Tag Archives: NAFTA

Thousands of Mexicans march to scrap NAFTA, as government fights to save it

Thousands of Mexicans march to scrap NAFTA, as government fights to save it

By Daina Beth Solomon

MEXICO CITY (Reuters) – While Mexican government negotiators fought tooth and nail to save the North American Free Trade Agreement during talks in Washington, thousands of Mexican farmers and workers took to the streets on Wednesday demanding the deal be scrapped.

Carrying banners that read “No to the FTA,” and decorated with images of the distinctive hairstyles of U.S. President Donald Trump and Mexican counterpart Enrique Pena Nieto, the protesters said the 1994 deal had devastated Mexican farms.

“We are against the treaty and the renegotiation because it has not benefited the country,” said university union spokesman Carlos Galindo, reflecting views widely held in the early years of the trade pact.

In a sign of that mistrust, on Jan. 1 1994 the Zapatista guerrilla army launched an armed uprising opposing free trade to mark the first day of NAFTA.

The fervor has faded and most Mexicans, including leading leftist Andres Manuel Lopez Obrador who will run for president next year, now broadly support a deal which has led to job growth, especially in the auto manufacturing sector.

A recent poll found most Mexicans wanted to save NAFTA.

Mexico’s government is keen to maintain preferential access to the United States and Canada, where nearly 85 percent of its exports are shipped.

However, much like in America’s rust belt, Mexico’s small, mainly indigenous farmers have not forgotten painful competition they blame on the free trade deal.

“The great loser in these last 23 years has been Mexico, above all, the small farmers,” said Ernesto Ladron de Guevara, speaking for one peasant farmers union at a park across from Mexico’s Foreign Ministry.

His union is pushing for NAFTA’s fate to face a public vote, possibly to coincide with next year’s July presidential election and, if the deal survives, wants it to exclude anything related to agriculture and food production.

Mexico now imports some $18.5 billion of agriculture products every year, making it one of the most important markets for U.S. farmers.

That makes U.S. rural states key supporters of the pact, making it harder for Trump to follow his declared instinct to rip it up in favor U.S. blue-collar workers who feel jobs have flooded south.

While some Mexican agriculture such as large-scale livestock farms and horticulture has flourished under NAFTA, others, especially small scale grains producers, have found it hard to compete with U.S. imports.

“The effects of the treaty have been negative for the country’s indigenous people,” said Jose Narro Cespedes, a small farmers’ representative.

Other protesters emphasized that Mexico needs to pay attention to itself, rather than outside trade partners.

“We need to focus on the internal economy,” said Galindo. “We’re a sweat-shop country, and the whole world knows it. The only thing we’re doing is exporting.”

 

(Editing by Frank Jack Daniel and Michael Perry)

 

Mexican official says migration, security at stake in NAFTA talks: report

Mexican Economy Minister Ildefonso Guajardo speaks during an interview at Reuters Latin American Investment Summit in Mexico City, Mexico August 8, 2017. REUTERS/Henry Romero

MEXICO CITY (Reuters) – Mexico could pull back on cooperation in migration and security matters if the United States walks away from talks to renegotiate the North American Free Trade Agreement, the Mexican economy minister said in a newspaper report published on Thursday.

Ildefonso Guajardo, who will take part in the first round of NAFTA talks with U.S. and Canadian officials in Washington on Wednesday, told the Reforma daily that new tariffs on Mexican exports to the United States were unacceptable.

“If they do not treat [us] well commercially, they should not expect us to treat them well by containing the migration that comes from other regions of the world and crosses Mexico,” Guajardo said. “Or they should not expect to be treated well in collaboration with security issues in the region.”

Guajardo also said if U.S. President Donald Trump moves to impose tariffs of 35 percent on any Mexican exports, Mexico could respond with “mirror” actions, such as putting an equal tariff on U.S. yellow corn.

In an interview with Reuters this week, Guajardo said he saw a 60 percent probability that the talks would be wrapped up by a soft deadline for year-end.

(Reporting by Veronica Gomez; Editing by Lisa Von Ahn)

U.S. farm lobby turns up heat on Trump team as NAFTA talks near

FILE PHOTO - U.S. Trade Representative Robert Lighthizer speaks during a ceremony at the White House in Washington, U.S. on May 15, 2017. REUTERS/Kevin Lamarque/File Photo

By Richard Cowan

WASHINGTON (Reuters) – With talks to renegotiate the NAFTA trade pact just weeks away, U.S. farm groups and lawmakers from rural states are intensifying lobbying of President Donald Trump’s administration with one central message: leave farming out of it.

