August 28, 2018
Conference Call: US-Mexico Trade Deal: Implications and Next Steps
By Valentina Sader
The call featured the following speakers: Jason Marczak, director of the Adrienne Arsht Latin America Center; Valeria Moy, nonresident fellow of the Adrienne Arsht Latin America Center Atlantic Council and director of México, ¿Cómo vamos?; Miguel Noyola, partner and member of the Global International Commercial and Trade Practice Group at Baker McKenzie; and Bart Oosterveld, the C. Boyden Gray fellow on Global Finance and Growth and director of Global Business & Economics Program Atlantic Council.
Click here to listen to the conference call. (Due to technical difficulties, the beginning portion of the audio recording is unavailable.)
Ms. Moy kicked off the conversation outlining Mexico’s reaction to the announcement. In her view, the deal was extremely well-received in the country, even by financial markets. She noted caution, however, as the agreement has not yet been signed. Mr. Oosterveld added that the bilateral deal was a surprise to both the Canadian government and the US Congress, as the latter had only authorized the renegotiation of a trilateral agreement.
Mr. Marczak emphasized the importance of the timing, noting the Canadian Foreign Minister, Chrystia Freeland’s urgent travel to Washington DC. He also mentioned the deadline of Friday, August 31, 2018 for the US administration to submit its notification to Congress to allow for a finalized signature under Mexican President Enrique Peña Nieto. In reference to the Mexican President-elect, Andrés Manuel López Obrador, Ms. Moy asserted that his administration would actually welcome the finalization of the agreement by Peña Nieto, in order to prioritize other issues on López Obrador’s agenda. However, if not signed before December 1, negotiations could continue with potential changes, especially if Canada does not join by then.
Mr. Noyola analyzed the implications for the countries’ respective relationships, noting trade deals already in effect of which Mexico and Canada are members, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). He also questioned the legal procedures and technicalities of a possible trilateral agreement, considering that under US law, removal of Chapter 19 might require a notice period of more than 90 days.
Mr. Marczak commented on Canada’s “red line” around Chapter 19, specifically the trade remedy and safeguard provisions, to which both Mr. Noyola and Mr. Oosterveld agreed, emphasizing the significance of this provision and the likelihood that Canada will want to reopen negotiations of this Chapter. Mr. Noyola also mentioned the Investor-State Dispute Settlement (ISDS) mechanism as critical protections for foreign investors, specifically in emerging countries such as Mexico, mentioning, “it is a bit curious now that it is the US who wants to walk back those mechanisms…” He then questioned the implications for unprotected sectors, which could potentially be more vulnerable under López Obrador’s administration than under prior governments.
Shifting the conversation to the overall importance of US-Mexico relationship, Mr. Marczak emphasized the two countries’ cooperation on intelligence sharing, at the border, in [military] training, as well as on environmental issues. He further noted that although, “NAFTA is a commercial accord, it has also created a North American space [with] cooperation on a number of different issues… all across the three countries that frankly have made us as North America be able to compete much more effectively in the broader global economy.” On the Canada-US relationship, Mr. Oosterveld noted that “while relationships between the US and Mexico might have taken a slight turn for the better [on Monday], relationships between US and Canada are considered by many Canadians to be an all-time low.”
Ms. Moy closed out the call on a positive note by acknowledging that although the deal seems to encourage manufacturing in the US, it is a great opportunity for Mexico to transform their auto industry into one that has the domestic capacity to produce at a level high enough to satisfy the proposed 75% auto trade and rule of origin provision.