Mexico vows it won't cut a separate trade deal with Trump

Mexican officials went out of their way yesterday to tell their Canadian counterparts not to read anything intothe fact that their trade negotiators and the Americans are meeting bilaterally in Washington on Friday that the new government in Mexico City isn't planning to cut a separate deal with the U.S. outside of NAFTA.

"The fact that this time we're going to Washington for a bilateral is just a sequence of things," saidMexico's Secretary of the EconomyIldefonsoGuajardo, who handles theNAFTAfile. He addedthat the Canadianand American negotiating teams also often hold two-way talks, and Friday's bilateral isn't an indication that Canada could be left out in the cold.

"It's just a method, not a direction,"Guajardocontinued. "We're not moving in the direction of a bilateral agreement. We still want a trilateralNAFTA."

In a joint news conference with his Canadian counterpart Chrystia Freelandyesterday, Mexico's Foreign Minister Luis Videgaray insisted that "we will be closing ranks with Canada For us, NAFTA is a trilateral agreement."

The statement came in response tospeculation prompted by a series of public claims by U.S. President Donald Trump that the U.S. and Mexico would make a separate two-way trade deal to replace NAFTA.

Trump seemed to reference those claims yesterday as he met with the EU's Jean-Claude Juncker in the White House, when he remarked that "we're doing very well with Mexico."

Mexican officials maintain that any negotiations on a two-way trade deal between Mexico and the U.S. remain a figment of the U.S. president's imagination.

A Mexican government official speaking on background to CBC said his government was frustrated by the fact that storiesgiving credence to those claims had circulated in Canadian media.

"I don't know how it even got started," he said, adding that the Mexican government had given no such signals.

Transition going smoothly

One of the reasons for the talks being held Friday is to introduce the members of the incoming Mexican government to their Washington counterparts.

One of them tapped to take over from Guajardo as the head of the NAFTAteam needs no introduction. Jesus Seade Kuri is a respected economist who has known U.S. Trade Representative Robert Lighthizer personally for many years, since Seade Kuri's time as an ambassador and deputy director at the World Trade Organization.

Like his brother, a well-known mathematician and academic, Seade Kuri holds a doctorate from Oxford.

In a radio interview on Tuesday, Seade Kuriexpressed optimismabout reaching a three-way NAFTA deal in the near future. "A very feasible expectation is that we'll be concluding the negotiation in the next two months if possible, or if not, a few months further down the road."

He also dismissed Trump's talk of a bilateral deal with Mexico as mere posturing.

"It would be a legislative commotion, a horrible argument that would last a year and cost him a lot politically," he said. "I don't think it's going to happen."

Seade Kuriwon't be the only incoming official accompanying Guajardo and Videgaray to Washington. Each man is also bringing along the personwaiting in the wings to replace him when the new Mexican government takes power on December 1.

The incoming foreign minister is Marcelo Ebrard, who like his leader, President-elect Andres Manuel Lopez Obrador was mayor of Mexico City, and a very successful one. Guajardo will be replaced by Graciela Marquez Colin, an economic historian with a PhD from Harvard.

A cabinet designed to reassure

Fears that Lopez Obrador's election would trigger a run on the Mexican peso did not materialize, and Mexico's private sector has been notably sanguine about the political ascent ofa man who once provoked fears of confiscation and nationalization.

That's partly because he selected a cabinet of competent technocrats, with few posts going to militants of his own MORENA (Moviemiento de Regeneracin Nacional) party.

The cabinet picks include a number of academics. While some, including Marquez Colin, lack executive experience, most are respected experts in their fields.

The youngest member of the cabinet and one of the few with strong left-wing activistcredentials is Luisa Maria Alcalde, a 30-year-old Berkeley graduate who will take over the Labour and Welfare portfolio. She has pledged to help young people find work and supports increasing the minimum wage. Boosting wages in Mexico particularly in the auto sector is a key goal of both U.S. and Canadian trade negotiators.

Another important NAFTA player is Canadian-educated Victor Villalobos, who takes over at Agriculture, Fisheries and Food. Grains, meat, fruits and vegetables are important articles of trade between the three NAFTA members and can be among the most contentious.

Marco Antonio Fernandez, a professor at the School of Government of Tecnologico de Monterrey, says the cabinet-in-waiting has created a good first impression by making clear it will stay the course in the NAFTA talks.

"The doubt I have is about what they have in mind as a Plan B if the talks fail," he says. "It would be a total mistake to open the door to a bilateral deal with the Trump administration."

Fernandez says Trump sent a "flattering" letter to Lopez Obrador congratulating him on his huge margin of victory, but the letter also contained a threat. It said that a successful NAFTA renegotiation could bring benefits to both countries, "but only if it can go quickly, because otherwise I must go a much different route."

"I hope the new cabinet will continue the dialogue, but cannot be rushed and should not feel subject to any threat," said Fernandez. "I want to see that Marcelo Ebrard (who showed the Trump letter to the Mexican media) understands that."

Lopez Obrador, often seen as a firebrand and provocateur in the past, has shown a cooperative attitude toward the outgoing government, pledging to support it in ongoing NAFTA talks and speaking favourably about its approach.

He's also committed to respecting any NAFTA deal the PeaNieto government reaches during the transition period. That concession probably increases the chances of a deal emerging by the fall.

Luis Videgaray said that outgoing ministers "have been given strict instructions to collaborate closely with the team of President-elect Lopez Obrador. That is for the good of Mexico, not only so that the transition will be orderly and efficient, but also so that Mexico can present a common front to the world, and particularly to the government of the United States."

Foreign Minister Freeland also was sounding a positive note yesterdayabout her first encounter with the president-elect and his team. The Canadians, she said in a conference call after the meeting, wanted to know "where this government which has a very strong mandate was when it comes to NAFTA. We have a clear understanding now.

"I'm hopeful to move NAFTAtalks back into high gear now that we're past the Mexican elections."

The dreaded auto tariff

The Mexican and Canadian ministers used almost identical language to condemn a proposed 25 per centU.S. tariff on vehicles from the two countries. Both Guajardo and Freeland said NAFTA negotiators were close to agreement on new rules of origin for cars and car parts, and that the changes would entail a shift to a new business model for carmakers.

Referencing the U.S. proposal to add a five-year sunset clause toNAFTA, Guajardo said "we can't ask the automobile industry to invent a new industry and at the same time, tell them this may all change in five years."

Guajardo added that he was optimistic that the U.S. won't impose the tariffs, saying he was encouraged by the fact that the American auto industry roundly condemned the proposal in recent hearings.

"There was practically no one who spoke out in support of this measure in public testimony. Ninety-nine per cent of those who expressed themselves were against. That wasn't the case with the hearings on the steel and aluminum tariffs."

If the tariffs go ahead, Videgaray said, "we're going to respond as we have throughout this negotiation. First of all, we'll do it through a professional team of negotiators, and with seriousness, and not through the media.

"Secondly, we'll do it in the closest coordination with our Canadian colleagues."