“These talks are consequential. There may be some dramatic moments ahead,” Canada's foreign minister, Chrystia Freeland, said Monday, in anticipation of the first round of NAFTA renegotiations, 23 years after the agreement first came into effect.
As talks begin Wednesday — the second round is expected to be held in Mexico in early September, with the third in Canada at a date yet to be determined — we bring you up to speed on the priorities identified so far by Canada, the United States and Mexico, along with the players who will be at the table this week in Washington and those who hold influence behind the scenes.
With reporting from Bryan Borzykowski in Toronto, Liz Enochs in San Francisco and David Agren in Mexico City.
NAFTA, Take Two: Your guide to who's who
Team Canada: Well-prepared, with firm priorities
No matter what happens with NAFTA renegotiations, no one can say that Canada wasn’t prepared. Over the last several months, ministers, officials, business executives and others have been blanketing the U.S. to ensure people there know just how important NAFTA is to the Canadian and American economies. Prime Minister Justin Trudeau has also put together a top-notch team, led by Foreign Affairs Minister Chrystia Freeland, that brings together decades of trade experience.
“You might think, based on media reports, that we’ve been preparing since February,” Freeland said in a speech delivered Monday, in advance of this week’s negotiations. “In fact, we began planning as soon as NAFTA emerged as an issue in the U.S. presidential campaign.”
With the chief negotiators of the Trans Pacific Partnership (TPP) and the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) both playing central roles in these talks, Canada has put its best people on the job. “It’s an excellent and well-prepared team,” says John Curtis, a senior fellow at the C.D. Howe Institute and the founding chief economist at what was then the Department of Foreign Affairs and International Trade.
They will have their work cut out for them. With U.S. President Donald Trump saying repeatedly how bad a deal NAFTA is for America, there’s no doubt his team will try and put the U.S. ahead where they can. Does that mean scrapping Chapter 19 — the trade dispute panel that the U.S. calls unfair, but which allows Canada and Mexico to appeal duties placed on non-U.S. products? Will they try and find a way to reduce their trade deficit with Canada? Is Canada really not worth worrying about, as Trump said in a call to Mexico’s president in January?
Time will tell just what the Americans hope to get out of re-opening NAFTA, but nothing major will likely get done over the first few days of talks. “This week is going to be a taking-stock exercise,” says Patrick Leblond, a senior fellow at the Centre for International Governance Innovation and an associate professor at the University of Ottawa. “They’re going to scope out the negotiations because the mandate is not clear.”
While Freeland made Canada’s core positions known on Monday, including bringing stronger labour safeguards and enhanced environmental provisions into the agreement, more details on these points and others will likely merge over the next few days. Canadians may also get a sense of whether hot button issues such as Chapter 19 are deal breakers or negotiation points. “I would not be surprised to see the Mexicans and Canadians say that you can forget [negotiating] Chapter 19 because it’s not going to happen,” says Leblond. “That could be on the table right away.”
In any case, Canada’s team at home and in Washington is going to be busy talking to NAFTA’s many stakeholders here and abroad. Here are the Canadians leading the way:
Normally, Canada’s trade minister — currently François-Philippe Champagne — would be the lead politician on free trade agreements, but there’s nothing normal about this renegotiation. Instead, Chrystia Freeland, the minister of foreign affairs, will be the go-to Liberal for all things NAFTA.
Why her? Because she knows America better than most, having been a high-ranking journalist with Thomson Reuters in New York, covering banking, trade and the economy. “She knows her files really well and she’s known across the U.S.,” says Curtis.
Freeland has already been hard at work meeting counterparts in the U.S. and sending others, including premiers and mayors, to small town America to promote the virtues of NAFTA, but she’ll now be dealing with more trade minutia as negotiations play out.
Her main role will be to stay in regular communication with Canada’s chief negotiator Steve Verheul — and relay anything important to the prime minister. She’ll also oversee the NAFTA advisory council and speak to the media when needed. “She’ll be giving ongoing advice to the negotiating team and back up to the cabinet and the prime minister,” says Curtis.
