Canada may abandon NAFTA Negotiations
Instead of dwelling on NAFTA, the Canadian government will negotiate bilaterally with the United States, while Mexico is now looking for alternative markets for its products.
The renegotiation of the North American Free Trade Agreement (NAFTA), one of the promises of Donald Trump in campaign, seems to be unattractive for Mexico and Canada.
As of right now, 73% of Mexico’s exports go to the US market and now, their access to America’s consumers will have to be renegotiate under a new scheme that will govern trade relations with the United States.
The reality of having to renegotiate NAFTA alone came after Canadian officials said that Canada’s national interests are more important than their relationship with Mexico, and that Canada will most likely conduct bilateral trade negotiations with the United States, as supposed renegotiating NAFTA along with Mexico.
The statement by Canadian officials contrasts with the public assertion so far by the government of Justin Trudeau, who has denied that he will leave Mexico alone in the negotiations.
“Our negotiating positions are totally different,” a second government source told Reuters. “Mexico is hanging by the feet of the window of a skyscraper.”
About 74% of Canadian exports go to the US, a level similar to that of Mexican exports. However, unlike Mexico, Canada’s economy is more diversified and its domestic market is much more mature.
The declarations of the Canadian authorities were issued only 24 hours after Trump announced that his country will not ratify the TPP – the trade agreement that included Canada, Mexico, Peru and Chile with seven countries of Asia Pacific including Japan And Australia.
The statement also comes just a week before Trump receives his Mexican counterpart, Enrique Peña Nieto, in the White House in a meeting that will be the starting signal for negotiations on the new commercial scheme between both countries.
On Tuesday, Canadian Foreign Minister Chrystia Freeland recalled at a press conference held in Calgary that “the TPP is constructed in such a way that it can only enter into force with the United States as a ratifying country”, so “the TPP cannot exist without the United States being part of it. “
In this way, the Executive of Trudeau departs from the plans of the other signatory countries, among them Australia and New Zealand, who want to resurrect the treaty, even without the presence of the USA.
One of the ideas that have arisen in the last hours is to incorporate China and other Asian nations that were not present in the TPP.
The Mexican government, through its minister of Economy, Ildefonso Guajardo, said Tuesday that it will not accept a new trade pact with the US and Canada that is not advantageous for all parties.
“If we are going to go for something that is less than what we have, it does not make sense to stay,” Guajardo said in a statement to Televisa.
If the outcome of the negotiation does not imply gains for both parties, the economic official has said that the Latin American country will refuse to remain in the treaty: “there would be no other option,” he said.
However, Guajardo has never referred to the possibility of betting on bilateral rather than trilateral agreements, as suggested by the aforementioned Canadian sources.
Both Guajardo and Mexican Foreign Minister Luis Videgaray, a man of the highest confidence of Peña Nieto, travel to Washington on Tuesday to prepare the ground for the meeting between the two presidents.
NAFTA will be one of the major issues that will be put on the table, but it will not be the only one: there will also be issues related to security and migration between the two countries.
The meeting at the highest level is presumed to be vital for the economic future of Mexico in the short and medium term. Weighed heavily against the dollar and other major international currencies, the Latin American country has seen a sharp rise in inflation, which hit a five-year high in the first half of January.
More importantly, the country has seen how the shadow of uncertainty has settled on foreign direct investment, a good predictor of an economy as open as the Mexican.