MEXICO CITY – Mexico faces daunting challenges in the fifth North American Free Trade Agreement (NAFTA) renegotiation round, which got under way on Friday amid fresh warnings from the United States.
Just days before the talks, scheduled to take place from Nov. 17-21, US Commerce Secretary Wilbur Ross warned Mexico and Canada of the consequences of not reaching a new agreement.
The dissolution of NAFTA would be “far more damaging to them than to us,” Ross said at the Wall Street Journal’s CEO Council Meeting on Tuesday. “I would certainly prefer them to come to their senses and make a sensible deal.”
Mexican Economy Secretary Ildefonso Guajardo Villarreal responded a day later, recalling that many areas of the US with strong trade relations with Mexico would be adversely affected if the trade deal is scrapped.
The president of Mexico’s Business Coordinating Council, Juan Pablo Castañon, told EFE that his coalition of business groups was hopeful that final agreement can be reached on important chapters such as financial services, energy and e-commerce.
But he acknowledged there were issues with no apparent “room to maneuver.”
One thorny issue is the US’s insistence that a larger share of manufactured products, particularly in the automobile sector, be made in North America to qualify for duty-free status.
In the case of automobile rules of origin, the US says it wants the North American content of cars to climb to 85 percent (up from 62.5 percent at present). It also wants a new rule stating that cars manufactured in Canada and Mexico must have 50 percent American content to qualify for zero tariffs.
The US furthermore wants a new agreement to contain a “sunset” clause that would require each of the three parties to re-approve the deal every five years.
This latest round of talks on revising NAFTA, a trade deal linking Mexico, the US and Canada that took effect in 1994, will be held for the first time without the presence of the politicians overseeing the negotiations: Guajardo Villarreal, Canadian Foreign Affairs Minister Chrystia Freeland and US Trade Representative Robert Lighthizer.
According to a trilateral statement, the three NAFTA Ministers agreed not to attend the fifth round “so negotiators can continue to make important progress on key chapters advanced in Round 4.”
Due to the lack of progress in the fourth round in Arlington, Virginia, held from Oct. 11-17, the parties said they had agreed on a longer intersessional period before the next negotiating round.
That decision means the seven rounds of talks are not expected to conclude until March 2018, or just months before Mexico’s presidential election.