On Aug. 2, Canada got something it has never had before: a deputy ambassador in Washington. It’s not just an honourary position — with trade veteran Kirsten Hillman in the role, it’s another sign that the Liberals are taking these negotiations extremely seriously.
When it comes to trade and foreign affairs, there may be no one more experienced than Hillman. She was Canada’s chief negotiator on the TPP and most recently served as an assistant deputy minister at Global Affairs, where she helped ratify CETA. “She has such vast experience in this area,” says Walid Hejazi, an associate professor of economic analysis and policy at the Rotman School of Management.
One of the main plusses of having her on the team is that she already knows the personalities Canada will be dealing with and the issues they’ll be discussing. Many of the provisions in the TPP will likely pop up again here. “She understands the trade issues and the people,” Hejazi says. “She’s plugged in.”
There may be no more challenging a job than being Canada’s chief NAFTA negotiator, but if anyone’s up to task it’s Steve Verheul, says Curtis. The longtime negotiator has plenty of experience hammering out major trade deals — he was the chief negotiator for CETA, Canada’s chief agriculture negotiator from 2003 to 2009 and even had a hand in NAFTA when he worked at Agriculture and Agri-Food Canada.
Two things make him the right person for the job: he can handle the pressure and he has a history of bringing numerous sides together. “He’s calm as a church mouse,” says Curtis. “He’s steady, trustworthy and has the confidence of all the provincial, territorial and federal people.”
It’s this last point that’s especially key. As with CETA, there are many interests that Verheul must take into account during negotiations. Most industries have something at stake here, while certain requests that the U.S. and Mexico may make could fall under provincial authority.
He’ll also be liaising with Hillman and Freeland, talking to businesses and NGOs and overseeing a large domestic negotiating team, too. “It’s a tough job, but he has the personality for it,” says Curtis.
While Verheul will get the glory if things go Canada’s way, he’s by no means the only one trying to renegotiate this monstrous trade deal. David Usher, director general of trade negotiations at Global Affairs Canada, has the important task of gathering information from provinces, federal departments and others who have a stake in this process.
Usher, a former ambassador to Ethiopia who has represented Canada at the WTO and OPEC and has held numerous trade-related roles, likely won’t be in Washington during the negotiations. Instead, he’ll be setting up interdepartmental meetings, relaying information from other interested parties to Verheul and making sure all voices are heard.
“You won’t hear much from him, but he’s very strong and very quiet and he’ll be working behind the scenes,” says Curtis.
How many people does it take to wrangle opinions from NAFTA’s various stakeholders? A lot. While Usher will be talking to the country’s various trade teams, Kendall Hembroff will be doing yeoman’s work, asking academics for their thoughts, gathering economist’ opinions and dealing with interdepartmental trade teams on a more ground floor level.
Hembroff, a director at Global Affairs Canada, has been working in the department since 2000, holding increasingly more senior positions, so she knows her stuff, says Curtis. She’ll be reporting to Usher.
One of her more important duties will be to ask academics, economists and think tanks to come up with ideas on how certain deals will impact Canadian industry and our economy. “It’s behind the scenes, but it’s quite elaborate,” says Curtis. “She has to find out what the impact of something will be on the Canadian and provincial economies. It’s that kind of level.”
While NAFTA is a deal between countries, some of the things America or Mexico may want could fall under provincial jurisdiction, says Leblond.
For instance, American wine producers would like more access to the Canadian market — there are restrictions that prevent non-Canadian wines from entering our market — but alcohol regulation is a provincial matter. “The federal government can say ‘we agree to this,’ but the provinces can say ‘we don’t care,’” says Leblond.
Most provinces have a trade team, with the bigger ones having chief negotiators — Raymond Bachand, Quebéc’s former finance minister, is that province’s top negotiator, for instance, while Janel Quiring is B.C.’s top negotiator. It’ll be their job, and the other main provincial negotiators’, to work with Usher and the rest of Verheul’s group to get their positions heard.
“These will be the people interfacing with the various teams at Global Affairs,” says Leblond. “They’re not at the actual negotiating table, but they’ll be the ones who say on their end what they can or cannot do.”
