Mexico Warns It Is Ready To Quit NAFTA If Trump Crosses "Red Lines"

Tyler Durden's picture

Under relentless pressure from President Donald Trump, Mexico is said to be ready to discuss changes to trade rules about a product's country of origin to try to avoid a disruptive fight with the United States over commerce.

As the two countries begin a difficult new relationship, Mexico sees possible common ground with Trump on the "rules of origin" of the North American Free Trade Agreement (NAFTA) that binds the two countries and Canada, Reuters reported. However, as AFP adds, even before the talks started, Mexico has drawn red lines ahead of the negotiations with Trump's administration, warning it could quit the talks and NAFTA itself, if the discussions hit a wall, no pun intended.

Of course, it all begins with the wall.

During his campaign, Trump vowed to make Mexico pay for a massive border wall and threatened to finance it by tapping into the $25 billion in remittances that Mexican migrants sent back home last year. Mexico does not see things that way. "There are very clear red lines that must be drawn from the start," Economy Minister Ildefonso Guajardo told the Televisa network as he prepares to meet with US officials in Washington on Wednesday and Thursday.

Asked whether the Mexican delegation would walk away from the negotiating table if the wall and remittances are an issue, Guajardo said: "Absolutely."  Guajardo and Foreign Minister Luis Videgaray will hold the face-to-face talks with the new US administration ahead of a meeting between Trump and President Enrique Pena Nieto on January 31.

In addition to the wall, Trump wants to renegotiate NAFTA with Mexico and Canada, warning last week that he would abandon the pact unless the United States gets "a fair deal." The Mexican government has responded that it is willing to "modernize" the pact, which came into force in 1994 and represents $531 billion in annual bilateral trade between Mexico and the United States.

 

Some 80 percent of Mexico's exports go to the United States, a clear indicator of the country's dependence on the US market for its economic well-being.

But Guajardo warned on Tuesday that Mexico was also willing to use the nuclear option, and exit the 23-year-old agreement. "If we're going for something that is less than what we have now, it doesn't make sense to stay in," Guajardo said.

That said, since Trump's stated intention is ultimately dismantling Nafta, Mexico's gambit does not sound like a very reasonable initial negotiating position.

Cited by AFP, Pena Nieto vowed on Monday that there would be "neither confrontation nor submission" in the negotiations, which will include trade, immigration and other issues. Pena Nieto also looked further north for help on Sunday as he spoke with Canadian Prime Minister Justin Trudeau by telephone to discuss ways to boost North American economic integration.

Luis de la Calle, a Mexican economist and one of the original NAFTA negotiators, said it is impossible to enter negotiations without being willing to walk away if necessary.

Trump "puts pressure in an almost extortionist manner... to get as many concessions as possible," de la Calle told AFP. "But countries must be much smarter."

It was not clear just how countries can be smarter if, at least in the case of Mexico, the US has enough trade leverage it could cripple 80% of Meixcan exports overnight.

Videgeray said that while the United States has "great interest" in talking about trade, Mexico wants to "talk about every issue."

On a separate topic, Pena Nieto has called on the Trump administration to do more to stop the illegal flow of weapons from the United States into Mexico, which Mexican officials blame for fueling a brutal drug war. To this Trump has responded that Mexico has to do more to stop the illegal flow of drugs from Mexico to the United States.

Meanwhile, even as it faces tough talks with the United States, the Mexican government is setting its eyes on new trade pacts with other countries. After Trump withdrew the United States from the Trans-Pacific Partnership on Monday, Pena Nieto said his government would immediately seek to negotiate bilateral agreements with other TPP members to "diversify" his country's trade relations.

Guajardo noted that Mexico has good relations with China and said Beijing was a "big concern" for the Trump administration. It is unclear whether China has an interest in expanding its Pacific trade partnership to include the US neighbor, and how the US would react to such an eventuality.

But Valeria Moy, director of the Mexico Como Vamos think tank, said Latin America's second biggest economy cannot lose sight of the importance of the United States while it looks for deals elsewhere.

"If you have the world's biggest market next door to you, that's the market you need to take care of, period," Moy said. "What we can diversity is who we buy from." And since that is not the US, one can see why Trump is confident he has all the leverage ahead of this particular round of trade talks which will be closely followed by the rest of the world, as it sets the stage for similar bi- and multi-lateral talks with other nations around the globe all vying for the wallet of America's overindebted consumer.

