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talking tough

Mexico will not accept US limitations in the form of tariffs or quantitative managed trade schemes, deputy economy minister Juan Carlos Baker tells Jacopo Dettoni. There might be room to review the rule of origin – but only if this strengthens regional value chains.  

Q: Is Mexico committed to leaving the negotiating table if the US proposes border tariffs of any sort?

A: Yes, that’s definitely the case. At this stage, there is no clarity over the renegotiation of the North American Free Trade Agreement [Nafta] as the US administration hasn’t notified Congress about it yet. Before this lack of clarity, we are getting ready by making clear the things that we don’t want, including border tariffs, which we consider a setback.

Another issue we rule out is any scheme of managed trade where we would be subject to limitations, such as trade quotas. The bottom line is that any scheme that brings about restrictions to our trade, either tariff or quantitative restrictions, is something Mexico is not willing to do.

Q: Peter Navarro, US president Donald Trump’s top trade advisor, recently shifted the focus of the debate on to strengthening Nafta’s rule of origin. What’s your position on that?

A: The rule of origin is already very strict for certain goods. Although we cannot rule out discussing the rule of origin, we have to analyse it case by case, because there are goods and technologies that are not available any more in the region for reasons of price, quantity and quality.

There might be space to review the rule of origin in some sectors, as long as there are the necessary conditions of price, quantity and quality [to replace imports of production inputs with local productions]. The final aim of this process has to be to strengthen the competitiveness of sectors that have yet to develop, not to make it more expensive for the final consumers.

Q: Mexico’s trade deficit with Asia and Europe – with production inputs making up the bulk of it – is bigger than its trade surplus with the US and Canada. Looking at the figures, it looks as if Mexico is just a transit country where imported products get assembled or processed to meet rule-of-origin requirements and gain tariff-free access to the US.

A: We import production inputs that get processed and exported, but this process has to add value to meet rule-of-origin requirements. Beyond figures, this is how global value chains work. It’s important to highlight how Mexico, thanks to its 46 free-trade agreements [FTAs] can become an important recipient for investment into manufacturing productions bound for the US and elsewhere.

Q: The national government and individual states have made efforts to improve ties with China over the past few years. Can Chinese investors fill the void left by US investors, which account for about half of Mexico’s FDI, if Nafta negotiations fail?

A: China is already the country’s second largest trade partner without any sort of trade agreement. We are seeing investment in Mexico from China, but also from other parts of the world; Japanese investment, for example, has spiked up. There are opportunities for Chinese investment in Mexico in fields such as energy and infrastructure, but there isn’t a programme to replace US investment with Chinese investment. It’s more about diversifying the investment matrix.

Q: You have been Mexico’s deputy chief negotiator for the Trans-Pacific Partnership [TPP]. Is there any future for the TPP without the US?

A: I don’t think so, because the conditions to ratify the agreement cannot be met without the US. However, the TPP is the most sophisticated trade agreement out there and I’m convinced it will influence global trade in the decades to come – perhaps becoming the base of other regional platforms or bilateral agreements. At the same time, we are negotiating our FTA with Europe and are planning to wrap it up by the end of the year. 

This article is sourced from fDi Magazine
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