The business community
While NAFTA will be discussed and negotiated by politicians and government-appointed officials, it’s the business community that might have the most at stake. If the country loosens supply management rules, dairy farmers may see their livelihoods impacted, for instance. Other changes related to duties and taxes could impact a host of industries, like retail, e-commerce, aerospace and more.
The business community doesn’t have a direct seat at the negotiating table, but some organizations, such as the Canadian Chamber of Commerce and the Canadian Manufacturers and Exporters, could be in a nearby room, waiting for details and relaying their thoughts to the negotiating team, says Leblond. “They’re going to have someone there to at least listen and monitor what’s going on,” he says.
Some large companies, ones that may be more directly impacted by any changes to trade, could have executives on site, as well. “Business will be a huge player,” Leblond says. “They’ll be available for informational briefings and consultations.”
One of Freeland’s more astute moves was putting former Conservative cabinet minister and newly appointed global fellow of the D.C.-based Wilson Center Rona Ambrose on the NAFTA advisory council. While the council is made up of several important individuals, it’s Ambrose who will “channel the Conservative view,” says Hejazi.
Ambrose, who is well respected in her party, most recently serving as its interim leader, is also from Alberta, and will likely ensure her home province’s needs are represented, too, he says. But most importantly, she’s there, along with former cabinet minister James Moore, as a Conservative.
“She’s there to alleviate any concerns that the Liberal government is ruling without cross-party communication,” says Hejazi. “They want to present a unified front.”
In some ways, the prime minister is the most important person in trade negotiations — he’s the one who will sign off on the final document, whenever that may be complete.
Usually, presidents and prime ministers stand mostly on the sidelines, letting everyone else do the difficult work. With this negotiation, though, Trudeau may be busier than usual, says Leblond.
If the U.S. takes a hard line on, say, Chapter 19 — which is possible — Freeland will ask Trudeau if he wants to step away from the negotiating table or continue pushing forward.
If Trump starts tweeting about Canada in a negative way, Trudeau may be the one to calm the public or give his U.S. counterpart a call. “He’s already had to talk to Trump when he threatened to leave NAFTA. It was him who tried to change his mind,” says Leblond. “He may have to step in at that level.”
Team United States: Focused on reducing trade deficit
Despite the fact that regional trade has more than tripled since NAFTA went into effect in 1994, U.S. President Donald Trump has notoriously called the pact “the worst trade deal ever negotiated.”
That kind of rhetoric, appealing to the laid-off miners, factory workers and others who blamed free trade for their woes, helped elect the most populist American president in decades. Trump’s move to renegotiate NAFTA is meant to appeal to his supporters by signalling that he intends to rewrite trade rules to ease their pain.
One problem with the president’s framework, according to economists, is that it places trade front and centre in a process where it doesn’t belong. While a rising trade deficit from 2000 to 2010 coincided with the loss of almost six million U.S. manufacturing jobs, economists lay those losses at the feet of not trade, but of increased automation and the adoption of advanced, productivity-enhancing technologies.
“Worker dislocation in the U.S. is really a story about technology and productivity,” said Josh Meltzer, a trade expert at the Brookings Institution. “There’s no indication the administration has wrapped its head around this in the slightest. In fact, if you look at the Trump budget, they would be basically proposing to get rid of almost all the support for training and worker relocation.”
Still, the Trump administration has said labour and environmental obligations will be renegotiated, and observers expect both areas to be elevated from the existing “side agreements” to full chapters in a renegotiated NAFTA, which would give the provisions more clout. Labour leaders are pushing for stronger grievance procedures and wage protections, as well as heightened workplace inspection protocols.
The overarching objective announced by the Office of the United States Trade Representative (USTR) is reducing the U.S. trade deficit. Given that the U.S. has a trade surplus with Canada of almost US$8 billion, this essentially implies a focus on reducing the US$63 billion trade deficit with Mexico.
Trade experts scoffed at this goal. The idea that both Canada and Mexico would agree to accept larger trade deficits for themselves in order to reduce the U.S. trade deficit “makes absolutely no sense,” said Monica de Bolle, a senior fellow at the Washington-based Peterson Institute for International Economics. “If the premise is to reduce the U.S. trade deficit, nothing’s going to get done by the end of the year.”
