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NAFTA Sticking Points: 9 Issues Standing In The Way Of A Deal

Huffington Post / Alexander Panetta / May 22

 

From cars to milk to pharmaceuticals, there’s plenty left to resolve.

WASHINGTON — The NAFTA negotiations could continue for a while, with U.S. trade czar Robert Lighthizer signalling he wants significant changes in multiple areas and isn’t interested in a quick, limited deal.

Here are some key flashpoints involving Canada:

—Autos: This is the sticking point countries have spent the most effort trying to solve. The U.S. wants to stem the loss of manufacturing jobs to Mexico. Canada broadly shares that goal. However, the issue has prompted some concern, and not only from Mexico. While the U.S. has significantly softened its earlier demands, it still wants 40 per cent of every car built in a high-wage jurisdiction; 75 per cent of all parts to be North American; and 70 per cent of steel to be North American.

Critics of the plan say it could backfire: if auto-makers decide they don’t want to deal with all this red tape, they can just ignore NAFTA and simply pay the 2.5 per cent U.S. tariff on cars. Critics say that won’t create jobs — just more expensive cars, and less economic activity.

—Pharmaceuticals: It’s the stated goal of U.S. trade policy to make other countries pay more for drugs, so that foreigners shoulder more of the burden of research and development costs. The U.S. has a particular gripe with Canada: it’s reduced Canada’s ranking in an annual report card on intellectual property, partly over policy changes at Canada’s Patented Medicine Prices Review Board.

The U.S. wants more transparency in how drug prices are set in Canada. Its industry is also pushing for greater ability to appeal pricing decisions. Such objectives place it in direct conflict with the Trudeau government, which wants to create a national pharmacare plan and intends to argue that its policy is consistent with that of President Donald Trump, who campaigned on controlling drug prices.

—Dairy: The U.S. has two problems with Canadian dairy policy. First, Canada limits imports and sets fixed prices under a supply-management system, and does the same for poultry and eggs. Second, Canadian producers who are protected from competition are at the same time selling surplus ingredients onto the world market for cheese-making, contributing to a global glut.

The U.S. has demanded an end to these surplus sales, and also an end to supply management within 10 years. Canada’s counterpoint is that the U.S. engages in its own protections, supporting farmers during boom-bust cycles; it argues that Canada’s system at least has the benefit of being stable, and not requiring periodic bailouts. If past history is any guide, a middle-ground compromise might be possible: in agreements with Europe and the TPP countries, Canada opened up its dairy market by several percentage points.

—Dispute settlement: NAFTA is enforced by three main systems for settling disputes: Chapter 11 lets companies sue governments for unfair treatment, Chapter 19 lets industries fight punitive duties, and Chapter 20 lets countries sue countries.

The U.S. wants to weaken two of the three, and entirely end Chapter 19. It’s a historically emotional issue for Canada, as Chapter 19 was the original make-or-break condition for free trade with the U.S.; it’s also been used to fight softwood lumber duties. However, some observers question the relevance of Chapter 19 today, as other forums exist for fighting duties.

Take the spat against Bombardier, in which duties were overturned in the U.S. court system. As for Chapter 11, Canada has less of a historical attachment, although it’s extremely popular with those business allies in the U.S. fighting to preserve NAFTA.

The Trump administration’s trade czar dislikes all these systems — Lighthizer sees them not only as a violation of national sovereignty: he argues that Chapter 11 helps companies do the dirty deed of outsourcing jobs. He argues that if companies want to shift plants elsewhere, the U.S. government should not be in the business of protecting their legal rights in, for instance, Mexico.

—De minimis: Americans are allowed to spend $800 online before they pay duties on a foreign purchase; Canadians can spend $20. It’s one of the lowest rates in the world. Lighthizer says it might not be necessary to match the U.S. amount, but he says that 40-fold difference is unreasonable. Retailers argue that shifting the de minimis level would fuel a commercial real-estate crisis, and disproportionately benefit American tech companies which enjoy economies of scale.

