What should Mexico do if the US delays the approval of the USMCA

Experts consulted by Expansión affirm that Mexico must work to guarantee the rule of law and aim at commercial diversification.

Given the wave of uncertainty that prevails due to the approval of the Treaty between Mexico, the United States and Canada USMCA (T-MEC) in Spanish in the congresses of these last two countries, the government of Andrés Manuel López Obrador (AMLO) must work to send signs of certainty to the investors agreed experts consulted by Expansion.

They pointed out that the trade agreement is only part of the necessary ingredients to attract investment to the country. The mood in Mexico is that the new trade agreement will be ratified. However, changes are necessary to reduce the impact of a possible extension in their discussion.

“There are many things that generate investment, the treaty is only one of those ingredients that help you generate foreign direct investment (FDI). The T-MEC is just an instrument. The important thing is to do things well at home, build trust, ”said Moisés Kalach, coordinator of the Strategic Consultative Council for International Negotiations (CCENI) of the Business Coordinating Council (EEC).

That certainty has to do with respecting the rule of law, not changing the rules of the game from one day to another; as well as allowing the private initiative to collaborate on issues, for example, of infrastructure and the energy sector.

In addition to what the government can do to build trust and attract investment, Mexico has to find a way to maintain the investments that have come as a result of the trade war between the United States and China.

“There are a good number of investments that, unfortunately, are not going to come until that degree of uncertainty is removed, but some of us can strengthen them,” said Juan Carlos Baker, former secretary of Foreign Trade of the Ministry of Economy.

Mexico has to work on two routes: the first one has to aim to reinforce the export markets that have recently been reached, as well as to ensure that companies that have moved in the wake of the trade war between the two largest economies of the world remain, added Baker, who is now a professor at the Pan American University.

The second route has to be directed to Europe.

“Last year the negotiation and modernization of the agreement with Europe was concluded, but this agreement later had a series of administrative issues that are in the process of being resolved. It is not that there is something wrong with the negotiation, something pending, just trying to make 28 countries in the European Union move at the same time is a bit complex, ”he said.

There is a third factor that can tip the balance of certainty and confidence in favor of Mexico: this has to do with economic indicators.

“Internal and external interest rates have begun to decrease in recent months and, this, could mean that, on the one hand, we have lower financial costs. Although to a lesser extent, it can also be positive for the issue of investment and economic activity, ”said Alejandro Saldaña, chief economist at Banco Ve por Más (BX +).

Will the USMCA “T-MEC” be ratified?

Although the probability of the ratification of the T-MEC in the United States has diminished, in Mexico there is confidence that the process will take place, despite issues such as the possible political trial of President Donald Trump (impeachment).

However, if the agreement is not ratified this year, at least in the United States, there is little hope for 2020, because the political agenda will be eclipsed by the presidential election.

“If it doesn’t come out right now, 2020 is totally politicized. The dynamics of the election itself cause the legislative agenda to be greatly reduced; also those states that begin to have elementary schools to define candidates start early in the year. “The possibility that if it doesn’t come out now, it will be taken out in 2020, I don’t see it,” Baker said.

“It must be taken into account that in Canada it has not been ratified and they have elections. It is possible that the discussion will also be postponed in that country for at least a couple of months. In the picture it looks a bit difficult to ratify in the short term, ”added Saldaña.

Although ratification options next year are scarce, there is confidence in the private sector that this may occur in 2020.

“Right now we have a window of opportunity in this session in the US. Between 14 and Thanksgiving we have a window of opportunity and, after that, we will have others. The windows of opportunities always exist ”either in this year or in 2020, Kalach said.

On Monday, the United States Chamber of Commerce ( AmCham) called on the United States to approve the T-MEC , ensuring that it is a critical moment for the US economy.

Last week, federal government officials such as the secretaries of the Treasury, Arturo Herrera; of Economy, Graciela Márquez; and the Undersecretary of Foreign Trade, Luz María de la Mora, expressed her confidence that the United States Congress will approve the T-MEC.

On Thursday, the undersecretary and trade negotiator for North America, Jesus Seade, announced that he met with the US trade representative, Robert Lighthizer, with whom there was “significant progress,” he wrote on his Twitter account.

“Between Canada and Mexico, these disciplines are already in force by the TPP. In that sense, Mexico has an advantage over the United States, ”said Baker.

What happens if the USMCA “T-MEC” is not ratified?

While the new trade agreement for North America is not ratified, there are two alternatives: that the commercial relationship between Mexico, the United States and Canada be governed by the rules of the North American Free Trade Agreement (NAFTA) or, if the US makes the decision If the agreement goes out that the commercial relationship is regulated by the rules of the International Trade Organization (WTO).

“We must not panic, but if for some reason President Trump – who is completely unpredictable and has had a reputation for making very questionable decisions -, suppose the T-MEC does not happen and, in revenge, the Lord decides to do something against NAFTA 1, how to get out, Mexico has to have an action plan to mobilize allies in the US to make sure that whatever is going to have to be applied at the border is according to what exists in the provisions of the World Trade Organization (WTO), ”said Baker.

It is undeniable that any difference between Democrats and Republicans will make noise in the ratification of the trade agreement, the Mexican government has to insist on the ratification of the T-MEC and protect NAFTA 1.

“As long as we have the original NAFTA, it is still in force and that is the one that governs commercial relations, with a legal solidity between Mexico, the United States and Canada and, therefore, we do not believe that there is a risk of instability for that issue,” Kalach said. .

“Everything Mexico had to do, it already did: the treaty is already signed, the labor reform is already there; We already accomplished everything we had to do and, now we have to be very careful not to let ourselves be influenced by the political noise that happens in the United States, ”he added.

The democratic role

The Democratic Party has pointed out issues related to the labor and trade union part of the T-MEC, as a condition for its ratification. Now, prior to the start of the presidential race in the United States, they may take advantage of this issue as part of the strategy to win votes.

“The T-MEC can be that instrument that they use to demonstrate that, in fact, they can be a responsible opposition and, at the same time that they handle the request for political trial, they can continue making their job,” said Juan Carlos Baker.

“If the Democrats want to play seriously and want to be consistent, and also help their own constituents take them seriously, I think they would have to pass the T-MEC,” added the UP professor.

Analysts and experts agree that, as long as the ratification of the T-MEC is not given, uncertainty for investors and entrepreneurs will continue, however, there is confidence that the trade agreement will be approved.

“In the private sector we have been, we are and will continue in this process until this is well. We have a lot of confidence and we are very optimistic about what we are doing, ”said Moisés Kalach.

Source: expansion.mx

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