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US Delegation’s Visit to Mexico Sends Positive Signal for NAFTA

2018-07-14 03:16
A 30-minute phone conversation between President Donald Trump and Mexico’s newly elected, leftist president Andrés Manuel López Obrador seems to have opened a new chapter in the relationship between both countries. A delegation of Trump administration officials will meet with López Obrador on July 13 to continue the dialogue, sending positive signals for the ongoing NAFTA negotiations. Senior White House adviser and Trump’s son-in-law Jared Kushner will meet López Obrador on July 13. Secretary of State Michael Pompeo, Treasury Secretary Steven Mnuchin, and Homeland Security Secretary Kirstjen Nielsen will be joining the meeting as well. López Obrador praised Trump for not bringing up his proposed border wall during their phone conversation on July 2. “I thank him a lot, I say so sincerely, for the respectful treatment we have received from President Trump and the U.S. government,” López Obrador told The Associated Press on July 10. Mexico wants to see NAFTA talks wrapped up by this fall, which is a positive signal for the negotiations. The prospect of a deal, however, depends on how fast NAFTA nations can overcome some sticking points. “I don’t think they have that many remaining sticking points, to be truthful,” said Paula Stern, founder and president of the Stern Group and former chairwoman of U.S. International Trade Commission. “It really is up to the president to decide whether to push for a success before the November elections.” Mexico’s new president-elect has pledged that he would be supportive of the current government’s approach to the NAFTA talks until his inauguration on Dec. 1. In order to coordinate the trade negotiation efforts during his transition, he designated a chief NAFTA negotiator in the new Mexican government who will be working closely with the outgoing government’s team. According to Antonio Ortiz-Mena, senior vice president of the business strategy firm Albright Stonebridge Group, there are several sticking points on a new NAFTA deal and the sunset clause is the most problematic one. The Trump administration requests a clause specifying that the agreement expires after five years unless the three countries agree to extend it, thus requiring the trading partners to reexamine it every five years. According to Ortiz-Mena, the sunset clause is a “deal breaker” for both Mexico and Canada. “The idea behind these international trade agreements is to create stability and predictability,” he said. Businesses can deal with tariffs, but they don’t like uncertainty, he said. The sunset clause generates unacceptable uncertainty. At the Group of Seven (G-7) summit on June 9, President Donald Trump told reporters, “We’re pretty close on the sunset provision,” adding that it is one of the heavily negotiated clauses. There are a few other sticking points that have slowed talks, including disagreements over “rules of origin” on products such as autos and the use of an international dispute settlement mechanism when problems arise. Rules of origin set the criteria needed to determine how much of a car can be built in Canada or Mexico to qualify for sale in the United States. The Trump administration has been demanding to increase the percentage of a vehicle’s parts that must come from a NAFTA country for it to be shipped across borders duty-free. Mexico, however, has been pushing back, claiming that the rules are impossible to implement. The United States also demands to abolish the pact’s dispute-resolution provisions. According to Ortiz-Mena, Mexico and Canada need strong dispute settlement clauses, as they need a way to limit the ability of the United States to use its market power and implement unilateral protectionist actions. In addition, the Trump administration wants to set higher wage standards for an automobile to be duty-free. One of the campaign pledges of López Obrador was to fix the low and stagnant wages in Mexico. Thus, he aims to raise wages by 15 percent each year. However, meeting Trump’s demand on wage standards might be tricky as more than half of workers in Mexico are enga