Mexico’s incoming trade chief says the new trilateral trade pact with the United States and Canada is far from a done deal, and that she is concerned it will not be passed in the U.S. Congress, given the fraught state of the country’s domestic politics.
“It’s still a big ‘if’ in terms of the [midterm] election in the U.S.,” said Luz Maria de la Mora, who will handle the trade portfolio for Andres Manuel Lopez-Obrador once he takes office as Mexico’s president on Dec. 1. “And we know that this is going to fall into the trap of domestic politics in the U.S. I think we have a lot to worry about. We’re going to see NAFTA and Mexico coming into play in terms of the politics of Democrats versus Republicans and [President Donald] Trump."
A provisional text of the rebranded U.S.-Mexico-Canada Agreement (USMCA) was reached on Sept. 30 and must be approved by the legislatures in all three countries to supersede the current North American free-trade agreement. Passage in Canada’s parliamentary system is secure; Mexico’s current and incoming governments are ideologically opposed on many issues, but have been unanimous in their endorsement of the tentative trade deal.
But there are growing concerns in Mexico – and elsewhere – that approval of the agreement in the United States is far from certain, and will not be fast.
Should Republicans retain control of both houses of the U.S. Congress in November, the agreement stands a reasonable chance of passage, Ms. De La Mora said – but should Democrats make gains, “we will be used as a chip in the negotiations. … Democrats are not fans of trade, and they’re not fans of the NAFTA agenda or the U.S.-Mexico-Canada agenda.”
“As a matter of principle, I think it is going to be difficult for Democrats to just hand a victory to Trump,” she added. “Politically speaking, it will be very difficult to say, ‘Oh, yeah, President Trump did a fantastic job of renegotiating NAFTA.’”
Democrats may be concerned the deal would offer dispute-settlement protection for U.S. investors in some but not all manufacturing sectors in Mexico or Canada, she said.
“We don’t know how the process will go or if there’s going to be something else that the U.S. is going to want to get from this negotiation,” said Ms. De La Mora, a political scientist and trade expert who was part of the NAFTA negotiations team for Mexico in the early 1990s. “I don’t know how much President Trump will be able to exert pressure on Democrats to say, ‘Okay, This is the deal. This is a done deal and we will not go back to the table.’" She said she worries that if the Democrats reject USMCA, Mr. Trump could pull his country out of NAFTA and blame them.
Ms. De la Mora is not alone in her concerns. Antonio Ortiz-Mena, a former head of economic affairs at the Mexican embassy in Washington, said neither a Republican nor a Democrat advantage guarantees the deal will pass: Republicans' traditional pro-free-trade view has evaporated in the Trump era. “If the Democrats manage to get control of the House, they will be in a bind – they will not want to give a legislative victory to Trump, but interestingly the labour provisions in new agreement are pretty deep and enforceable.”
Mr. Ortiz-Mena, who is now a senior vice-president at the Washington-based business strategy firm Albright Stonebridge Group, predicted the agreement will be ratified “but not without a lot of sound and fury – it will be a protracted and painful delivery.”
Daniel Ujczo, an Ohio-based trade lawyer, estimated that USMCA is already 85 to 100 votes short of a congressional majority, and the calculus will get more complicated if Democrats gain seats. He said Democrats might want to put their own stamp on the deal, such as having the three countries negotiate tougher environmental or labour side-letters, as they did in 1993 after a Democratic president replaced a Republican one before NAFTA was ratified.
Mr. Trump could also terminate NAFTA to force Congress’s hand. “The wild card in all of this is the patience of the President,” Mr. Ujczo said.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, described a plausible scenario in which a Democrat-controlled Congress focuses on investigating or impeaching Mr. Trump rather than approving his trade deal.
“Confirming Donald Trump’s trade success centrepiece is going to probably be a loathsome event for a House that is going to be focused on moving away from his leadership,” he said. “In that environment, do you confirm the guy’s greatest public triumph? Maybe. But you’re not likely to do it on Day 1 and without extracting something else in return.”
Canada-based makers of auto parts cheered the USMCA because its rules would favour domestic manufacturers, including a requirement that a car’s main components be 75-per-cent made in North America, and Mr. Volpe fears for those gains. “I’m worried that after a year and half of negotiations and uncertainty, while we put the [USMCA] negotiations to bed, the benefit of all that sacrifice might be pushed off further into the future,” he said.