Finally, making matters worse for Mexico is that suddenly its "other" Nafta partner, Canada, appears to have left it hanging. In a separate Reuters report, Canada said it would focus on preserving its U.S. trade ties during talks to renegotiate NAFTA and may not be able to help Mexico avoid being targeted by the Trump administration, Canadian government sources say.

"We love our Mexican friends. But our national interests come first and the friendship comes second," a source said on the sidelines of a cabinet retreat in Calgary, Alberta.

"The two are not mutually exclusive," the source added. The comment was the starkest yet by Canadian officials, who are increasingly convinced Mexico will suffer the most damage from changes to the North American Free Trade Agreement.

The government dismisses the idea that Canada will formally abandon Mexico. Foreign Minister Chrystia Freeland said on Tuesday that Canada supported NAFTA as a trilateral agreement and noted that Trudeau had talked to Mexican President Enrique Pena Nieto over the weekend.

 

That said, the government sources note Mexico and Canada would appear to have little in common. Trump is unhappy about the large U.S. deficit with Mexico and has promised to punish firms with manufacturing bases there.

 

"Our negotiating positions are totally different. Mexico is being hung out of an skyscraper window by its feet," said a second government source.

 

"Mexico is in a terrible, terrible position. We are not," said another Canadian person involved on the trade file.

And just like that, Trump has managed to divide, and shortly conquer, his counterparties in yet another negotiation.

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Starvation 2017's picture

"How dare America defend her own interests for the first time in decades!"

evoila's picture

we'll walk away from nafta. what sort of negotiating tactic is that? All Trump needs to say is, OK, see you, and walk out. Mexico will then have to come back hat in hand.

 

What a bunch of idiots.

FreedomGuy's picture

They think the deal is a Mexican stand off.

 

knukles's picture

Don't let the door slap you in the tokus on the way out

Very poor bargaining starting point, Juan. 
Never lead from weakness

D Nyle's picture

if they don't deal, we'll dump 30 Mill illegals on them, oh were going to do that anyways, so fuck em

Son of Loki's picture

That Mexican is a joke. Bill Clinton's naft gutted the American working class. If they want to nullify it, so be it! Trump erects the wall and this Hombre down south will see several million very hot tomales revolting. Their Mexican leaders are as bad as Soweeto; all promises but they do zero for their people and let them die like rates. It's no wonder they all want to come to this great country esp as Trump makes it Great again!

As Trump said, we'll let the good ones pass thru the gates to America and reject the criminals and gangsters and drug runners.

Government needs you to pay taxes's picture

Gonna be a donkey show.  Let's hope Trump is the one doing the fucking, on behalf of all Americans.

philipat's picture

So shouldn't Mexico's equivalent of Ross Perot (Perhaps Trump's dear friend Carlos Slim?) be screaming about the "giant sucking sound" of US jobs returning to the US if Mexico does indeed decide to pull out of NAFTA?

The Gun Is Good's picture

LOL! Totally.

(So no NAU either then?)

StychoKiller's picture

Well gee, Juan, please don't throw us in that briar patch! :>D

johngaltfla's picture

Don't let the door hit you in your beaner ass el Presidente. I hope Trump crushes Mehico in these negotiations.

Antifaschistische's picture

Trump's done more in one week than Hillary would have done in 6 months...well, she may have passed an executive order making vagina's an endangered species, or outlawing guns with black barrels or some other profound piece of legislative genius.

petar's picture

Even Mexico doesn't take us seriously anymore. In couple of months the rest of the world will follow!

Jacksons Ghost's picture

Trail of Tears 2....ooops....sorry, got caught up in my namesake.

fix's picture

I call your bluff, and raise the wall ten feet

centerline's picture

+1 K.  That was a shitty bluff.  Bad form.

Raffie's picture

WON'T SOMEONE PLEASE THINK OF THE TACOS!!!!

SHEEPFUKKER's picture

Me gusta border skirmishes. 

 

nmewn's picture

Here we go...

"But Guajardo warned on Tuesday that Mexico was also willing to use the nuclear option, and exit the 23-year-old agreement. "If we're going for something that is less than what we have now, it doesn't make sense to stay in," Guajardo said."

