Mexico has threatened to leave the North American Free Trade Agreement (NAFTA), if the US crosses certain “red lines” in the upcoming renegotiation of the trade pact.
Speaking to the Televisa network, Mexican Economy Minister Ildefonso Guajardo said, “There are very clear red lines that must be drawn from the start.”
Guajardo said Mexico would “absolutely” walk out of negotiations in the event that Trump’s border wall or remittances from Mexican citizens in the US were brought into the talks.
Mexico may be talking a tough game – and showing a willingness to walk is a good negotiating tactic – but they are in an incredibly weak position.
Mexico sells 80% of their exports to the United States – an even higher percentage than Canada. That means Mexico faces economic disaster if there is any meaningful decline in their access to the US market.
“What we want is to maintain free access for Mexican products, without restrictions, without tariffs and quotas,” said Mexican Foreign Minister Luis Videgaray.
Reuters is reporting that Mexican officials are looking at changing ‘rules of origin’ requirements to convince the US not to talk negative action against Mexico.
Under current rules, cars made in Mexico must have 62.5% of their material made in North America. If Mexico raised that percentage, it would mean a higher percentage of the vehicle material would be from the North American market, meaning more jobs and manufacturing in the United States and potentially Canada as well – at the expense of manufacturers in Asia.
Speaking of Canada, there is a growing sense that Trump’s concerns about NAFTA are targeted almost exclusively at Mexico, and that Canada can benefit by emphasizing our bilateral economic relationship with the United States.
That means Mexico will be left mostly on their own to deal with the US negotiators. With their economy so dependent on America, it could be tough times ahead for North America’s southernmost member.
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