Still, many concur that the trade deal needs to be modernized. “Technological innovations — the Internet, information and communication technology, and automation — have fundamentally altered the way goods and services are produced, traded, transported, and financed,” said a report from the Peterson Institute. The report estimates that 12 percent of global goods trade is now conducted via e-commerce and that international data flows have increased 45 times over the past decade.
The Trump administration aims to add a digital economy chapter to a revised NAFTA. Other priorities include targeting “unfair subsidies, market-distorting practices by state-owned enterprises, and burdensome restrictions on intellectual property,” according to the USTR’s statement on the U.S. agenda for the talks.
The goal of the upcoming talks, according to the Peterson Institute, should be to fix NAFTA’s flaws and “bring the pact up to code with 21st century trading practices.”
Commerce Secretary Wilbur Ross built his US$2.5 billion fortune buying and restructuring failed companies. As Trump’s point man on international trade, he seems to think U.S. trade policy needs a similar turnaround. “Just about every other country in the world has more protectionist rules than we do,” he said in a June interview with the Wall Street Journal. “We’ve been in a trade war for decades. The only difference is now the American troops are coming to the ramparts for the first time.”
Ross has been vocal about what he sees as shortcomings of past trade agreements, complaining that the U.S., with a 2016 trade deficit of US$504 billion, has absorbed the trade surplus of the rest of the world. He argues for narrowing U.S. trade deficits by forcing other countries to buy more American goods and services in exchange for access to the large U.S. market.
The commerce secretary worked closely with Mexican Economy Minister Ildefonso Guajardo earlier this year to hammer out an agreement on the sugar trade in a process that “bodes well for our long-term relationship,” Ross said. The deal averted the imposition of duties and limited Mexican imports that U.S. producers had complained undercut their business. The process suggests Ross’ perspective, which will carry much weight with the NAFTA negotiating team, could be more focused on trade’s impact on big producers than its impact on the U.S. economy as a whole.
Whether Trump’s threat to withdraw from NAFTA was a real possibility or simply a negotiating tactic, it was one indication of Peter Navarro’s hard-line influence on trade policy.
Navarro, whose economic expertise is in utilities, not trade, has argued that trade is the world’s central problem — especially trade with China — and that global prosperity isn’t possible until trade is “fixed.” He views trade with nations such as China and Mexico as a zero-sum game, in which any gains on their part come at the expense of the U.S. Many economists view his focus on reducing trade deficits as, at best, simplistic, and at worst, a dangerous precursor to possible trade wars.
When the Navarro-led White House National Trade Council was replaced in late April with a newly created Office of Trade and Manufacturing Policy, which with a narrower agenda, one trade economist described Navarro as “marginalized.” Navarro didn’t see it that way, noting that he still advises Ross and U.S. Trade Representative Robert Lighthizer. In the upcoming negotiations, he has said he’s focused on revising “rules of origin” that limit foreign-made content in goods, in order to make the NAFTA trading bloc a manufacturing powerhouse.
Robert Lighthizer and John Melle
Robert Lighthizer has been down this road before. The U.S. trade representative handled trade talks with Japan as deputy U.S. trade representative in Ronald Reagan’s administration, winning concessions on steel imports through a blunt and sometimes hardheaded style.
Lighthizer’s approach could be balanced by career diplomat John Melle, the assistant USTR tapped to handle the day-to-day negotiations. With almost 30 years of experience in the USTR office, Melle has worked with Mexico on NAFTA-related issues for years, as well as handling other trade disputes with Canada and Latin America. The relationships he’s developed over those years could help smooth the way to finding common ground this time around.
From 1985 until his appointment as USTR head this year, Lighthizer had worked at New York-based law firm Skadden Arps Meagher and Flom doing the kind of spadework he has argued the U.S. should do more of: bringing trade complaints on behalf of U.S. companies such as U.S. Steel Corp. in various international forums.