Trump blames the North American Free Trade Agreement – the “worst trade deal ever” in his words – for millions of lost manufacturing jobs and promises to tilt it in America’s favor.

But for U.S. farmers the 23-year old pact secures access to stable, lucrative markets in Mexico and Canada that now account for over a quarter of U.S. farm exports. (Graphic: http://tmsnrt.rs/2tNMtlc)

Now they fear this access could become a bargaining chip in efforts to get a better deal for U.S. manufacturers.

“Perhaps some other sectors of our economy are given better terms and in exchange for that agriculture tariffs would be reintroduced,” said Joe Schuele, a spokesman for the U.S. Meat Export Federation in Denver, Colorado.

Another concern is that the mere uncertainty of open-ended trade talks could drive Mexico to alternative suppliers of grains, dairy products, beef and pork.

Mexico became even more crucial after Trump’s pullout from a vast Pacific Rim trade pact negotiated under Barack Obama dashed farmers’ hopes of free access to more markets.

Next week, U.S. Trade Representative Robert Lighthizer is due to outline the administration’s goals for the NAFTA talks to Congress and the farm lobby has turned up the heat in the past weeks to ensure that its interests will make Lighthizer’s list.

Operating under the umbrella of the U.S. Food and Agriculture Dialogue for Trade, more than 130 commodity groups and agribusiness giants since Trump’s inauguration have been bombarding the new administration with phone calls and letters, public comments to USTR and face-to-face meetings with top officials who have Trump’s ear.

“Our first ask is to do no harm,” said Cassandra Kuball, the head of the umbrella group.

Lobbyists said that Lighthizer, Agriculture Secretary Sonny Perdue and Commerce Secretary Wilbur Ross have been receptive, but the wild card is how Trump ultimately will come down on the talks. They also wonder what concessions Mexico will seek from Washington in the talks due to start in mid-August.

Among the groups involved are the American Soybean Association, Corn Refiners Association and National Grain and Feed Association and firms such as Land O’Lakes, Inc., Tyson Foods<TSN.N>, Inc., Louis Dreyfus Company North America, Archer Daniels Midland Co. and others.

For example, U.S. cotton producers, marketers and shippers in mid-June warned the Trump administration that any weakening of NAFTA “would threaten the health of the U.S. industry and the jobs of the 125,000 Americans employed by it.”

QUADRUPLING EXPORTS

Annual U.S. farm exports to Mexico have grown from about $4 billion in 1994, when NAFTA began, to an estimated $18.5 billion this year. With Canada included, that number is forecast to reach $40 billion, quadrupling under NAFTA.

Republican lawmakers from rural states that have backed Trump in the 2016 election have sought to leverage their political clout to press farmers’ case at a time when they struggle with low crop prices.

Pat Roberts, Republican senator from Kansas, who chairs the Senate Agriculture Committee, said he used an unexpected invitation for a private White House meeting with Trump to plug in agriculture’s cause in NAFTA and beyond.

“He (Trump) wanted to know what was happening in farmland,” Roberts said. “I told him we went through a very rough patch and if we did not have a strong, robust, predictable trade policy, it’s going to make life much more difficult in farm country,” Roberts said of the 45-minute meeting in late June.

In May, 18 Republican senators, mainly from pro-Trump farming states, wrote the administration about the “tremendous growth” in U.S. trade with Mexico and Canada as a result of NAFTA.

“Efforts to abandon the agreement or impose unnecessary restrictions on trade with our North American partners will have devastating economic consequences,” they warned.

Trump’s pledges to crack down on immigration and calls for a wall along the border with Mexico also vex farm state lawmakers.

“What I really need is a good, solid immigration system,” South Dakota Republican Senator Mike Rounds said. Given his state’s low unemployment rate of just around 2.8 percent, farmers and ranchers need better access to legal foreign labor, he said.

STORM OVER SUNNY SLOPE

Agriculture Secretary Perdue got a taste of farmers’ angst when met cattle ranchers in Nebraska on May 20. The event was held shortly after Washington agreed with China to resume beef exports, but some 60 ranchers who gathered at U.S. Senator Deb Fischer’s Sunny Slope Ranch quickly turned to NAFTA.

