Mexico prepares for a post-NAFTA world

By Elliot Bullman

According to the Associated Press, Mexico is taking U.S. President Donald Trump’s threats to leave the North American Free Trade Agreement very seriously as the second round of renegotiating talks opened Friday Sept. 1 in Mexico City.

tlcan plan b

In the aftermath of Trump’s tweet last Sunday saying that Mexico and Canada are “both being very difficult, and we may have to terminate,” Mexico now says it is developing a “Plan B” in case Trump withdraws from the trade pact.


Mexico’s Economy Secretary Ildefonso Guajardo told the country’s Senate. “We have to have an alternative plan perfectly prepared. A scenario without NAFTA is something we have to think about.”

Guajardo said key sticking points include U.S. demands to modify NAFTA’s dispute resolution process and tighten labour standards. In comments to Mexico’s Senate, he said that about 15 of the 25 negotiating groups have run into differences after the first round of talks started on Aug. 16 in Washington.

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One significant clash is over NAFTA’s method of resolving disputes. The current agreement allows binational panels of private experts to decide differences, making it harder for one nation to unilaterally impose tariffs on another. The United States wants to eliminate those panels, but Canada and Mexico fear that would allow the U.S. to throw its greater weight around.

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U.S. negotiators also want to tighten enforcement of labour standards, which are currently covered in a largely toothless NAFTA side agreement. A key draw for foreign assembly plants and investment has been Mexico’s low wages. While average manufacturing wages in China had risen to $3.60 per hour by 2016, Mexico’s had shrunk to $2.10, a level some economists say is artificially low.

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With many workers unable to afford the vehicles Mexico produces, the country exports about three times as many cars as are purchased domestically. Most of those exports go to the United States.

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