Negotiators from the United States, Canada and Mexico resumed NAFTA talks this week in Mexico City on the North American Free Trade Agreement. The three countries will attempt to hammer out significant differences that threatened to derail the agreement entirely during the previous round of negotiations which closed in Washington in mid-October.
At the last round in October, U.S. negotiators proposed changes to the rules of origin for autos, which are used to determine how much of a vehicle must be made in a certain place to fall under the deal.
Mexico´s negotiators are responding to U.S. proposals on higher U.S. content for automobiles and a sunset clause that would allow the deal to automatically expire after five years.
In the run up to this week’s talks Mexico’s government prepared a macroeconomic response in case U.S. President Donald Trump makes good on threats to dump NAFTA, an event which could wreak havoc on the Mexican economy and hurt the peso. The Peso has taken a beating in recent weeks following more threats from President Trump walk away from the treaty.
Mexico’s Foreign Minister Luis Videgaray said on Monday the government and central bank were preparing a plan to address the possibility of a future without NAFTA, but gave few details.
The government has said it is examining how it could adjust Mexican legislation to give investors certainty about their investments if the almost 24-year-old NAFTA collapses.
According to analysts, it is likely that a termination would revert trade to the rules governed by the World Trade Organization (WTO), which encourage investment and with which Mexico could live.