—Intellectual property: The U.S. complains about Canada’s border controls on counterfeit goods. It says it’s concerned that Canada doesn’t provide customs officials with the ability to inspect, seize, and destroy pirated goods moving through Canada to the United States. It complains that there were no known criminal prosecutions for counterfeiting in Canada in 2017, calling Canada an outlier among developed countries. It also bemoans what it calls excessive use of education-related exceptions to copyright laws, which it says have damaged the market for educational publishers and authors.

—Procurement: Canada’s aim is to increase companies’ access to public-works contracts abroad, expanding that access from federal contracts to state/provincial and local ones. Currently, subnational procurement rights are negotiated on a case-by-case basis. The U.S. has the opposite goal: It wants to limit the access Canadian and Mexican companies already enjoy at the federal level, restricted to whatever amount of contracts American companies win in the other countries.

—Sunset clause: One of the most controversial ideas of this negotiation. The U.S. has pushed for a clause in the deal that would cancel NAFTA after five years, unless every country agrees to keep it. Critics say this is a recipe for permanent uncertainty. They ask how a car company, for instance, is supposed to invest in all the assembly-line changes demanded in this deal, when the whole deal could be over in five years. They also point out that NAFTA already has a termination clause, which countries can invoke if they’re unhappy.

Prime Minister Justin Trudeau ridiculed the sunset idea in a public event in New York. He used a real-estate metaphor and made clear he was addressing President Donald Trump: What developer would build a skyscraper on a piece of land, Trudeau asked, if access to that land was only guaranteed for five years?

—Professional visas: Canada wants to modernize the list of professions eligible for a NAFTA work visa under Chapter 16. The current list of jobs eligible for these visas is decades old, and features almost nothing for the tech industry. Companies complain this makes it hard to send their own employees to branches across the border. The U.S. has put up some resistance, as any expansion of work-related migration risks being wrapped into the heated U.S. immigration debate.

 

Huffington Post / Alexander Panetta / May 22

 

 

NAFTA countries set to blow through Paul Ryan’s May 17 deadline without a deal

Bloomberg.com / Financial Post / May 14

 

The three countries’ ministers working on the deal aren’t scheduled to meet this week, sources say, though lower-level talks continue and may yield a breakthrough

NAFTA negotiators from the U.S., Canada and Mexico are poised to miss the deadline this week cited by House Speaker Paul Ryan, the latest blown marker for reworking the 24-year-old deal.

U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Affairs Minister Chrystia Freeland aren’t scheduled to meet together in person this week, according to three government officials familiar with talks who spoke on condition of anonymity. The trio met at least bilaterally every day last week.

The Trump administration is increasingly preoccupied with its efforts to reach a peace deal with North Korea and avoid a trade war with China. Senior economic adviser Liu He will be in Washington this week for talks with the administration on ways to resolve the trade dispute between the two countries.

Lower-level NAFTA talks will continue and could yield a breakthrough and a ministerial meeting, but none has been scheduled so far, according to the people. The three officials said the ministers could meet next week, or later in the month. Chief negotiators are scheduled to hold a conference call early this week to assess the status of the talks and whether a ministerial meeting is feasible later this week, one of the people said.

While the ministers will keep in touch by phone, the lack of a face-to-face meeting after such a big push last week would show how far apart the sides remain on updating the North American Free Trade Agreement. Ryan injected a sense of urgency when he said lawmakers need notice of intent to sign a deal by May 17 so they can vote before this Congress ends in December.

The Canadian dollar pared its gain in Monday trading, while Mexico’s peso extended its losses, falling 0.7 per cent to 19.5585 per dollar at 1:45 p.m. in New York.

WORK CONTINUES

Although Ryan’s comments put the firmest deadline yet on NAFTA talks, many analysts have said U.S. deadlines are murky, and that a deal reached later in May or even in June could theoretically get passed. A spokeswoman for Ryan, AshLee Strong, said the May 17 target is due to timelines set out in U.S. trade law, not an arbitrary political date. “This is not a statutory deadline, but a timeline and calendar deadline,” Strong said by email Friday.

Whether Lighthizer could seek to notify Ryan by Thursday of his intent to sign, without an actual deal in place, is somewhat unclear. Lighthizer cited the House speaker’s deadline to pressure his Canadian and Mexican counterparts during a trilateral meeting Friday, according to two people familiar with the talks. President Donald Trump’s trade chief has indicated he needs a deal this month but hasn’t publicly identified a particular day.

