement; [with] development projects that generate jobs in Mexico, and with that, reduce migration and improve security,” according to an informal translation, adding, “There was respectful treatment and our representatives will talk.”
 
But Seade said his preference was that NAFTA remain trilateral, while acknowledging that sometimes “it’s very difficult to dance in trios.”
 
“Now, the NAFTA in particular as an instrument that relationship we believe has worked very well as a three-party arrangement,” he continued. “We are very happy with the NAFTA as a three party arrangement. We want to understand why -- our impression is that the main motivation to split it, is because you can agree with one country on one thing but not with the other … But if that is the reason then I think the best medicine is to sit the three together and try to inject a new dynamic to try to bring the negotiation to a successful conclusion.”
 
Seade said bifurcating the talks would hamper integration of the three countries’ automotive sectors especially since NAFTA’s automotive rules of origin will be tightened.
 
Seade also believed a deal had been in the offing prior to the election and could be reached now that the Mexican election was no longer looming over the talks.
 
“We come saying, ‘Well the election is no longer an uncertainty, it’s been done, here’s the winner, nice to meet you,’ and on top of that that winner is saying we essentially support the position of Mexico and the present team and anything new that we bring will be efforts and ideas to unlock rather than [complicate]” he said.
 
“So it may be possible to resolve the problems and if so that’s much better, an agreement between the three, because it has worked extremely well between the three so it is our preference,” he added. “I mean there’s a lot of business that has already been built between the three and this has to develop even more.”
 
He said he planned to identify areas of the negotiation where the parties could find “find the best bang for the buck.”
 
“And by bang for the buck, I mean where can we identify issues that divide us where the benefit of the U.S. for some particular movement might be much for significant than the cost for us,” he said.
 
“So that’s very much my idea of negotiation,” he added. “You put exactly as much effort into putting yourself in the shoes of the counterpart to see how exactly to satisfy their needs to the best possible extent as you put into your agenda.”
 
Analysts on Monday said that AMLO might be more amenable to addressing the issue of wages in NAFTA, a key demand of Democratic lawmakers, because he has talked about raising Mexico’s minimum wage. Seade said that while AMLO did want to address the Mexico’s minimum wage, it might not be as part of NAFTA, especially since the U.S. is proposing a wage threshold specifically for the automotive industry.
 
“I don’t think he would be open to the kind of proposals on the table because it could be a very distortionary thing, that you could increase wages by any amount -- the numbers on the table or any other numbers -- in one sector and then you say, ‘Well what about other sectors?’ What about electronics, or what about kitchenware or other equipment or what about the tourism industry?” he said.
 
“He’s definitely going to do things that I believe should be [enacted] outside the NAFTA … on the minimum wage because the minimum wage is ridiculously low and he wants to work on that, and I think that’s something that could be a subject for discussions also with America but I’m not sure it’s part of the NAFTA, because in the NAFTA we are focusing on the car industry,” he added. “I don’t want to say there may be discussions, I don’t want to say that, I’m not saying that. I am saying that AMLO has referred to the inadequacy of current minimum wages in Mexico, we probably want to work on that.”
 
Trump on Sunday also threatened to hit NAFTA countries with tariffs on cars if they don’t make a satisfactory deal. Those duties would be on top of Section 232 tariffs on steel and aluminum the U.S. has already placed on Canada and Mexico, drawing retaliation from both countries.
 
“If they're not fine, I'm going to tax their cars coming into America, and that's the big one,” he said when asked if NAFTA could be concluded in time for the U.S. congressional midterm elections.
Analysts and Seade however said Mexico would not be bullied. Chris Wilson, the deputy director of the Wilson Center’s Mexican Institute said an AMLO administration would continue to resist U.S. pressure tactics as Mexico has thus far.
 
“They have to for domestic political reasons,” he said. “They cannot be seen as being bullied by the United States and rolling over when it comes to U.S. demands.”
 
“Certainly in Mexico it will be very hard for the new president to look like he gave in to extreme pressure from the northern neighbor even though he has a strong interest in reaching an agreement,” Tony Wayne, a former U.S. ambassador to Mexico said, on the Wilson Center conference call.
 
“I think it’s going to remain very tough, and he would find it a very difficult position to look like he has yielded right as he’s entering office,” Wayne added.
Seade said the 232 tariffs would continue to be separate from NAFTA.
 
“I don’t see ourselves responding to that, we’ll handle the two things separately,” he said. “We’ll have a negotiation in good faith.”
 
“That’s not part of the NAFTA and therefore it’s not part of my current duties,” he added. “Right now, my job is NAFTA and that has nothing to do with NAFTA, legally. Of course, politically, it has everything to do, but I’m just leaving that to the authorities. It’s really a stretch to say this is national security and it’s also not constructive to say, ‘You give us a good result on NAFTA, these tariffs go. You don’t, these stay and you get new ones on other products.’ That is not the way to do it.”
 
“I don’t see most of your trading partners including this one responding to that,” Seade said. -- Anshu Siripurapu (anshus at iwpnews.com <mailto:anshus at iwpnews.com>)
 
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