Andrés Manuel López Obrador’s success in the Mexican presidential election Sunday could pose profound implications for renegotiating the North American Free Trade Agreement (NAFTA).
President Donald Trump has been reworking the massive trade deal with partner countries Canada and Mexico, as part of his promise to ensure that trade prioritizes domestic workers. But the talks have been tense, with the recent election of Obrador adding another level of complexity.
Obrador was highly critical of NAFTA as he worked to unseat President Enrique Peña Nieto. Obrador is a bit like Trump in that he is an economic nationalist who promises to put his country first on trade deals.
But after winning the election, he told Milenio TV he would respect the ongoing talks, with the aim of forging a deal that is good for Mexico.
“The results of the Mexican presidential election may further complicate already tenuous NAFTA negotiations,” Jacqueline Varas, the director of immigration and trade policy at the center-right American Action Forum, told LifeZette.
“While Obrador indicated after his win that he is committed to preserving NAFTA, he has expressed skepticism toward the agreement in the past and a willingness to abandon it if favorable terms are not met. This would be exceedingly harmful for the U.S. economy.”
The American Action Forum found in a report on December 11 that outright withdrawal from NAFTA would cost United States consumers and businesses up to $7 billion annually in increased prices, and could also jeopardize 14 million jobs and threaten nearly $1 trillion in North American trade.
“Politics in both the United States and Mexico will inevitably impact the outcome of these negotiations,” Varas said. “However, the economic benefits for all three nations in North America, including job creation, supply chain integration, expanded market access, and consumer savings, is more significant than any potential political considerations.”
Obrador’s nationalist bent could help America in some regards. Trump has proposed requiring automobile parts from Mexico come from plants paying workers higher wages, to discourage companies from outsourcing jobs for cheaper labor.
“The Mexican president-elect and President Trump share an interest in raising labor standards in Mexico,” Vanderbilt University Law School professor Tim Meyer told LifeZette. “One of the United States’ creative proposals to break a logjam in negotiations on rules of origin for autos had been to require that auto parts made in Mexico come from areas with higher minimum wages. The incoming Mexican government might well be more receptive to that proposal, which would clear what might be the biggest hurdle in the negotiations as far as Mexico is concerned.”
The issue would then come down to timing, with the current Mexican government still in place until December 1. Mexico has not been friendly toward Trump’s auto parts idea. The United States has a midterm election beforehand, too, which could completely change the political calculation to get a revised trade deal through Congress.
“The outgoing government has resisted the United States’ proposals on autos, as well as other issues such as investor-state dispute settlement and a sunset,” Meyer said. “Given the lame-duck government in Mexico and the fact that any revised NAFTA would have to be considered in 2019 by the U.S. Congress elected in November, it would not surprise me if negotiations continue at a slow pace.”
Meyer adds that, although the United States has continued to push for faster negotiations, Mexico and Canada have resisted. He questions whether negotiations will accelerate noticeably, although the Mexican election removes some uncertainty.
The Trade Promotion Authority (TPA) is another consideration on timing since it can expire, making it harder to get a deal approved. The TPA gives the president room to negotiate a deal that will be fast-tracked through the Congress for a simple up or down vote without amendments.
The Trump administration has already missed TPA deadlines, including one on Sunday. U.S. Trade Representative Robert Lighthizer announced Monday that Congress has extended the deadline.