Emily Davis, a spokeswoman for Lighthizer, referred to a written statement he released Friday when asked for comment Monday. In it, Lighthizer said talks have “covered a large number of very complex issues” and the U.S. “is ready to continue working with Mexico and Canada to achieve needed breakthroughs on these objectives.” The statement made no mention of any deadline.

‘TOO STUBBORN’

Former Mexican President Vicente Fox said Mexico will only sign on to a good NAFTA deal, otherwise it could withdraw and pivot to expanded trade with countries such as China, Argentina and Brazil.

“Mexico is not weak on this negotiation. We have leverage, and this should be understood on the U.S. side — which, by the way, everybody understands how this can be solved except Señor Trump,” Fox said Monday in an interview with Bloomberg Television. “He’s too stubborn. He just wants to win, he wants all the marbles for himself and nothing for the rest.”

Freeland is in Mexico City Monday for talks on Venezuela and hasn’t said if she will meet Guajardo privately there. In a sign of the dimming odds for an imminent deal, Guajardo and his team told dozens of stakeholders from Mexico’s private sector they should return home from Washington because no breakthrough was expected, according to two people familiar with the meeting. Stakeholders from all three countries are cancelling or delaying visits to Washington this week, four other people familiar with the talks said.

The existing NAFTA remains on the books unless a country withdraws, which would require six months notice. No country has given that notice, though Trump has threatened to do so. On Friday, the president called NAFTA a “horrible disaster” for the U.S.

Lighthizer has said the political calculus for passing a new NAFTA would change if it had to be voted on by the next Congress. Mexico and Canada have downplayed the urgency to reach a deal this week.

The countries have been holding periodic discussions since August. They had initially sought a deal by December, and then by March, and are now in what they consider a continuous round of negotiations. Talks have focused recently on the auto sector, with Canada hailing progress but with big gaps still remaining. Even if the sides agree on auto rules, they remain far apart on issues such as a sunset clause and dispute-settlement panels.

Ryan is pushing for a deal because of timelines in U.S. trade law, but another deadline looms. Mexico’s election will be held July 1 and looks set to usher in a new president who could seek changes to anything not yet finalized.

 

Bloomberg.com / Financial Post / May 14

 

NAFTA negotiations enter critical week with the U.S. still pushing a hard line

From: Financial Post / Thomson Reuters / Veronica Gomez and Anthony Esposito / May 7

 

Sources close to the talks have suggested there is a creeping feeling of uncertainty and pessimism because of gridlock on the most critical issues

WASHINGTON — Talks to update the NAFTA trade deal enter a make-or-break week on Monday, as ministers from Canada, the United States and Mexico seek to resolve an impasse in key areas before elections in Mexico and the United States complicate the process.

Discussions in Washington will center on rules of origin that govern what percentage of a car needs to be built in the North American Free Trade Agreement region to avoid tariffs, the dispute-resolution mechanism and U.S. demands for a sunset clause that could automatically kill the trade deal after five years.

U.S. Trade Representative Robert Lighthizer warned last week that if the talks took too long, approval by the Republican-controlled Congress may be on “thin ice.” The aim is to complete a vote during the “lame-duck” period before a new Congress is seated after November’s congressional elections.

Mexico holds its presidential election on July 1 and the front-runner, leftist Andres Manuel Lopez Obrador, says he wants a hand in redrafting NAFTA if he wins.

“We have a window of opportunity in the next two or three weeks … considering two things: where the talks are now and the political calendars” in Mexico and the United States, said Moises Kalach, head of the international negotiating arm of Mexico’s CCE business lobby, which is leading the private sector’s involvement in the talks.

Sources close to the talks have suggested there is a creeping feeling of uncertainty and pessimism going into the new round because of gridlock on the most critical issues.

At the heart of the NAFTA revamp is U.S. President Donald Trump’s desire to retool rules for the automotive sector in order to try to bring jobs and investment back north from lower-cost Mexico. Despite months of talks on the issue, the sides remain far apart.

