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NAFTA negotiations could mark end of an eraPresident Donald Trump's push to renegotiate the North American Free Trade Agreement is putting Mexico in a tough spot, threatening the system that has helped turn the country into a top exporter through low wages, lax regulations and proximity to the United States.
With talks set to start on Aug. 16, the Trump administration is targeting the massive U.S. trade deficit with its southern neighbor and the weakly enforced labor, environmental and manufacturing rules that for 23 years have drawn American assembly plants to Mexico and launched a flood of televisions, cars and appliances from across the border.
"Mexico was resting on its merits and has been in a comfort zone, and now we have to leave it," Economy Minister Ildefonso Guajardo told a business group recently. "The alarm clock has rung for us to wake up."
Tightening Mexico's labor laws and strengthening unionization could push wages up, or at least stem the flight of jobs to Mexico, experts say.
Guajardo said Mexico is willing to negotiate labor and environmental issues as part of the talks to be held in Washington. "I think it would be progress, to guarantee that the benefits of the agreement are shared among all."
Guajardo appeared to be similarly flexible about making "fine adjustments" to the rules-of-origin in manufacturing, which dictate how much regional content would be required to consider a product "made in North America." Critics have accused Mexico of importing a lot of Chinese or European components, assembling them and labelling them made in North America.
"Since NAFTA was implemented in 1994, the U.S. bilateral goods trade balance with Mexico has gone from a $1.3 billion surplus to a $64 billion deficit in 2016," the U.S. Trade Representative's Office said in unveiling its plans for renegotiating the accord. "The negotiating objectives also include adding a digital economy chapter and incorporating and strengthening labor and environment obligations that are currently in NAFTA side agreements."
Publication date: 8/11/2017
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