Thanks to his work as the chief counsel to the Senate Finance Committee from 1978 to 1983, Lighthizer is also experienced at moving deals through Congress, a key constituency due to its constitutional authority over trade. The USTR is Congress’s main point of contact on trade policy, a role that could test Lighthizer’s skills of persuasion when it comes time to selling a renegotiated NAFTA.
The agriculture sector
Agriculture Secretary Sonny Perdue played a key role in averting Trump’s plan to withdraw from NAFTA. When he and Ross met with the president to try to change his mind, Perdue brought along a map showing the areas of the country that would suffer the worst job losses in agriculture and manufacturing from such a move — many of them were counties that had voted for Trump in November. Added to pressure from the leaders of Canada and Mexico, the map was persuasive. The president decided to renegotiate rather than withdraw.
“While a number of U.S. economic sectors have benefited over the decades under NAFTA, if you look at the statistics no sector has really benefited as much as U.S. agriculture,” said Kellie Meiman Hock, a trade expert at McLarty Associates, an international strategy consulting firm.
U.S. farm exports to Mexico have soared from about US$4 billion at NAFTA’s inception to roughly US$18.5 billion this year, or US$40 billion when Canada is included, and the agriculture industry is keen to protect those gains. That’s why farm groups and the red-state governors and senators that represent their members have kept the heat on the administration to stay hands-off on the provisions of the agreement that affect agricultural interests.
The U.S. Constitution gives Congress authority over international trade. In recent years, Senators and House members have effectively ceded some of that authority to the Executive branch, but that stance has begun to change with a volatile populist in the Oval Office whose globalist and isolationist wings have struggled to advance a coherent trade policy.
Congress takes its oversight of the trade function extremely seriously, trade experts say, and lawmakers will likely be watching the NAFTA renegotiations very closely. While red-state Senators are watching to ensure no ground is lost on agricultural trade, many Democrats will be focused on the labour and environment chapters.
“Big votes are hard at the best of times,” said Meltzer of Brookings, pointing out that free trade opponents, including some Democrats, have characterized NAFTA as a job-killing agreement, so there are likely to be demands for trade adjustment assistance for displaced workers. “The updated NAFTA looks basically like the TPP with a few bells and whistles,” he added. Considering that, he said, it’s an open question whether a revised NAFTA can win the support of Congress.
Team Mexico: Trepidation turns to cautious optimism
NAFTA renegotiations couldn’t come fast enough for Mexico. In the first months after his election, Donald Trump traumatized the country’s economy with tweets as he jawboned automakers into manufacturing in the United States and sowed such instability the peso sunk to historic lows. FDI slipped and companies shelved expansion plans.
But Mexico enters NAFTA negotiations with a sense the worst is behind it. The peso has rebounded, investment is returning and the country even reached an agreement with the U.S. on the contentious sugar issue — a sign to many that deals could be struck with the new U.S. administration.
“There was a definite overreaction,” said Jonathan Heath, former chief Latin America economist at HSBC and a dual Mexican-Canadian national. “It wasn’t like the country was going to disappear.”
Mexico outlined its objectives for NAFTA renegotiations on Aug. 1. Priorities include modernizing the trade deal to incorporate digital and energy issues — the latter omitted originally, but now necessary after the energy reforms of 2013. Mexico also will seek to maintain investor protections and introduce anti-graft measures.
“This will be more about rules and standards, and not about tariffs,” said Brenda Estefan, former security attaché at the Mexican embassy in Washington and a foreign affairs analyst. Like Canada, Mexico has concerns with rules of origin regulations and Trump’s talk of trade deficits. It also wants to keep trade free rather than managed and would like to keep intact Chapter 19, the dispute resolution mechanism.
Mexico has signed trade agreements with 45 countries — more than any other nation. Having pursued so many trade deals might favour Mexico as it enters NAFTA renegotiations. Its team members “are all very experienced, very professional and know how to negotiate,” said Luis de la Calle, a former NAFTA lead negotiator.
In early January, President Enrique Peña Nieto tapped his closest political confidant, Luis Videgaray, to manage Mexico’s relationship with the Trump administration by appointing him foreign relations secretary. It was an obvious choice for Peña Nieto, whose history with Videgaray dates back more than a decade. Videgaray managed Peña Nieto’s 2012 presidential campaign and served as finance minister for the first four years after his election.