A round of talks among Canadian Foreign Minister Chrystia Freeland, Mexican Economy Minister Ildefonso Guajardo and Lighthizer scheduled for last week was cancelled to allow consultations with the Mexican car industry and for the American to go on a trade mission to China.

Mexico’s main auto sector lobby has described the latest U.S. demands, which include raising the North American content to 75 per cent from the current 62.5 per cent over a period of four years for light vehicles, as “not acceptable.”

“The positive momentum on the rules of origin appears to be counterbalanced by the opposite movement on labour wage treatment proposals,” said Flavio Volpe, president of Canada’s Automotive Parts Manufacturers Association.

The U.S. proposal also would require that 40 per cent of the value of light-duty passenger vehicles and 45 per cent for pickup trucks be built in areas with wages of US$16 per hour or higher.

That is seen as a hard pill to swallow for Mexico, where the Ann Arbor, Michigan-based Center for Automotive Research has estimated auto assembly workers average under US$6 an hour, and auto parts plants workers average less than US$3 an hour.

Critics also say it would create a bureaucratic nightmare of paperwork.

 

From: Financial Post / Thomson Reuters / Veronica Gomez and Anthony Esposito / May 7

 

 

Mexico fully expects to reach a consensus on NAFTA trade deal

FROM: CNBC / Sam Meredith / 22 April 2018

Mexico believes it is on the brink of agreeing to the modernization of the North American Free Trade Agreement (NAFTA).

Alongside the U.S. and Canada, Mexico is in the midst of eight-month-old talks to try to update the NAFTA deal — which is thought to underpin about $1.2 trillion in yearly trilateral trade.

“In the baseline scenario of the central bank, we have that there will be a version of NAFTA,” Mexican Central Bank Governor Alejandro Diaz de Leon told CNBC’s Joumanna Bercetche on Saturday.

“We know that there have been ups and downs in the negotiation … (But) we do hope that the advantages for the three countries will prevail in some version of the agreement,” he added.

Rules of origin

In an apparent bid to try to quickly wrap up the reworking of the 24-year-old accord, leading Mexican officials have sought to convey an upbeat tone in recent days.

Late last week, Mexico’s Economy Minister, Ildefonso Guajardo, said lawmakers had made “a lot of progress” after the second day of meetings with U.S. Trade Representative Robert Lighthizer and Canada’s Chrystia Freeland. And on Sunday, Mexican President Enrique Pena Nieto said his country was feeling optimistic about the prospect of being able to successfully conclude the talks in the coming weeks.

Canada’s Foreign Minister Chrystia Freeland (C) speaks before the start of a trilateral meeting with Mexico’s Economy Minister Ildefonso Guajardo (L) and U.S. Trade Representative Robert Lighthizer during the third round of NAFTA talks involving the United States, Mexico and Canada in Ottawa, Ontario, Canada, September 27, 2017.

Ministers from the U.S., Canada and Mexico are trying to press ahead with the negotiations in order to try to avoid clashing with a presidential election in Mexico on July 1. Nonetheless, reaching this milestone would mean overcoming major differences on several U.S. demands.

Canada and Mexico have battled with the U.S. over their apparent reluctance to adhere to tougher NAFTA regulations on the content of vehicles made in North American nations. Often referred to as the rules of origin, it is widely considered to be a key sticking point to the talks.

President Donald Trump’s negotiators had initially called for tariffs on the content of vehicles made in NAFTA nations to increase to 85 percent from 62.5 percent. However, Washington’s stance over this issue has reportedly softened in an effort to reach a consensus with their North American neighbors sooner rather than later.

Market has ‘priced in’ NAFTA outcome

The U.S. was thought to be looking to secure a deal in principle with the NAFTA agreement sometime over the next three weeks. Meanwhile, Mexico’s Guajardo said he saw an 80 percent chance of reaching a deal by the first week of May.

Trump, who has repeatedly threatened to walk away from the negotiating table in the absence of major changes, has criticized the pact for creating jobs in Mexico at the expense of U.S. workers.

