Economics: Nafta progress, but low visibility
One could imagine a huge sigh of relief surrounding the end of the sixth round of Nafta re-negotiations. Not only had the US government not used the occasion to pull out of the treaty altogether, as some observers had earlier feared, but the talks in Montreal produced what even the US trade representative termed “some real headway”, as negotiators concluded the chapter on corruption and an appendix on information technologies, and achieved further progress in many of the almost thirty thematic negotiating groups.
But such progress did little to dispel continuing uncertainty surrounding Nafta’s fate. The latest Canadian efforts to placate Washington’s insistence on sharply raising North American and US content rules for the auto industry drew the ire of USTR Robert Lighthizer, who promised to push for major breakthroughs in the coming days but also reinforced concerns that the talks will drag on beyond Mexico’s presidential elections and possibly well beyond the US midterms.
While the Mexican and Canadian delegations continue to devise new means to update the treaty in ways that can satisfy all three governments, there is zero visibility as to the ultimate direction in which the US hopes to take the renegotiation. What is apparent is that with the US cabinet and other officials lacking a clear game plan and seemingly speaking at cross-purposes, everything remains subject to the whims of the man in the Oval Office.
In light of the lack of progress and excess acrimony of the previous six rounds, the three countries have agreed not to force the talks into rigid timelines, but to seek ways most conducive to achieving the best results, thereby raising the prospect that talks could drag on for some time to come.
But on a positive note, the risks to the Mexican economy posed by the uncertainty surrounding the negotiations have elicited effective responses from the authorities that have contributed to a reasonably stable economic performance in recent months. This perhaps helps explain why business sentiment extended and accelerated its recovery of last year through January, including a sharp bounce in sentiment within the manufacturing industry, which had been underperforming the corresponding commercial sector index for some time.
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