...well no shit Fonzi, thats prolly how American workers felt 23yrs ago! You want a piece of the action or not? If not, you're fired.

Thats how you "negotiate" for your people ;-)

undertow1141's picture

80% of Mexican trade is with the US. He can bluster all he wants, if he walks away for US trade he bankrupts Mexico, it's that simple. He's just pissed Trump is taking the prize pig and bringing it back home to the US.

DownWithYogaPants's picture

We don't want to bankrupt Mexico.  All the beaners will head north in their hippity hoppity cars and taking huge burrito dumps all over the place.

 

BarkingCat's picture

If the border was secured by the army, they can try but that's about it.

Escrava Isaura's picture

Really?

Go ask these American business of your negotiation tactics and see what they think:

http://www.census.gov/foreign-trade/statistics/product/enduse/exports/c2010.html

 

Starvation 2017's picture

You're naïve if you think Mexico would win in a trade war with the U.S..

 

But really I'd expect nothing less from you, considering your history of ceaseless anti-U.S. rhetoric. One might think you have an inferiority complex with your obsession. I don't really understand why you lurk ZH rather than a latin America-centric news aggregator.

DownWithYogaPants's picture

Escrava Isaura is a boring little telenovela that is put on every so often in Brazil.  The character here on ZH is a douche bag.

nmewn's picture

Go ask Carlos Slim fuckwit.

monad's picture

Their appetite for tools and machines is almost as great as their appetite for 11 year olds. Death to all globalists. Let Mexico nationalize their assets and live Maxine Waters' evil DREAM.

dogismycopilot's picture

hey man, your wife just called chated with 5 of us asking if she could trade ass for a ticket out of Brazil. you better lock that shit up hombre. 

Oldwood's picture

Well, currently we buy more agricultural goods from Mexico than we sell them and the deficit is growing. Maybe US producers can just sell to US consumers. If Mexicans can afford it surely we can.

https://www.export.gov/article?id=Mexico-Agriculture

Jethro's picture

More like when the Sherriff in Blazing Saddles is holding the gun to his own head, but meaningfully and with full sincerity in this dude's case.

demi urge's picture

Will they?

Who's more used to dealing with hardship, Mexicans or the US people?

Joe Sichs Pach's picture

So they walk and don't come back - what's lost?

demi urge's picture

Well, almost a trillion dollars of goods we consume, according to the article.

DownWithYogaPants's picture

If Pepe and his "Trump as puppet" theory is correct then these products are soon to be made by robots in the USA and a few humans.

nmewn's picture

Maybe a little more hardship will turn them against the asshats who have been running their country into the ground since like...for fucking-ever.

demi urge's picture

You mean the Americans that send hundreds of billions to their drug cartels with their habits?

nmewn's picture

Thats called a free market. Apparently you would call it the mercado negro?

True Blue's picture

You're right: Trump should legalize it all and completely collapse that narco-republic flat.

ZeroSense's picture

Hopefully Mexico and others will allow Russian and Chinese naval bases or Missiles against USA....

nmewn's picture

No biggie, obviously you don't read the Fake News. 

Putin and Trump are the best of friends! ;-)

Bill of Rights's picture

Works for me to weakened super powers coming together I don't see why this is a problem .

Blanco Diablo's picture

 A US backed regime change would be good for both peoples.

BarkingCat's picture

Name one place that this happened. 

SilverRhino's picture

Japan.   Germany.  Except in those places we did it right, crushed them flat and rebuilt them.

Croesus's picture

@ Mexico:

Don't threaten us, with a good time...

SILVERGEDDON's picture

Good. Fuck you too, Mexico - take all your illegals back, keep your fucking lousy factories and consumer goods too, while you are at it. 

The multinationals can swallow that one along with you fuckers.

Enjoy your drug cartels with no USA market for their products - the wall will be tighter than a gnat's ass.

Hasta la vista, dickwad.  

philipat's picture

Agreed but more accurately perhaps "How dare America defend the interests of its people over those of big Corporations" for the first time in decades. And aren't the Libtards the very people who should be celebrating this?

swamp's picture

Why are the store avocados from Mexico when there are fields of them for miles all around the county?

NAFTA