“If the president wants to renegotiate that agreement with our neighbors and partners in Mexico and Canada please leave the ag portion of that discussion out,” said Pete McClymont, executive vice president of Nebraska Cattlemen, summarizing the discussion.

While lobbying in Washington, some Republican lawmakers have also met with Mexico’s ambassador and U.S. farming representatives traveled south to assure their partners unsettled by Trump’s “America First” mantra.

“The common comment is: ‘why are you here? The problem is not with us. The problem is in Washington. Why are you talking to us?'” said Tom Sleight, president and CEO of the U.S. Grains Council. “The new normal is that feed buyers, millers, grain buyers are actively looking at alternative sources,” he said.

It will take months to find out how effective the lobbying was. Meantime, some are willing to give Trump the benefit of the doubt.

Daryl Haack, a corn and soybean farmer from Primghar in northwest Iowa, like others fears retaliation from either Canada or Mexico, but is optimistic it will not come to that.

“I think President Trump is a negotiator,” he said. “I think he runs bluffs. A lot of negotiators will do that.”

(Reporting By Richard Cowan, Additional reporting by Mark Weinraub, Karl Plume and Theopolis Waters in Chicago; Editing by Caren Bohan and Tomasz Janowski)

U.S., Mexico to make statement on Tuesday after sugar talks

A worker looks to sacks filled with sugar at Emiliano Zapata sugar mill in Zacatepec de Hidalgo, in Morelos state, Mexico, March 7, 2015. Picture taken on March 7, 2015. REUTERS/Edgard Garrido

WASHINGTON (Reuters) – U.S. and Mexican officials planned an announcement on sugar trade on Tuesday after talks went into overtime this week as negotiators grappled with last-minute U.S. industry demands.

U.S. Secretary of Commerce Wilbur Ross and Mexican Minister of Economy Ildefonso Guajardo will make an appearance at 1:45 p.m. at the U.S. Chamber of Commerce in Washington, the Commerce Department said in a statement.

Ross on Monday extended the deadline for the negotiations by 24 hours to complete “final technical consultations” for a deal.

Sources on both sides of the dispute said the U.S. sugar industry had added new demands outside of the terms agreed on earlier, despite an agreement that had already been struck between the governments.

An agreement in Washington would help avert stiff U.S. duties and Mexican retaliation on imports of American high-fructose corn syrup before wider trade talks expected in August.

A deal also would end a year of wrangling over Mexican sugar exports. The latest talks began in March, two months after President Donald Trump took office vowing a tougher line on trade to protect U.S. industry and jobs.

They are seen as a precursor to the more complex discussions on the North American Free Trade Agreement between the United States, Mexico and Canada.

(Reporting by Susan Heavey and Doina Chiacu; Editing by Chizu Nomiyama)

Exclusive: U.S.-Mexico sugar deal struck ahead of NAFTA talks; industry divided

By Adriana Barrera and Dave Graham

MEXICO CITY (Reuters) – The U.S. and Mexican governments reached a deal in a dispute over trade in sugar on Monday, sources said, averting steep U.S. duties and Mexican retaliation by Mexico on imports of American high-fructose corn syrup ahead of the renegotiation of NAFTA.

Two sources, speaking on condition of anonymity, said the two sides were working on final details of a deal in Washington that would end a year of wrangling. The latest talks began in March, two months after President Donald Trump took power vowing a tougher line on trade to protect U.S. industry and jobs.

They are seen as a precursor as well as significant hurdle to the more complex discussions on the North American Free Trade Agreement between the United States, Mexico and Canada, which are expected to start in August.

One source said the sugar deal would benefit both the United States and Mexico, with another saying Mexico will agree to export less refined sugar and send a lower quality of crude sugar to the United States than it previously did.

Both sides also would avoid potentially inflammatory tariffs that could have kicked in if a deal was not reached.

Some members of the U.S. sugar industry, however, are not happy with the reported deal and were pressuring the Trump administration to stop it, one source said. Some of their Mexican counterparts also expressed anger at what they see as unfavorable terms.

ICE U.S. domestic raw sugar futures for July delivery finished down 2.9 percent at 27.66 cents per lb, in the largest one-day loss in over a year.

U.S. Commerce Secretary Wilbur Ross came close to hammering out a compromise deal before an earlier deadline in May, but it fell through as the U.S. sugar lobby upped its pressure on U.S. lawmakers, said two sources familiar with the talks.

The powerful lobby includes the politically connected Fanjul family, Imperial Sugar, owned by Louis Dreyfus Co, and U.S. cane and beet growers.

