Mexico pushes ahead with speedy NAFTA game plan | Business| Economy and finance news from a German perspective | DW | 26.07.2018
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Mexico pushes ahead with speedy NAFTA game plan

Mexico chooses a new strategy ahead of the renegotiation of the North American Free Trade Agreement, as newly elected Mexican President Andres Manuel Lopez Obrador starts to warm up to Donald Trump.

Even though Mexico's newly elected president, Andres Manuel Lopez Obrador, raged against US President Donald Trump — his country's favorite enemy during the campaign — since his victory, he has stuck to more conciliatory tones.

"I am encouraged by the fact that we both know how to do what we say, and we have both faced adversity with success. We manage to put our voters and citizens at the center and displace the establishment. Everything is ready to start a new stage in our societies' relationship based on cooperation and prosperity," wrote Lopez Obrador in a letter to Trump on July 12 which he made public over the weekend.

In it he urged both sides to get back to the NAFTA negotiation table after talks stalled in March, since "prolonging the uncertainty could slow down investments in the medium and long-term." At the same time, Lopez Obrador proposed treating migration in an integral and thorough manner "to ensure that Mexicans do not have to migrate because of poverty or violence."

A further delay in the NAFTA negotiations would make it difficult for Mexico's economic growth, and thus the government's strategy to create jobs and improve the living conditions of Mexicans.

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Slow reaction

Washington's response? No tweet!

But in a letter dated July 24, sent in response to Lopen Obrador's original note, Trump expressed his willingness to cooperate, but demanded quick results.

"I believe a successful renegotiation of the North American Free Trade Agreement will lead to even more jobs and higher wages for hard-working American and Mexican workers — but only if it can go quickly, because otherwise I must go a much different route," wrote Trump.

Despite this threat, Trump has been surprisingly cordial to Lopez Obrador. Though during and after his election campaign he has repeatedly stirred up hatred against illegal (Mexican) immigrants and threatened mass deportations, the construction of a wall along the border and the end of the NAFTA agreement.

Read more: EU-Mercosur trade deal 'could be done by September'

In the last weeks, Trump brought up the idea of bilateral trade deals first with Mexico and then with Canada, causing quite a stir. "So we'll see what happens. We may do one separately with Mexico and we'll negotiate with Canada at a later time. But we're having very good discussions with Mexico," Trump told White House journalists.

Mexico's current economy minister, Ildefonso Guajardo, warned in a radio interview that such a move would take a lot of time because it would be starting "at zero" because Trump would first have to get the green light from Congress to negotiate a free trade agreement that is different from NAFTA. Mexico's designated foreign minister, Marcelo Ebrard, also said he wanted to stick to the three party negotiations.

Current Mexican President Enrique Pena Nieto who lost the recent election (Reuters/D. Becerril)

Current Mexican President Enrique Pena Nieto who lost the recent election to Andres Manuel Lopez Obrador

Timely completion

However, Lopez Obrador has made it clear that the current government of Enrique Pena Nieto will be the one to continue the NAFTA negotiations. Lopez Obrador would only send his confidante Jesus Seade, who made clear in an interview with the magazine US Trade that he would reject the same points that the current Mexican government has rejected.

This is mainly about the so-called 'Sunset clause,' which would see the new NAFTA agreement end automatically after five years should the three member states not agree on an extension beforehand.

In addition, Mexico and Canada have rejected US demands for a softening of the arbitration agreement, higher hurdles for the delivery of cars and car parts to the US, a ban on state aid to agriculture and an immediate expansion of imports of US goods to help balance out the trade imbalances.

Read more: What you need to know about NAFTA and other American trade spats

Guajardo seems confident that the NAFTA negotiations would be completed within 45 days. He has received signals from both Lopez Obrador and US officials, which he interprets to mean that NAFTA negotiations will be done before the end of Pena Nieto's presidential term.

This would be in the interest of both countries. The Republicans could present a successful renegotiation of NAFTA ahead of congressional elections in early November as a promise fulfilled; Mexico would have defused a ticking time bomb before Lopez Obrador took office on December 1.

On Thursday, negotiations on reshaping the North American Free Trade Agreement will resume in Washington. Then it will become clear whether Lopez Obrador's more conciliatory strategy will be a path to success.

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