Economics: Trade-war talk rocks Nafta round
Negotiators did not come away empty handed March 5 from the seventh round of Nafta modernization talks as progress was achieved on numerous fronts, and four out of 30 chapters have been fully exhausted to all three countries' satisfaction. But there was probably less progress than Mexican negotiators had anticipated as they and their Canadian counterparts ‒ along with much of the world ‒ were blindsided by US President Trump's abrupt announcement of tariffs on all iron, steel and aluminum imports.
Many of the most intractable differences in the negotiations remain. These include US proposals on a five-year sunset clause, new regional content rules for the automotive sector, overhauling dispute mechanisms to favor differences being litigated in national courts, and making agricultural trade rules subject to seasonal considerations. White House talk of tariffs and trade wars, as well as continuing frictions between Trump and President Enrique Peña Nieto, were hardly conducive to achieving any progress, but Mexico clearly came prepared with a more flexible attitude to discussing some of those ideas after initially closing ranks with Canada in rejecting them out of hand.
It is clear that the Nafta renegotiation talks are taking place under very difficult conditions that are further charged with political and ideological factors beyond any considerations directly related to international trade and investment, much less any serious approach to strengthening North America competitiveness. But In recent months, the risks posed to the Mexican economy by the continuing uncertainty of the negotiations have been dealt with quite well, and so far we see signs of a reasonable degree of stability.
The private sector and financial markets in Mexico have learned not to overreact to outbursts of messaging from President Trump; the peso has remained remarkably stable at better than 19 to the US dollar; Mexico's non petroleum trade surplus has continued to grow at a brisk pace and has largely offset the country's petroleum trade deficit; and despite slowing GDP, lackluster investment growth and fears that it will not prove possible to keep a lid on public spending and debt in a presidential election year, major international ratings agencies have taken a more favorable view of Mexican debt.
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