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NAFTA Renegotiation May Impact Mexico Positively

NAFTA Renegotiation May Impact Mexico Positively

NAFTA Renegotiation Being Viewed Favorably by Mexico

As talk of a NAFTA renegotiation ramps up, Mexico is surprisingly indicating an eagerness to move forward with talks. The southern neighbor of the US is pushing to begin the discussion immediately in hopes that co-operation will actually benefit Mexico.

Current NAFTA is Not the Mexican Boon Some Claim

President Donald Trump and his supporters often claim that Mexico has unfairly benefited from NAFTA (the North American Free Trade Agreement) at the expense of the US. But the statistics tell a different story. Rather than becoming enriched and prosperous as a result of unfair trade advantages viz a viz the United States, Mexico’s poverty problem has actually expanded under NAFTA (03/30/17). Mark Weisbrot, co-director of the Center for Economic and Policy Research, states unequivocally:

“Many people think that since American workers lost out from NAFTA, Mexicans must have benefited, but the data shows that this is not true.”

Instead, studies show a far more complex dynamic with some areas benefiting from NAFTA while others declined. In manufacturing, for example, Mexico certainly benefited. Yet overall, the country remains poor, and approximately 55% of Mexicans today cannot afford basic expenses, such as food, housing, health care, education transportation and clothing – up from 52% when NAFTA was first enacted in 1994.

Mexico is Eager to Begin NAFTA Renegotiation

Mexico’s future looks bright in spite of current poverty statistics. It has become less dependent on the ups and downs of the energy industry and has increasingly integrated into the global supply chain. The country is facing a presidential election next year, and the current administration is hoping to conclude a NAFTA renegotiation before then in case the newly elected Mexican president is not as keen on dealing with the Americans. Mexico’s economy secretary, Ildefonso Guajardo, recently stated this position in an interview with CNN Money (04/07/17):

“It will be in the best advantage of the countries involved that we finish this negotiation within the context of this year… Incentives are there for us to really set an objective of negotiation — the latest by the end of 2017.”

Mexico believes continued co-operation with the United States combined with its newfound viability within the global marketplace will propel their country out of poverty. And several economists agree (05/07/17). Indeed, Citigroup recently upgraded its outlook for Mexico’s economy, predicting the Latin American country will expand 1.7% this year – up from their earlier projection of only 1.2% growth. In explaining this positive outlook for Mexico amid a NAFTA renegotiation, Citigroup explained the basis of their projection:

[The update was] predicated…on a more constructive assessment of what the future of North American integration might look like…On the relationship with the US there appears to have been a rethinking of trade issues within the Trump administration…We now think that NAFTA will be “rebalanced” but also “upgraded” [benefiting Mexico].

Will trade continue during this transition?  Companies that were doing business in Mexico prior to the US elections of November, 2016 have been experiencing an uptick in growth.  One would ask, “how could this be with all of this controversy about NAFTA renegotiations?”  The answer is simple.  Mexico’s most valuable asset is a huge body of intelligent, honest hardworking people who are willing to work to improve their state of life.  It’s a simple supply and demand issue.  South of the border is a huge supply of potential employees willing to work for 20% of the costs being required North of the border.  North of the border is an economically driven demand for such labor.  Trade continues and growth continues and will continue as both nation’s struggle to update and improve NAFTA for their mutual benefit.

The reader is invited to review our Blog at https://www.tecma.com for articles on subjects such as this.

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