Economist on How Mexico Lost a Chance to Strike a Better NAFTA Deal With US

Mexico's decision to revise the North American Free Trade Agreement (NAFTA) in Canada's absence was a gross mistake, according to researchers from the National Autonomous University of Mexico (UNAM).

"The bilateral form of negotiations plays into the hands of the US government," Luis Lozano Arredondo, a UNAM economist, told Sputnik Mundo. "Mexico and Canada were going hand in hand, but the US could not allow this to continue. It has always been like that. The US does not enter into negotiations, in which they do not lead, do not manage, do not express its opinion and do not decide."

His colleague, David Lozano Tovar, shares a similar stance: "Although there was much haste in signing a free trade agreement with the United States, it was a mistake to leave Canada out in the cold," he said adding that Ottawa had always worked in tandem with Mexico during multilateral negotiations.

According to Tovar, Mexico's decision to overhaul NAFTA will come with a cost as Canada will take action. "Canada's silence following these statements does not appear to be a good sign," he opined.

Furthermore, there is no guarantee that Canada will agree with what was discussed by the US and Mexico: Ottawa may conclude its own bilateral deal with Washington, the Mexican researcher presumed. "Perhaps, Canada will gain far more benefits than Mexico," he suggested.

On the other hand, the decision to renegotiate NAFTA in the absence of the third party creates a bad precedent for Mexico with regard to other economic blocs, such as the European Union or the Pacific alliance, he warned.

On August 27, the White House announced that Donald Trump had kept his promise to revise NAFTA: "The Administration has secured a preliminary United States-Mexico Trade Agreement that modernizes and rebalances the trade relationship to reflect the realities of the 21st century," the official statement said, adding that "this is the first time that a modern United States trade agreement has been renegotiated."

​"Our new Trade Deal with Mexico focuses on farmers, growth for our country, tearing down trade barriers, jobs and having companies continue to pour back into our country. It will be a big hit!" Trump tweeted Tuesday.

New Deal Doesn't Play Into Mexico's Hands

Commenting on the US-Mexico talks, UNAM has emphasized key points of the agreement: First, the deal envisages an increase in the volume of spare parts manufactured in North America for Mexico's automotive industry by 62-70 percent; it was also agreed that 40 percent of the production should be conducted by workers with a wage of at least $16 per hour.

Second, American companies will have an opportunity to go ahead with the exploitation of Mexico's energy resources, as the country's latest energy reform has liquidated the monopoly on extraction that the country's state-owned petroleum company PEMEX had previously enjoyed.

Arredondo slammed the changes as discriminatory.  For his part, Tovar suggested that the new version of NAFTA would narrow Mexico's room for maneuver under the energy reform championed by President Enrique Pena Nieto since 2013.

"This means the continuation of Enrique Pena Nieto's privatization policy, which implies the loss of [Mexico's] national sovereignty in the energy sector," Tovar said.

The researcher presumed that the outgoing Nieto government of had negotiated the continuation of the energy reform with the inucoming administration of Andres Manuel Lopez Obrador, who won the Mexican 2018 presidential election on July 1.

Mexico Should Have Waited Till US Mid-Term Vote

According to Tovar, Mexico should have waited until the US mid-term elections in November and, possibly, struck a better deal.

"The revision of NAFTA was a part of Trump's economic proposals. It's his priority to announce that he has delivered on his promise," the economist pointed out. "For Mexico, it would be strategically more reasonable to wait and freeze the negotiations until the new administration rises to the power with its own views on the change. But they did not do it."

In contrast to Trump, Obrador seems to backpedal on his election promises, the researcher noted, referring to the country's energy reform and changes in NAFTA with regard to Mexico's oil reserves.  It was Jesus Seade Kuri, Obrador's representative, who oversaw the negotiations and provided consultations to the parties on various matters, including the issues concerning the country's energy sector.

"We've lost on issues which even contradict what Lopez Obrador offered during his election campaign," Tovar opined. "Mexico had political weight in relation to elections [in the US], and Trump mentioned that some concessions could be made to conclude an agreement. Why then push Canada aside in such a rude way?"

Menwhile, UNAM researchers believe that Ottawa is likely to conclude a better deal with the Trump administration, Canada is facing an ultimatum from Washington who has threatened to leave it from the pact.

Canadian Foreign Minister Chrystia Freeland has to make a decision on whether to join the revised agreement or withdraw from it by September 31. Earlier, she praised the deal struck by Mexico and the US but shied away from saying whether Ottawa would follow suit and make concessions.

The views and opinions expressed by the speakers do not necessarily reflect those of Sputnik.