But his appointment stirred outrage: during the 2016 campaign, Videgaray convinced the president to invite Trump to Mexico City for an ill-fated appearance at the presidential palace, in which the Peña Nieto appeared passive and inadvertently made a Mexican enemy look presidential. Videgaray made matters worse by telling a skeptical staff at the foreign relations secretariat: “I’ve come to learn” — not reassuring comments as Mexico confronted the Trump threat.
Videgaray, an MIT-trained economist, has earned some plaudits, though, especially for his handling of the temperamental Trump. Pundits suggested he was picked for the U.S. file also because of a relationship with Trump’s son-in-law and adviser, Jared Kushner. Leaked transcripts of a Trump-Peña Nieto phone call suggest the strategy wasn’t the wrong idea, though analysts say U.S. and Mexican secretaries have since formed strategic relationships.
“He’s working the deal with the Trumps, with the top circle there,” said Federico Estévez, political science professor at the Autonomous Technological Institute of Mexico. “He brings in whoever he wants [into the negotiations] and Peña will trust him to the end.”
As a sign of the importance of NAFTA negotiations — or an indication of the time it may take to reach a deal — Videgaray ruled himself out as presidential hopeful in 2018, as he would have to exit government by the New Year to be eligible (though he also sits low in the polls).
Among Videgaray’s first appointments was a new ambassador to the United States: Geronimo Gutiérrez, a friend from university and then-head of the North American Development Bank (NADB,) which funds water, environmental and infrastructure projects in U.S. and Mexican borders states. Gutiérrez formed part of a small team with Videgaray, which kept its dealings with Kushner and Trump discreet — and didn’t leak to the Mexican media.
Gutiérrez is an old hand on U.S. relations; he served as undersecretary for North America in the Vicente Fox administration from 2003 to 2006. While overseeing the San Antonio, Texas-base NAD bank, analysts say he developed relationships which may prove profitable in the NAFTA negotiations.
“He dealt with lots of border state congressmen and senators,” says a trade consultant, who knows Gutiérrez but preferred anonymity to be able to speak candidly. “There’s a reason he was appointed ambassador. Yes, he has the technical expertise, knowledge of Mexico and the U.S., but also his developing of political and friendly relationships.”
Gutiérrez was the fourth Mexican ambassador to Washington in four years — a show of neglect in what is Mexico’s most important international relationship, according to analysts. “It took [Peña Nieto] a while to prioritize foreign relations in general,” said José Briseño, Washington correspondent for the Mexican newspaper Reforma. “He thought trying to modernize the economy and doing some domestic things would be enough.”
Whereas Videgaray is overseeing the political parts of the NAFTA renegotiations, as minister of the economy, Ildefonso Guajardo, 60, is the point person for dealing with the domestic constituencies impacted by NAFTA and overseeing the Mexican negotiating team.
“He is the technical expert on all of these negotiations,” Briseño said. “He’s the one who has been developing the relationships with the private sector on the Canadian side and the U.S. side and what’s going to be on the timeline.”
Guajardo, an economist by training and politician with the Institutional Revolutionary Party (PRI) in his native Nuevo León state, headed Mexico’s free trade office in its embassy in Washington in the early 1990s, “so he knows the issues,” Briseño said. “He also presents a very competent face in the media in general.”
Diminutive and diplomatic, Guajardo often appeared in Mexican and foreign media to rebut Trump’s tweets and tirades targeting Mexico — often playing the bad cop to Videgaray’s good cop. “Toyota has 10 plants in the United States…if I were Mr. Trump, I’d treat them with more respect,” he told Mexico television after a Trump tweet targeting the automaker. He later told The Globe and Mail, “You cannot ask me to [accept poor] conditions in terms of trade and then request my help to manage migration issues from other nations or…the prosecution of criminal activities and narcotics.”
