Mexico Threatens to Leave Major Trade Pact if U.S. Negotiations Fail

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NAFTA Protester

On Tuesday, Mexico said it would leave the North American Free Trade Agreement (NAFTA) if the incoming negotiations with the U.S. on the border wall and remittances collapse.

During the presidential race, Donald Trump pledged to force Mexico pay for a “fully impenetrable” wall on the U.S.-Mexico border. The wall will prevent illegal immigrants from South America to reach the U.S. It is unclear how Mexico will pay for the structure because it has repeatedly refused to do so.

Mexico Ready to Walk Away from the Negotiating Table

Lat week, Trump said the country would indirectly finance the wall through the $25 billion worth of remittances that Mexican migrants send to their relatives back home.

Mexican Economy Minister Ildefonso Guajardo called for the two countries to draw “very clear red lines” in the negotiations. Guajardo and other Mexican government officials will meet with the Trump administration on Wednesday and Thursday.

When a reporter asked whether the delegation would leave the negotiating table if talks fail, the minister replied: “Absolutely”. The Mexican official will negotiate with the U.S. administrations before Trump and Mexican president Enrique Pena Nieto meet next Tuesday.

The real estate tycoon wants to negotiate with Mexico the fate of NAFTA, a major trade deal that includes Canada. Trump too said the U.S. would leave the agreement if the country fails to get a “fair deal”.

Mexico once said it was willing to “modernize” the 1994 treaty which resulted in a $531 billion in annual trade between the two countries. Under the pact, about 80 percent of Mexico exports reach the U.S. This is a clear sign Mexico heavily relies on its neighbor to thrive economically.

However, Guajardo said the country was ready to leave the agreement.

If we’re going for something that is less than what we have now, it doesn’t make sense to stay in,

the Mexican official said Tuesday.

Mexico May Abandon NAFTA

Pena Nieto said Monday that the country sought neither confrontation nor submission in the incoming talks. The negotiations will not focus solely on the border wall but it will include immigration reform, trade, and other topics. The Mexican president reportedly called Canadian Prime Minister Justin Trudeau on Sunday to talk about North American economic cooperation.

Luis de la Calle, who was one of the trade deal’s initial negotiators, noted successful negotiations imply that any side can walk away if necessary. Calle criticized Trump for seeking as many concession as he can get in a nearly “extortionist manner”.

Mexican officials want to discuss not only trade, as the U.S. suggested, but other hot issues such as the illegal trade of firearms from the U.S. to Mexico. Mexican authorities claim the weapons continue to fuel a violent drug war in the country.

The new U.S. president’s first executive action was to abandon president Obama’s signature trade deal, the Trans-Pacific Partnership. In response, Mexico turned to other countries to “diversify” its trade relations.

Mexico eyed China in its hunt for new deals, but experts say Mexico cannot ignore the U.S. altogether. One economist noted that the U.S. remains the planet’s largest market, so Mexico, which is just next door, should focus primarily on that market. The Central American country can only “diversify” the countries it imports goods from, the expert thinks.
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