Mexico had free access to the U.S. sugar market under NAFTA, but U.S. sugar refiners accused it of dumping subsidized sugar, undercutting their businesses. In retaliation, the United States slapped large duties on the Mexican sweetener, but a 2014 agreement suspended the tariffs in return for quotas and price floors for Mexican sugar.

The new deal would lower the proportion of refined sugar Mexico can export to the United States to 30 percent of total exports, from 53 percent, one source said. It also cuts the quality of Mexico’s crude sugar exports to 99.2 percent, from 99.5 percent, the source said, tackling a key complaint of U.S. refiners, who said Mexican crude sugar was close to refined and going straight to consumers.

The U.S. sugar market is protected by a complex web of price supports and import quotas, which confection makers and other critics say artificially inflates domestic prices. NAFTA opened the doors to Mexican sugar in 2008.

(Reporting by Adriana Barrera, Dave Graham and Anthony Esposito; Additional reporting by Christine Prentice in New York; Editing by Frank Jack Daniel and Paul Simao)

Mexico growth outlook brightens on exports, tone on NAFTA: official

FILE PHOTO - Trucks wait in a long queue for border customs control to cross into the U.S. at the Otay border crossing in Tijuana, Mexico, February 2, 2017. REUTERS/Jorge Duenes/File photo

MEXICO CITY (Reuters) – The outlook for Mexico’s economy is improving after stronger factory exports in the first quarter and a more optimistic tone on trade talks with the United States, a top finance ministry official said on Monday.

Finance Ministry Chief Economist Luis Madrazo said Mexico’s exports, excluding oil which has been hit by lower production by state-run oil company Pemex, grew 9.2 percent in the first quarter from a year earlier, the strongest pace in more than two years.

“(Factory) exports are now firing on all cylinders, and that is very good for Mexico,” Madrazo told Reuters in a telephone interview.

Mexico exports mostly manufacturing goods, compared to other Latin American economies that produce more raw materials, and it sends nearly 80 percent of its exports to the United States.

The finance ministry revised its official 2017 growth estimate upward on Monday to a range of 1.5 percent to 2.5 percent after data showed the economy was so far shrugging off fears U.S. President Donald Trump’s policies would hit exports and investment.

“The strength and resilience shown by the Mexican economy in the first trimester sharply reduces the likelihood of a slowdown in the second and third trimester,” Madrazo said.

Private sector economists have been revising up their outlook for Mexican growth since the Trump administration began to take a more constructive tone on talks to renegotiate the North American Free Trade Agreement.

Credit rating agency Moody’s late last month affirmed its A3 rating on Mexico’s government debt, but maintained a negative outlook due to lingering risks to Mexico’s economy from new U.S. tariffs under NAFTA revisions.

But Madrazo said the outlook for trade talks had improved since then, following last week’s letter from the Trump administration to the U.S. Congress that puts the countries on track to start talks on NAFTA around mid-August.

“Last week’s notification to Congress gives us a clear, credible signal that we are on the right track with trade negotiations and that should diminish risks from U.S. policy and should be credit positive,” Madrazo said.

(Reporting by Michael O’Boyle; Editing by Jacqueline Wong)

Mexico private sector eyes more NAFTA content in future products

FILE PHOTO - Trucks wait in a long queue for border customs control to cross into the U.S. at the Otay border crossing in Tijuana, Mexico, February 2, 2017. REUTERS/Jorge Duenes/File photo

By Dave Graham

MEXICO CITY (Reuters) – A modernization of the NAFTA trade deal should protect existing industrial supply chains in North America, but could seek to source more work for future products from the member states to help create jobs, a top Mexican negotiator in the process said.

The government of U.S. President Donald Trump on Thursday triggered the process to start renegotiating the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico, which could usher in formal talks by mid-August.

Trump has threatened to jettison the 23-year-old accord if he cannot rework it in favor of the United States, arguing it has gutted U.S. manufacturing by outsourcing jobs to Mexico.

NAFTA’s supporters say the integration of lower-cost Mexico into production chains has safeguarded employment by enabling North America to compete better with Asian and European rivals.

Mexican business leaders say toughening rules that stipulate a certain amount of content must be sourced from North America to qualify for NAFTA certification could be one way of allaying U.S. fears, and pave the way for an agreement on the revamp.

