Last June 19, the Mexican Senate ratified, as expected, the new North American Free Trade Agreement, now called simply USMCA, or the US Mexico Canada Agreement.
Not surprisingly, Donald Trump congratulated Mexican President Andrés Manuel López Obrador for what is considered a historical achievement, taking the opportunity to call on the U.S. Congress to follow a similar path.
In Canada, USMCA is under consideration by the country’s parliament and it may be ratified in the weeks to come, long before the general elections scheduled for October.
Thus, one out of three of the USMCA participants has paved the way and Canada may soon follow. But the winding and longest road may be on Capitol Hill.
Despite that, passing USMCA is a very important step for Mexico for a number of reasons. First of all, USMCA ratification took place just 12 days after Mexico and the U.S. reached an agreement to prevent Washington from imposing a five percent tariff against Mexico’s exports.
As is well known, Donald Trump planned on punishing Mexico for “doing nothing” to stop undocumented migration, since, according to him, hundreds and even thousands of migrants heading north pass through Mexico just to reach the U.S. territory. Thus, Trump mixed migration and trade, something highly unusual in Mexico-U.S. relations, since the two agendas have been traditionally negotiated on specific and independent tracks.
By ratifying USMCA, Mexico has reminded Trump that trade, as complex and dynamic as it is, needs to be addressed for its commercial and investment dimensions. It is dangerous to lump everything together. No need to include migration, unless, of course, the two countries decide to move ahead from free trade so that a North American common market – with labor mobility included – is built. Until then, migration should stay where it is.
Secondly, USMCA ratification by the Mexican Senate sends positive messages to international markets and business communities. The first six months of the López Obrador Administration have not satisfied the international markets, nervous at the decision of the Mexican Government to cancel the new Mexico City International Airport construction, and unsatisfied with the proposed financial restructuring of Petróleos Mexicanos (PEMEX), the national oil company – mostly because the government favors the creation of new refineries instead of the more attractive exploration and exploitation activities which clearly interest foreign investors. USMCA ratification means that Mexico is very much eager to be an important actor in a globalized world, playing by its rules.
Third, the passing of USMCA comes at a moment when López Obrador has been heavily criticized for not traveling abroad and for a perceived lacking interest in international relations. His record is impressive by any standard: not a single trip! He did not participate at the World Economic Summit in Davos, last January. He has not visited Central American countries, with whom migration issues are increasingly dominating the agenda and becoming a major problem in Mexico-U.S. relations. More recently, López Obrador said he will not be attending the G20 Summit in Osaka at the end of this month. Even the Japanese Government, which hosts the event, considers “very unfortunate” the absence of the Mexican President from the Summit. Yet, thanks to USMCA passing, López Obrador may argue that things are on track, that he cares about the world.
Fourth, USMCA has provided López Obrador’s Cabinet members with a strong reason of demonstrating unity at a time when tensions have surfaced, especially between the Ministry of Foreign Relations and the Ministry of the Interior, with concerns from the later against the Foreign Minister’s management of migration issues. Thanks to USMCA, it is trade now that’s taking the lead, at a time when the Foreign Minister is in New York to discuss with the United Nations’ Secretary General the Mexican strategy to cope with the migration challenge; whereas the Ministry of the Interior is sealing the Southern border.
Yes, USMCA is seen as a blessing at a very difficult time in Mexican-U.S. relations. Yet, there’s the need for Mexico to avoid claiming victory too early. There are some dark clouds on the horizon. First and most important, USMCA has not come into force and it may take a lot of effort and time from the Trump Administration – and Mexican lobbyists in the U.S. – to have it passed, especially in the House of Representatives. Time is critical due to the forthcoming U.S. presidential elections -just the very same day that USMCA was passed by Mexico, Trump officially announced in Texas that he will be running for reelection. The Mexican Government does not seem to have a “B plan” in case USMCA is not passed by the U.S. Congress and the current NAFTA ceases to exist.
Second, there are specific issues that may contribute to a very quick deterioration of trade relations between the two countries, unless they are properly addressed as soon as possible. For example, although the aluminum and steel barriers imposed against U.S. trade partners – Mexico and Canada included – came to an end for the two North American countries a couple of weeks ago, some technical work is required for the dismantling of these barriers. Then comes the tomato crisis, an issue that’s hurting Mexican producers since the U.S. market has always been the main destination.
Third, the dominance of the U.S. in Mexican foreign policy is clear. Not even Canada, the other partner within the USMCA, is on Mexico’s radar. Canadians, by the way, have had hard feelings for Mexico since August 2018, when USMCA negotiations concluded between Mexico and the U.S. with Canada excluded. This was despite the fact that, at the beginning of the process, back in August 2017, Mexico and Canada stated that they would be joining forces during the negotiations. The Trudeau Government feels Mexico betrayed this initial promise, and the López Obrador Administration has not approached Canada to heal the wounds. That said, Mexico looks very lonely in the world: it had to face by itself the most recent Trump’s threats on tariffs and the migration crisis. No government, no international organization supported Mexico. Thus, there’s the need for Mexico to look beyond the U.S.
Fourth, the ghost of the tariffs invoked by Trump through the International Emergency Economic Power Act is still there. If, after the 45-day period stated by Trump, the U.S. president considers that Mexico has done little or nothing to stop migration into the U.S., then tariffs will be applied against Mexican exports to the U.S. market. What would Mexico do in such a case? Despite the fact that, in all probability, Trump’s tariffs are illegal since the mentioned legislation deals mostly with sanctions against countries considered “enemies” of the United States, a simple threat was enough for Mexico to comply with Trump’s will. But as the former U.S. Ambassador to Mexico, Roberta Jacobson, recently explained during an interview with the BBC, it won’t be possible for Mexico to say yes to Trump every time he carries a stick.
At some point, it may be necessary for Mexico to say no to Trump, not only because his rhetoric is insulting. For a long time Mexico has done the dirty work the U.S. needed – say, by fighting drug lords and organized crime at a very high cost for Mexican society, and without getting much credit for doing so. The almost defunct Merida Initiative has relied mostly on Mexican human and material resources to fight organized crime. Now Mexico is asked, again, to do the dirty work, this time on migration, by compromising the much needed economic resources that López Obrador promised Mexicans to improve their standards of living. Not only that: the new Mexican National Guard, created to fight drug-crime related activities, now is chasing migrants. Is the Trump Administration considering a sort of Merida Initiative in dealing with migration issues? Will Mexico again contribute, almost alone – as it is the case in the war against drugs – to face migration with its own material and human resources? Needless to say a poorer and more insecure Mexico is not good news for Trump. Neither for America.