By Santiago Pérez
MEXICO CITY -- Mexican authorities are willing to discuss ways
for the U.S. to reduce its trade deficits under the North American
Free Trade Agreement as long as they don't threaten to curb
Mexico's ability to export, the country's economy minister
said.
The Trump administration made no mention of tariffs or other
trade barriers when it set out its objectives for renegotiating
Nafta. But topping the wish list was cutting U.S. trade deficits
with Mexico and Canada, an approach that has been criticized on
grounds that trade policy isn't the cause of the deficits.
"I'm not going to go and argue about whether it's right or wrong
to define trade deficits as a goal, that's not my role in the
U.S.," Mexico's Economy Minister Ildefonso Guajardo said in an
interview.
"We don't rule out the possibility of reviewing the trade
balance among the partners of North America as long as any solution
we propose is through expanded trade, not restrictions on trade,"
he added.
The U.S.-trained economist said Mexico's recent opening of its
energy industry to foreign investment is a case in point. Pipelines
are being built across the U.S.-Mexico border and Mexico is buying
increasing amounts of U.S. natural gas. Foreign oil firms arriving
in Mexico will need to buy imported equipment and machinery.
Carla Hills, the former U.S. trade representative who signed the
original Nafta in the mid-1990s, said the broad U.S. objective to
update the treaty were reasonable. John Melle, the assistant U.S.
trade representative for the Western Hemisphere who will serve as
chief negotiator for the Nafta talks, will have to balance the
economics and politics involved in trade deals. "I have a trade
deficit with my grocer, and a surplus with my company, which pays
me," Ms. Hills said. "I'd like to keep it that way."
The U.S. had a $63 billion deficit with Mexico in goods trade
last year. But the services sector, where Mexico runs a $10 billion
deficit, must also be considered, Mr. Guajardo said.
Adding e-commerce and energy provisions to the pact could help
the U.S. narrow its trade gap, Mr. Guajardo added. Their inclusion,
along with an update to intellectual-property rules, could bolster
U.S. private-sector support for the Trump administration's efforts
to overhaul Nafta, said Jaime Zabludovsky, a member of the Mexican
team that negotiated the original trade deal.
Concerns that renegotiation could hurt Mexico's export-dependent
industries have eased in recent months, helping the peso reach a
14-month high against the U.S. dollar, as bilateral relations have
warmed after a rocky start under the Trump administration.
A compromise agreement in June on Mexican sugar exports to the
U.S. showed the two sides understand Nafta's complexity and
commercial dynamics, Mr. Guajardo said.
"It was the first agreement that the Trump administration closed
with a foreign government regarding a conflict over trade
practices," he said. The sugar talks helped officials such as
himself and U.S. Commerce Secretary Wilbur Ross to get to know each
other.
"The most important capital in a negotiation is the credibility
of the negotiators," Mr. Guajardo said. "In the case of sugar we
found that."
Mexico's private sector has also been lobbying U.S. policymakers
to convince them of the benefits of Nafta, seeking support among
U.S. governors, lawmakers and mayors, particularly in states that
rely on trade with Mexico.
"We have made progress in countering some points of the
protectionist rhetoric," said Moisés Kalach, a businessman who
leads the effort. He put together a team of some 50 experts to
prepare possible responses to different scenarios the U.S. might
pursue.
Mexico is open to reviewing rules of origin, which determine how
much content of goods has to come from within the region to enjoy
tariff-free benefits of the pact, Mr. Guajardo said.
But revising rules of origin for thousands of products is
detailed work. "We need to see what's happened in regional trade
over the past 20 years. China and Vietnam weren't players back
then, and some goods are no longer made in North America," said Mr.
Zabludovsky, who is currently advising Mexican companies over
Nafta's renegotiation.
The timing of the talks -- which officials on both sides hope to
complete by year-end -- is a challenge, with Mexico holding
presidential elections and the U.S. midterm elections next
year.
"In a way, incentives have aligned," Mr. Guajardo said. The
first round of negotiations will take place in mid-August in
Washington.
A bone of contention could be the U.S. goal of eliminating
Chapter 19 of Nafta, a mechanism for challenging antidumping duties
imposed by governments to protect domestic industries or
sectors.
The removal of dispute-settlement mechanisms could affect U.S.,
Mexican and Canadians exporters alike, Mr Guajardo said. "We need
to take care to preserve something that has been positive," he
added.
--Juan Montes and Robbie Whelan contributed to this article.
(END) Dow Jones Newswires
July 22, 2017 13:25 ET (17:25 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.