Kenneth Smith Ramos
He might have an Anglo name, but Guajardo described Mexico’s chief technical negotiator, Kenneth Smith Ramos, as “super Mexican.” At 48, Smith is already seen as a veteran on trade issues. U.S.-educated, Smith entered the government in 1993 and worked as international affairs coordinator for the agriculture ministry. He now heads the trade and representation office in Washington for the Economy Secretariat. People familiar with Smith describe him as knowing his way around the U.S. capital and very familiar with his counterparts from the Office of the United States Trade Representative (USTR).
“He has the technical background and understanding of the North American relationship…how Canada may or may not work with Mexico in the NAFTA negotiations,” the trade consultant said.
“Ken has known [those within the USTR office] for 25 years,” said a former civil servant, who knows Smith from government work and preferred anonymity to speak candidly. “But that’s not where the difficulties in are in the negotiations. It’s on the high political side.”
The private sector
Mexico has consulted closely on NAFTA negotiations with its private sector, which is represented by the Consejo Coordinador Empresarial — a chamber of commerce, voicing the views of Mexico’s biggest businesses. “Mexico is one of the countries where the private sector is being consulted every step of the way in negotiations,” said Manuel Molano, deputy director of the Mexican Institute for Competitiveness. “This doesn’t happen in other places.”
A name coming up quietly as point person for industry is Moises Kalach, a textile titan who has invested in lobbying to keep NAFTA in place. A profile in the newspaper El Universal — Kalach doesn’t give many interviews — said he had invested heavily in lobbying and wants rules of origin regulations preserved. Mexico’s auto industry has raised similar concerns, which were a sticking point in talks on the Trans Pacific Partnership. “There’s a defensive agenda to protect the integrity of NAFTA so it doesn’t become a more closed region,” de la Calle said of the private sector’s priorities.
Last month, the Economy Secretariat ran an online consultation for NAFTA, though critics panned the process as a simulation and alleged big business had the government’s attention, while poorly-paid and -organized workers had no input. “Because of domestic politics they’re following the same strategy as ‘92, ‘93, when they firmly believed the only thing needed was the president’s approval and [that of the] Mexican business council and that was it,” said Carlos Heredia, professor at the Centre for Teaching and Research in Economics. “Other voices have been either not heard or suppressed.”
Andrés Manuel López Obrador
Andrés Manuel López Obrador looms large over NAFTA renegotiations, even though he won’t occupy a seat at the table. The left-wing populist and two-time electoral runner up, AMLO, as he is commonly called, leads early polls for the 2018 presidential election. His proximity to power spooks Mexico’s political and business classes, along with international investors, who liken him to Venezuelan dictator Nicólas Maduro — a comparison AMLO rejects.
His prominence causes disquiet in the U.S., too. Investor Tom Barrack, whose name has been floated as a possible ambassador to Mexico, told Bloomberg, “You see a Chávez sort of political movement that’s boiling up that’s really, really dangerous,” in an allusion to AMLO.
AMLO bitterly opposed the structural reforms promoted by Peña Nieto and compared opening the state-run energy sector to treason. He has since said he would put the energy reform to a referendum. Other reforms are likely to remain in the case of an AMLO-led government, Moody’s Investor Service said in a recent research note. He has not come out against NAFTA, though he recently told supporters he would revisit the treaty if there was “a bad negotiation.” But his refusal to rail against NAFTA as a wedge issues suggests to some that the anti-NAFTA constituency is small and the trade deal is too difficult to undo.
“There was a time in the ’90s when he was very critical of it,” says Rodolfo Soriano-Núñez, a sociologist in Mexico City. “But he knows pulling the cord would wreck entire cities such as Aguascalientes,” home to two Nissan plants and capital of a state of the same name, where the economy has expanded at a rate of more than 10 percent at times so far this decade.
“I do not think AMLO is happy with the number of U.S. agents in Mexican airports,” Soriano-Núñez added, referring to the close security cooperation between the two countries. “But my guess is that he understands he cannot blow [up] the security house of cards without tearing down the trade house of cards.”
A renegotiated NAFTA with any major changes would go to Mexico’s Congress for approval, which would likely be a formality. The ruling PRI holds an effective majority in the lower house and could count on support from the right-leaning National Action Party in the Senate, allowing it to reach a two-thirds majority.