When asked to what extent it had been a challenge to manage Mexico’s currency at a time when tweets from the U.S. president could prompt volatile swings in the exchange rate, Mexico’s Diaz de Leon replied: “Obviously some of these news and posture and messages have an effect on the exchange rate, but I also think the exchange rate has been learning how to extract the signal from those pieces of information.”

“So far, the market has priced in the NAFTA event according to what is likely to happen,” he added.

FROM: CNBC / Sam Meredith / 22 April 2018

 

 

A closer look at round seven of the NAFTA negotiations

FROM: Lexology / Dentons / 19 de marzo de 2018

 

Round seven of the NAFTA negotiations concluded in Mexico City on March 5, 2018. The talks ended with United States Trade Representative, Robert Lighthizer, indicating that the US is prepared to walk away from NAFTA and replace it with separate bilateral agreements. He urged the parties to finish the negotiations quickly, “Now our time is running very short…I fear the longer we proceed, the more political headwinds we will feel.”1 Lighthizer alluded to several ‘political headwinds’ that could impact the future of negotiations, including the presidential election in Mexico, provincial elections in Ontario and Quebec, and the US midterm elections.

The talks were impacted midweek by an announcement from President Trump that his Administration would impose tariffs on steel and aluminum imports. The proposed tariff would be 25% for steel imports and 10% for aluminum imports.

The proposed tariff triggered controversy within the Republican Party and the Administration itself. US House Speaker Paul Ryan, backed by a number of Republicans who support the President, has urged President Trump to back away from threats of a tariff, fearing that it could spark a trade war.2 In a letter to the President, 107 House Republicans wrote, “We urge you to reconsider the idea of broad tariffs to avoid unintended consequences to the U.S. economy and its workers.”3 On March 6, Gary Cohn, President Trump’s economic advisor, resigned. Cohn was a voice of free trade in a White House that is ambiguous at best on trade agreements.4

While the tariffs announced by President Trump ultimately excluded Canada and Mexico “for now”, the threat of tariffs proposal loomed over the remainder of the negotiations. Reportedly, the proposed tariff was the starting point for many discussions and was often referred to as “the elephant in the room”.5 The tariff proposal further impacted negotiations when President Trump linked the tariffs to the NAFTA negotiations. On March 5, he tweeted “Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed”.6 Canadian Trade Minister Chrystia Freeland responded in her closing remarks by saying “Canada would view any trade restrictions on Canadian steel or aluminum as absolutely unacceptable.”7 Mexican Economy Minister Ildefonso Guajardo responded by tweeting “Mexico shouldn’t be included in steel & aluminum tariffs. It is the wrong way to incentivize the creation of a new and modern #NAFTA”.8 On March 7, President Trump announced that he would initially exclude Canada and Mexico from the proposed tariff. However, the exemption could be rescinded if Canada and Mexico do not agree to an updated NAFTA.9

Notwithstanding the short term exemption on steel, supported by the Steelworkers and Speaker Ryan, President Trump again tweeted on March 5 on the Canadian farm system and how Canada “must treat [US] farmers much better.” Thus, US agricultural demands remain on the table, while Canada continues to steadfastly defend its agricultural sector, including the supply management system. Whether and how the negotiators will successfully bridge this issue remains to be seen.

Limited progress was made in other areas, such as the rules of origin provisions. Jason Bernstein, the US negotiator for rules of origin, was called back to Washington on February 26 to consult with US industry representatives, thus halting negotiations. Talks amongst technical experts are scheduled to resume in advance of the next formal round of negotiations. Similarly, investor-state dispute mechanisms and the proposed sunset clause were not emphasized this round.

With respect to energy, we understand there is agreement to include both a standalone chapter on energy as well as energy related sections in other chapters. The standalone chapter, because it will likely include Mexico unlike certain energy provisions in the current NAFTA, will focus on “more interconnectivity across the networks of energy in North America” and will seek to recognize the changes Mexico has made to allow for foreign investment in its energy sector. 10

Negotiators did close a number of smaller chapters, including regulatory practices, sanitary and phytosanitary measures, and telecommunications. Additionally, Steve Verheul, Canada’s chief negotiator, commented that the parties were close to completing sections on technical barriers but required more time on sections regarding the environment.11 While reportedly half of the chapters are between 80-90% settled, Lighthizer commented that only 6 of NAFTA’s 30 chapters have been officially closed.

