Panelists: Uri Dadush (Bruegel and the OCP Policy Center) Matt Gold (Fordham University School of Law) Thea Lee (AFL-CIO) Antonio Ortiz-Mena (Albright Stonebridge Group)

Moderator: Nelson Cunningham (McLarty Associates)

On February 9, 2017, WITA put together an outstanding panel to discuss the renegotiation as well as the future of NAFTA. There was much talk heard from Trump as a candidate, President-elect, and President, although there is no concrete plan to go forward. There have been discussions regarding Mexico and Mexicans and as much regarding China. The panelists on NAFTA 2.0 discussed what a new NAFTA policy could look like.

Panel 1: Macroeconomic, Foreign Policy, and Political Issues

Uri Dadush states that in his opinion there are three main scenarios for the new NAFTA:

Modifying NAFTA with new features although some that are close/closing down which he calls the NAFTA 0.9 scenario.

The first scenario which the speaker names “NAFTA 0.9”, is the positive one in which there is an unfinished trade agenda. Through NAFTA 0.9 there are anticipated disputes regarding investments, labor as well as environmental standards. Dadush sees the North American integration agenda as a broader infrastructure, which goes beyond the wall and the improvement of the border. He sees a realization in communication as well as a collaboration in the energy sector. Although the speaker expresses his belief that NAFTA 0.9 would bring many benefits to the US he does not think that it would be enough to hold the new administration at the negotiation table. He states that it is not sufficient to reduce the trade deficit with Mexico, and there is no reassurement that jobs will stay in the US nor that Mexico would pay for the wall.

Return to MFN trade with each other at arm’s length.

The second scenario is that in which the US could wave tariffs to its WTO applied level – 3% tax on imports. Mexico could stay within the WTO rules and raise its taxes to 8% average and its tax in agriculture by 20%.

The border adjustment task

The last scenario Dadush exemplifies that of border adjustment tax, although it is seen as worse in economic terms then scenario number two. It implies a 20% tax import on Canada and Mexico the world and as well as a 20% export subsidy. It would be a destruction of US economy. He states that it is impossible to tell how foreign exchange rates will adjust.

Matt Gold reports that the question remaining is what could Trump introduce that might change the fundamental dynamic? The President has threatened to leave NAFTA, and if the threat was credible it might be a game changer, although Mr. Gold does not believe that he is serious – so, therefore, he does not think that the dynamics have changed. The answer to the question of why the threat is not credible is that the US and Canada share a vast trade history as well as with Mexico and if the threads were broken many supply chains would be destroyed.

The speaker articulates that Trump would come upon an impediment because he cannot accept withdrawal from NAFTA without the approval of Congress. The President could roll back certain areas, although Congress has a particular authority. The rules of NAFTA remain for N. American companies, – although if he raised Tariffs, there might be a rebuttal from Mexico.

Gold asserts that NAFTA can only be negotiated on a trilateral front, and it is not possible on bilateral levels. Although President Trump insists that he would want to renegotiate NAFTA, Mexico and Canada have not agreed yet.

President Trump said that on the agenda was border security and Immigration although nothing regarding NAFTA. There was no summit; President Trump made a statement that he knew Mexico was going to pull out. He was floating the idea that there will be no NAFTA talk and because the feedback was negative he pushed Mexico out of the negotiation by politically embarrassing them.

Thea Lee notes that the labor movement has been engaged in the trade debate. The labor movement is not against globalization, although they have a strong set of ideas on trade agreements that have been embedded.

Further, regarding the different communities, Lee insists in international solidarity and trying to make rules that would be good for workers everywhere. They don’t believe the US should be first, but they want to talk about what type of global economy they want to live in, protections for the environment and the communities. NAFTA was not only about the trade but protection for investment and outsourcing. At the end of the day, there were not much-exporting goods to the people on the Southern border. NAFTA was used in a way that was not as much about trade, but also a corporate advantage. They want to eliminate the dispute settlements, want to increase the labor and environment protections and bring cases on the energy chapter as there has never been an enforcing mechanism. Further Lee underlines that it is important to challenge currency manipulation, the rules of origin, the procurement chapter and how it prevents the US to use its buying power to improve aspects.

Further, regarding TPP, the speaker jots down that the idea that TPP is a model for renegotiation NAFTA is delusional. She highlights the need to rethink the principles of first trade policies. The state department will continue advocating for American workers. They don’t think too much regulation is part of the problem.

Antonio Ortiz Mena sustains that the talk regarding the wall and who will pay for it generates a toxic environment, as well as the border tax, taxing remittances, real estate transaction. All these aspects create a life of their own, in a complex context in which Mexico will have a presidential election, and they have a very noisy democracy as well as a Congress. The political environment in the US is making it increasingly difficult for the Mexican government to receive a solution. The range of acceptable solutions is becoming smaller.

Mena underlines that there is a need for NAFTA to upgrade, modernize and for Mexico, the starting point should be the state as a tool. He doesn’t think that Mexico should accept anything less than the quota and tariff free. There are many investments in Mexico such as Exxon Mobile which is investing in oil that is after shipped to the US. Further, there are investments in Energy, telecom, e-commerce. There should be rules of origin, but he doesn’t think that there will be a complete renegotiation.

He feels secure that there should be a focus on North America, as there is a lack of infrastructures in the transportation sector, such as airports and ports. He retains the idea that Mexico will be the 6th world largest economy. He underlines that he does not believe that it is a 0 sum game.

Uri Dadush concludes that Mexico’s economic performance has disappointed compared to the integration of many relative developing countries in Europe, Mexican growth has been disappointing, not to do with NAFTA but governance issues in Mexico. He would argue that there was a sequence of crises in Mexico. As far as the US is concerned, this is a large economy, but trade is not the biggest part.


Synthesis by: Patricia Besciu, all ideas are those of speakers, no personal opinions included.

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