Mexico may have lost most with new NAFTA deal, but calls it a win

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Mexico’s negotiators presented the text of the a North American free-trade agreement to the senate here Sunday night, calling it a trilateral deal that would benefit the country.

“The important thing is that it will have the three countries,” said Juan Carlos Baker, undersecretary for foreign trade in the Ministry of the Economy.

The feverish negotiations between the U.S. and Canada in recent weeks drew much less attention here than they did in the two countries to the north, because Mexico and the U.S. reached their own deal on Aug. 27 and the Mexican government said it would proceed bilaterally if Canada and the U.S. could not reach an agreement.

But as details of the 11th-hour deal between Canada and the U.S. began to leak, there was a sense that Canada has done Mexico a major favour.

“I think Canada looks great – all of a sudden they are the big winners because it looks like they got Chapter 19, and this is a big win for the three countries,” said Ana Morales, an international trade consultant who previously worked with the NAFTA office at the Mexican embassy in Washington.

“And Mexico looks better tonight: We’re saved by the bell. We were going to be in deep trouble if Canada did not come on board, dealing bilaterally with Trump,” she added. The bilateral deal left Mexico in a decidedly weaker position, and the dispute resolution mechanisms in Chapter 19 have value for Mexico that most people here don’t even realize, she added.

Campbell Clark: Canada made concessions on NAFTA but new deal avoids major damage to economy

Of the three nations, Mexico may have gained the least – or lost the most – in the new deal.

But the overall feeling among Mexicans is perhaps best characterized as relief. Mr. Trump is seen as so unpredictable – and so irrationally convinced that Mexico was disproportionately benefiting from NAFTA at U.S. expense – that achieving any sort of a reasonable trade deal with him is seen as a victory.

“Preserving NAFTA is a big win: Trump is the most powerful man on earth and you have to remember he said, ‘The first thing I will do in office is to withdraw from NAFTA,’” said Luis de la Calle, a former Mexican trade negotiator. Given that, he said, emerging with any agreement is a major win.

This sentiment was echoed by many of the key private-sector leaders who were part of the Mexican “war room” for these 17 months of talks.

“We didn’t lose that much – we have a good deal on our hands,” said Moises Kalach, who heads Mexico’s largest textiles group and the international negotiating arm of the national business lobby. “It’s a good deal for Mexico – of course not everything is there that we would like [but] we didn’t cross our red lines.”

However, there is a sense that Mexico may have given up more than it needed to, particularly on auto production, where the rules were changed in a way that will favour more production from the U.S. and Canada.

Fausto Pretelin, an economics columnist with El Universal, said that Luis Videgaray, the Mexican foreign secretary who for a time took an unusual role as a kind of co-leader of the talks because he had a personal relationship with Mr. Trump’s son-in-law Jared Kushner, made too many concessions, particularly on the critical issue of auto production.

Mr. Videgaray is a close confidant of President Enrique Pena Nieto, and was seen as pushing for a deal the president could sign before he leaves office on Nov. 30 (thus giving him a legacy for a presidency that has been marred by scandal), even as Ildefonso Guajardo, the Economy Secretary who nominally headed the negotiating team, was pushing for slower talks.

But there was also concern here about what might happen to the negotiations after the July 1 election, given that the leading candidate, Andres Manuel Lopez Obrador, had in the past been a vehement critic of NAFTA who said it would be best for Mexico to leave the treaty.

But after winning the presidency with a sweeping majority, Mr. Lopez Obrador tapped left-leaning economist and former negotiator Jesus Seade Kuri to head up a parallel NAFTA negotiation team of his own, and it largely backed the Pena Nieto team’s positions. And then Mr. Trump and Mr. Lopez Obrador appeared to develop a certain rapport, which also softened the Mexico-U.S. relationship.

Mr. Seade said in an interview Sunday night that he was delighted and relieved that it was a trilateral deal. "The fact that Canada is in will be very popular across the board."

He predicted that the deal would be broadly well-received with Mexicans, although the tougher rules of origins on cars would draw criticism – but in the long term they will prove positive, he said, because “you have a whole region that is becoming more protectionist ... and now we are inside the curtain. That’s beneficial for Canada and Mexico.”

He said that in hindsight, it was possible that Mexico could have got through the negotiations without giving up as much as it did. “Probably Mexico could have been tougher and resisted concessions – in the car industry, for example – it probably was a little too much, but at same time that’s difficult to say, because Trump was so hell-bent on getting out of NAFTA.”

Mr. Kalach said the auto rules were the price Mexico had to pay to maintain the treaty, given that changes to car manufacturing and the jobs associated with it were Mr. Trump’s main priority going into negotiations. “Of course we don’t like that 25 per cent of the content has to be produced in high-wage zones, but we understand that in a negotiation as big as this you cannot like 100 per cent of every decision,” he said. “But in the big picture, in the long term, it’s a good deal for our country – it keeps investments in our country safe.”

He predicted that as Mexicans learn more about the final deal, they will feel more positive. "Twenty chapters were modernized and there are a lot of opportunities in there. There’s not a lot of talk about them but there is a lot of value there.” There are significant improvements in how e-commerce and anticorruption measures will be handled, he said, while the agriculture sector will get faster border processing and better sanitation rules.

“No duties were put on to any of our products, or quotas – so I don’t believe this was a useless type of deal. It’s a good balanced deal."