With respect to the sanitary and phytosanitary chapter that governs food safety, negotiators have settled on a fast-track system that would prioritize requests between the US, Mexico and Canada. This system is a first of its kind in international food safety agreements. Minister Guajardo said the chapter will help facilitate agricultural trade and it “guarantees animal and vegetable sanitation based in science.”12Additionally, sector annexes on proprietary food formulas and chemicals were closed this round. The annex protects the intellectual property of certain mixes and ingredients and allows for more regulatory cooperation for the use of chemicals. 13

The eighth round of NAFTA talks is expected to take place in Washington in April, subject to availability of Ministers who are traveling for other international meetings, including the upcoming Free Trade Area of the Americas summit.14

 

 

FROM: Lexology / Dentons / 19 de marzo de 2018

Mexico Economy Minister: NAFTA Must Remain Trilateral Accord

FROM: Voa News / Reuters / 3 de marzo de 2018

MEXICO CITY — Mexico’s Economy Minister Ildefonso Guajardo on Tuesday rejected making a bilateral trade treaty with the United States, saying the North American Free Trade Agreement, which is currently being renegotiated, must remain a three-country accord.

On Monday, U.S. Trade Representative Robert Lighthizer said time to rework the deal was running “very short” and again raised the possibility of the United States pursuing bilateral deals with its partners, while stressing that Washington would prefer a three-way agreement.

NAFTA “has to be a trilateral accord, given the conditions of integration in North America,” Guajardo said in an interview with the Televisa network on Tuesday. “It must be that way.”

Lighthizer said on Monday that Mexico’s presidential election and the looming expiry of a congressional negotiating authorization in July puts the onus on the United States, Mexico and Canada to come up with a plan soon.

The latest round of talks have been clouded, however, by U.S. President Donald Trump’s plans to launch metals tariffs. On Monday, Trump tweeted that “tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.”

Guajardo said on Tuesday that if the U.S. government were to push ahead with metals tariffs that included Mexico, the country would be forced to respond with politically targeted tit-for-tat responses.

“There’s a list (of U.S. products) that we are analyzing internally, but we won’t make it public, we’re going to wait,” Guajardo said.

He also said that in a meeting in Washington last week, in which he met Commerce Secretary Wilbur Ross, he told the U.S. official that Mexico should not be included in the proposed tariffs.

“We’re allies in national security … our industries are highly integrated, we buy more (U.S.) steel than we sell, and so there’s no point in shooting oneself in the foot,” he said.

 

 

FROM: Voa News / Reuters / 3 de marzo de 2018

Mexico’s economy rebounds in fourth quarter as elections loom

FROM: Reuters / Michael O´Boyle / 30 de enero de 2018

 

MEXICO CITY (Reuters) – Mexico’s economy bounced back more than expected in the fourth quarter, according to preliminary data, but signs of slowing growth could feed discontent ahead of the presidential election in July.

Gross domestic product in Latin America’s second-biggest economy grew around 1.0 percent in seasonally adjusted terms in the October-December period, compared with the previous quarter, the national statistics agency said on Tuesday.

A Reuters poll had forecast an expansion of 0.6 percent. The economy rebounded after shrinking 0.3 percent in the third quarter as the country recovered from two devastating earthquakes that dented activity in the July-September period.

Higher interest rates and persistent inflation could weigh on consumer demand that helped support the Mexican economy last year amid uncertainty around U.S. President Donald Trump’s threats to pull out of a free-trade deal with Mexico.

It is still unclear if Mexico, Canada and the United States will be able to renegotiate the North American Free Trade Agreement (NAFTA), adding to concerns about the outcome of Mexico’s presidential race, which a leftist candidate leads in the polls.

“Important investment decisions may potentially be postponed, scaled down or even canceled,” Goldman Sachs economist Alberto Ramos wrote in a note to clients.

Data showed that the industrial sector edged up 0.1 percent in the fourth quarter compared with the prior quarter, crimped by a decline in oil production.

