Trump threatens to nullify NAFTA: Mexico and Canada trapped in the labyrinth

The reopening of the treaty after 23 years was forced by the United States, under its President’s threat to cancel it if his demands are not met.

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A few days before the beginning of the second round of negotiations to modernize the Free Trade Agreement of North America (NAFTA), the president of the United States, Donald Trump, threatened once again, on Twitter, to withdraw his country from the trade agreement, criticizing both trade partners, Mexico and Canada.


“We are in the NAFTA (worst trade deal ever made) renegotiation process with Mexico & Canada. Both being very difficult, may have to terminate?”, he wrote, , as a threat, in his official account of the social network.


The reopening of the treaty after 23 years was forced by the United States, under its President’s threat to cancel it if his demands are not met. It is worth recalling that in 1994 Mexico transformed its economic model to integrate fully into the North American economy. 


In order to achieve this, they sacrificed food sovereignty and security, the peasant economy, small-scale agricultural production, market regulation, the growth of the internal market, the wages and social conquests of the workers, small and medium enterprise, benefits from the exploitation of natural resources, and put their stakes on a regional integration designed for the exclusive benefit of transnational companies. Now the US threatens to cancel it, the Mexican government has no way to effect an emergency exit from the labyrinth, and is struggling to save the model.


Yet this is not the first, but the second threat that the US leader has launched in less than a week: barely two days after the end of the first round of negotiations – on Tuesday, August 22 – in an event in Phoenix, Arizona, Trump indicated that probably, at some time, he would put an end to the agreement, in force for the past 23 years.


At that time, the Mexican Foreign Minister Luis Videgaray described the words of Trump as “a negotiation strategy”, while Canada laconically indicated that they would continue to seek a constructive process of revision.


The new threat raises the pressure, since it took place a few days before the three countries resume the second round of revision of the agreement, on September 1st to 5th in Mexico City.


What is certain is that the liberalization of the economies and the re-functionalization of the States at the service of the big corporations, are elements that have been incorporated and implemented in international instruments that regulate free trade among countries, such as NAFTA.




Trade is one of the major issues that Trump has brandished against Mexico even before arriving at the Presidency of the United States last January. In his words, NAFTA is responsible for the loss of 700 thousand jobs in his country and the trade deficit of 64 billion dollars that the United States has with Mexico.


But it must be noted that, from the beginning of the controversy, the Mexican Government has rejected the possibility of reinstalling customs duties or of reducing the deficit via a cut-back in trade. This would mean suicide, since Mexico sends 80% of its exports to the United States. Meanwhile, it has opted to include issues such as e-commerce, telecommunications and the energy sector, while Canada has been more cautious.


Like Mexico, Canada sends the greater part of its exports to the United States and would be harmed by protectionist decisions from Washington. The trade balance between the United States and Canada is more equal, but Washington claims that some Canadian goods, such as milk products, wine and cereals, are subsidized.


Canada recently insinuated that it could abandon the discussion if the United States presses the withdrawal of a key mechanism of conflict resolution. The two trade partners of the United States are unanimous in their opposition to the elimination of Chapter 19 that deals with the resolution of controversies, that Washington is aiming for.


The Canadian Foreign Minister, Christya Freeland, indicated that her country would also seek to impose strong labor standards, reinforce environmental regulations and introduce new chapters relative to gender equality and indigenous rights.


In the first round of negotiations involving the three NAFTA signatories, in Washington – for five days, from August 14th to 19th –, all the parties agreed to move ahead with an accelerated process to update the agreement, which was originally signed by former US President Bill Clinton, a Democrat.


The Canadian and Mexican negotiators believe that NAFTA needs to be brought up to date, even though they have defended the whole agreement. 


The wall


In a series of messages published last Sunday, the President of the United States also insisted that the Congress of his country find a way to fund his promised border wall. “With Mexico being one of the highest crime Nations in the world, we must have THE WALL. Mexico will pay for it through reimbursement/other”, wrote Trump.


At present, the United States border with Mexico has 1052 kilometres of fencing, equivalent to one third of the length of the Great Wall of China.  Nearly half of this wall is on the border of Arizona with Mexico. The issue of the wall will also be at the center of discussions in Congress, which will resume sessions at the beginning of September and, among other things, should approve the 2018 budget.


The Trump administration demands that the federal financing law should include funding for the construction of the wall, but the Democrats – who are opposed and are a minority in the Senate – could get intransigent and force the closing of federal offices for lack of resources, which would mean that hundreds of thousands of federal officials would be obliged to stay home, paralyzing many non-essential governmental services.


It is certain that both positions confront Trump with US Congress-persons and with their neighboring countries, but at the same time boost his popularity among his electoral base.


The Mexican Government has reiterated, as they have always maintained, that in no way and under no circumstances will they pay for a wall or physical barrier that would be built in US territory along the frontier with Mexican territory. The Mexican Foreign Ministry indicated that this determination is not part of a Mexican negotiating strategy, but is a principle of sovereignty and national dignity, terms that had been absent to date.


The Mexican Foreign Ministry responded to the accusations of Trump on violence in Mexico and noted that this is generated in Mexico by the illicit traffic in drugs, arms and money between both nations. “We repeat that this is a shared problem that can only end if the root causes are dealt with: the high demand for drugs in the United States and the offer from Mexico (and other countries)”, they insisted.


Agricultural disaster


Since January 1 1994, when NAFTA came into effect, having been negotiated by the Government of Carlos Salinas de Gortari with his US and Canadian counterparts, the Mexican agricultural sector has been the object of a systematic dismantling due to the radical asymmetry in the treatment that the signatory nations give to their respective producers.


While in the United States industrial agriculture enjoys subsidies of up to 30 per cent, on this side of the border such support does not reach a third of that figure, a disparity that is reflected in the fact that, during the 21 years of life of the agreement, only in two years did Mexico achieve a favorable trade balance in this item with its neighbor.


A clear example of this, pointed out in the daily newspaper La Jornada, is the case of maize; although this represents nearly 60 per cent of the value and the volume of Mexican agricultural production, between 2010 and 2014 the imports of this grain, vital in the diet of the Mexican population, increased by nearly 30%, despite the fact that in the same period consumption increased by only 7%. That is to say, the growth of external purchases is sustained, not by an increase in demand, but in the displacement of local producers by foreign groups.


Intellectual property


One of the principal points that the Mexican Government must avoid in the chapter on intellectual property, in the renegotiation of NAFTA, is for the United States to extend the lifetime of pharmaceutical patents, noted Rafael Pérez Miranda, specialist on this issue and a researcher with the Universidad Autónoma Metropolitana (UAM).


He added that Mexico should not allow Washington to impose patenting for second uses, a recourse utilized by the big pharmaceutic companies to prolong the exclusive use on certain products that they have already patented and manufactured, by finding a new use or variant to those already existing. If Mexico yields on this issue, medicines that are a health necessity for the country will cease to be accessible to the population, Pérez Miranda warned.


He indicated that care should be taken over the extension of patents through delays in the authorization for a product that is already registered to be traded, which Mexico had already agreed to in the Transpacific Partnership. Patents give exclusive rights to exploit an invention for twenty years.


(Translated for ALAI by Jordan Bishop)


Gerardo Villagrán del Corral: Mexican Anthropologist and Economist. Associate Researcher with the Latin American Centre for Strategic Analysis (CLAE)
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