Agriculture grew 3.1 percent on a quarter-on-quarter basis while services grew 1.2 percent.

Mexico’s central bank is expected to hike interest rates again in February to contain a surge in inflation. Higher prices and more expensive loans could weigh on consumer demand, analysts said.

Mexico’s economy grew 1.8 percent in unadjusted terms compared with the same quarter a year earlier, the agency said.

For full-year 2017, the economy expanded at an unadjusted 2.1 percent rate, down from 2.9 percent in 2016. That is the lowest annual rate of expansion since 2013, President Enrique Pena Nieto’s first full year in office.

”The Mexican economy is surviving rather than thriving,” said Neil Shearing, an economist at Capital Economics.

Pena Nieto promised to boost Mexico’s anemic growth rates by passing major economic reforms, such as opening the energy sector to private investment. But an oil price slump sabotaged hopes to supercharge growth, as Pena Nieto had promised.

Slack growth could fuel support for opposition candidates in the July 1 election.

A poll on Monday showed leftist Andres Manuel Lopez Obrador consolidated support in his bid for the Mexican presidency, but the race has tightened as another opposition contender gained ground while the ruling party trailed.

 

 

FROM: Reuters / Michael O´Boyle / 30 de enero de 2018

Mexico’s finance minister isn’t worried about a ‘plan B’ for NAFTA

FROM: CNBC / Natasha Turak / 25 de Enero de 2018

 

Mexico’s Finance Minister Jose Antonio Anaya appeared confident in the future of the North American Free Trade Agreement (NAFTA), telling CNBC Wednesday that dialogue between the trade partners was ongoing.

“Our central scenario is that this will go to a good deal,” Anaya said while at the World Economic Forum at Davos. “We believe trade is good for all three nations, and that’s what we’re hoping for.”

Asked about a potential “plan B” if the U.S. chooses to terminate the deal, Anaya stuck to a positive note, avoiding any doomsday scenarios.

Anaya’s Davos appearance coincides with the sixth and penultimate round of NAFTA negotiations currently underway in Montreal, Canada.

The 24-year-old agreement is now in jeopardy unless Canada and Mexico satisfy U.S. demands for changes to the deal. President Donald Trump maligned NAFTA during his presidential campaign, claiming it hurt American jobs, and threatened to abandon it altogether if his administration’s needs are not met.

NAFTA, which eliminated tariffs across territory encompassing 450 million people, has been a lifeline for Mexican jobs. Asked about the likelihood of a U.S. pullout, Anaya was vague.

“It’s hard to say, but … What we can say about the NAFTA negotiations is that there’s dialogue and there’s a process,” he said. Anaya took up the ministerial position in late 2017, after two years at the helm of state-owned oil company Pemex.

He echoed Canadian Finance Minister Bill Morneau, who spoke to CNBC earlier in the week, expressing confidence in the agreement’s preservation.

“Let us work on plan A,” Anaya said. “Plan A is that NAFTA has been good for Mexico, good for the United States, and good for Canada. That’s the way we see it, and we’re going to continue to work on a new version that is also good for all of us.”

“We want to keep it as a trilateral deal, and we’ve always worked on that front,” the minister continued. “The dialogue is going on, and that’s what we should bet on.”

Since the deal’s signing in 1994, U.S. foreign direct investment (FDI) into Mexico has increased from $15 billion to more than $100 billion, and regional trade has expanded from $290 billion to $1.1 trillion. Some 14 million American jobs depend on trade with Mexico and Canada, according to the U.S. Chamber of Commerce.

Disagreements persist over the negative impact of the trade pact on the American economy. Washington D.C.-based think tank Public Citizen has reported the deal led to the loss of up to 1 million U.S. jobs and a $181 billion trade deficit with Mexico and Canada.

The bulk of U.S. jobs lost were in former manufacturing hubs like Michigan and Texas, states that went to Trump in the 2016 election.

 

 

FROM: CNBC / Natasha Turak / 25 de Enero de 2018

Killing NAFTA would cost 300,000 American jobs, analysis says

FROM: CNN Money / Patrick Gillespie / 16 de Enero de 2018

If President Trump tears up NAFTA, you’ll notice the impact. It would cost the United States 300,000 jobs, cut economic growth, hurt stocks and cause prices for consumer goods to rise, according to an analysis.

Oxford Economics, a global consulting firm associated with the English university, published the report a week before the sixth round of talks on NAFTA, the trade agreement between the United States, Mexico and Canada.

The 300,000 jobs would represent a setback of about two months of job growth at the economy’s current pace. About 14 million American jobs depend on trade with Mexico and Canada, according to the U.S. Chamber of Commerce.

If Trump decides to pull out, he has to give six months’ notice. Oxford assumes the job losses won’t come until 2019.

Negotiators from all sides meet next week in Canada to resume NAFTA talks. The first five rounds have yielded no major progress on divisive issues such as how and where cars are manufactured.

Leaders from Canada and Mexico say some Trump administration proposals are dealbreakers. The Trump trade team argues that Canada and Mexico are unwilling to compromise.

Trump has made it clear that if the United States can’t get the deal it wants, he will withdraw from the agreement, which has been law since 1994.

In such a scenario, U.S. economic growth would be slower in 2019 — 1.5%, compared with 2% if NAFTA is left in place, according to Oxford. The Federal Reserve estimates growth this year will be 2.5%.

Business investment growth would also slow because of concerns about protectionist trade measures from the White House, the analysis says.

And Oxford economist Oren Klachkin forecasts that investors would put their money into less risky assets like bonds and ditch stocks, causing the S&P 500 to be 5% lower than it otherwise would be.

To be sure, Canada and Mexico would feel the pain, too.

Oxford estimates that the Mexican peso would drop 8%, which would put it at an all-time low, and the Canadian dollar would decline 2.5%.

The Mexican and Canadian economies rely much more on trade, and could lose a larger share of jobs and investment compared with the United States.

Without a free trade deal, Canada and Mexico would raise their tariffs on American products more than the United States would charge for Mexican or Canadian goods entering America.

Every country has something called “most favored nation” tariffs, established by the World Trade Organization. Developing countries like Mexico are allowed to have higher tariffs than developed countries like the United States to remain competitive.

Oxford’s scenario does not assume that Trump would slap a 35% tariff on Mexican exports, as he threatened during his campaign.

Higher tariffs across the region would cause imports and exports to decline and prices to rise for consumers.

Oxford estimates that the U.S. economy would recover from the NAFTA-related hit by 2020 as businesses adjust to the new reality.

But Mexican leaders warn there would be far-reaching consequences in immigration. They think ending NAFTA would push more Mexicans to seek work illegally in the United States.

It would also be a major rupture in U.S.-Mexican diplomatic relations. It was American leaders who lobbied their Mexican counterparts in the 1990s to sign the agreement in the first place and lower its trade barriers.

The White House did not respond to CNNMoney’s request for comment.

 

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FROM: CNN Money / Patrick Gillespie / 16 de Enero de 2018

RBC boss says chances of NAFTA being scrapped are rising

FROM: Thomson Reuters / 9 de Enero de 2018

TORONTO — Royal Bank of Canada’s Chief Executive Dave McKay said on Tuesday he believes there is now a greater chance that the North American Free Trade Agreement could be scrapped.

“I think the probabilities are increasing that you’ll have some type of dynamic where there is an announcement of a scrapping of NAFTA,” he said at a Canadian Bank CEO conference hosted by RBC in Toronto.

Canadian bankers have expressed concern about the progress of talks to rework the trade agreement and how renegotiations could hamper the ability of clients to do business with customers in the United States and Mexico.

McKay said he agreed with other business leaders and the Canadian government that no deal would be better than a bad deal.

“We don’t want to be stuck long-term with a deal that hurts our economy,” he said.

McKay also said RBC, Canada’s biggest bank by market value, is now spending $3 billion a year developing new technologies. The bank is one of the biggest Canadian investors in technology such as artificial intelligence and blockchain and has increased the proportion of its technology spending on innovation compared with maintaining existing systems.

© Thomson Reuters 2018

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FROM: Thomson Reuters / 9 de Enero de 2018