Offering insight into how Mexico may seek to broker a deal, Moises Kalach, a linchpin of the country’s private sector defense of NAFTA, said U.S. business leaders and government officials were increasingly persuaded that existing supply chains should not be disrupted – but that future production lines could be tailored to provide more work for North America.

“Obviously, innovation and technology have been changing the way and even form of how products are made, and there’s an opportunity to have certain products and innovations made with a lot more regional integration, without doing damage to current lines of production,” Kalach, who heads the international negotiating team of Mexico’s Consejo Coordinador Empresarial business lobby, said by phone from Washington.

“This is part of the proposal that we want to put on the table, that we want to push,” Kalach added, speaking after U.S. Trade Representative Robert Lighthizer had kicked off a 90-day consultation process with Congress and others over NAFTA.

Elaborating, Kalach said new products and materials in industries like carmaking and electrodomestic goods – sectors where Mexico runs a sizeable trade surplus with the United States – could be made with higher NAFTA content in the future.

Trump argues Mexico’s surplus with the United States proves that the deal has hurt U.S. industry. Supporters of NAFTA say U.S. consumer demand has fueled the U.S. deficit and point out that the Mexican surplus has fallen since peaking a decade ago.

The deal underpins more than $1 trillion of trilateral trade.

U.S. Trade Representative Lighthizer said in Washington that NAFTA had been successful for U.S. agriculture, investment services and the energy sector, but not manufacturing.

Kalach said after Thursday’s announcements it was still unclear exactly what the United States would seek in the renegotiation.

Thomas Donohue, head of the U.S. Chamber of Commerce, said in a statement on Thursday that the NAFTA renegotiation should do “no harm”, and urged leaders to move quickly to avoid crimping investment and overly politicizing the talks.

(Editing by Frank Jack Daniel and Lisa Shumaker)

NAFTA demise fears fade as U.S. firms committed to Mexico: lobby

Frederic Garcia, president of the Executive Council of Global Companies (CEEG), gestures during an interview with Reuters in Mexico City, Mexico May 17, 2017. REUTERS/Carlos Jasso

By Dave Graham and Ana Isabel Martinez

MEXICO CITY (Reuters) – Companies no longer fear the North American Trade Agreement (NAFTA) will collapse and top U.S. multinationals in Mexico are committed to investing in the country going forward, the head of a global business lobby said on Wednesday.

Frederic Garcia, President of Mexico’s Executive Council of Global Companies (CEEG), said preparations to renegotiate NAFTA and growing awareness of the accord’s economic benefits had all but put an end to fears that the deal would be scrapped.

“There was a moment where the probability, or the perception that NAFTA would end, was very strong,” Garcia said in an interview in Mexico City. “But today I think there’s an awareness that it will continue. The big worry that the deal could come to an end is an issue that’s behind us.”

The CEEG represents a host of multinationals in Mexico including AT&T Inc <T.N>, Coca-Cola Co <K.O>, General Motors Co <GM.N>, Microsoft Corp <MSFT.O>, Exxon Mobil Corp <XOM.N>, Nestle, HSBC, Siemens and IBM Corp <IBM.N>, which it says account for around 40 percent of total foreign direct investment.

It and other business associations have been active in extolling the benefits of NAFTA to Americans to counter threats by U.S. President Donald Trump to dump the 23 year-old accord that binds the United States, Mexico and Canada.

Mexico’s Economy Minister Ildefonso Guajardo said on Tuesday he expected the U.S. government to notify Congress early next week of plans to rework the accord, yielding talks by late August.

It was not yet clear how NAFTA would be revamped, but if Mexico’s efforts to update its free trade deal with the European Union proved instructive, it could include provisions to boost corporate compliance and adherence to the law, Garcia said.

Trump said last month he was ready to renegotiate NAFTA with Mexico and Canada, though since taking the presidency in January he also has maintained that the United States could withdraw from the agreement if talks did not work in favor of his homeland.

Arguing the accord has destroyed U.S. jobs, Trump has menaced multinationals manufacturing in Mexico with punitive tariffs, and his threats to quit NAFTA. This sent the peso to a record low in January.

Earlier that month Ford abruptly canceled a $1.6 billion plant in central Mexico following verbal attacks by Trump. But as the rhetoric from the White House began to moderate, the peso has recovered somewhat, and fears for NAFTA’s future have eased.

Last week, a Mexican business lobby said it expected investment to drop slightly this year due to uncertainty over Trump, but Garcia said the CEEG would make no forecasts over projected outlays to avoid drawing attention to the matter.

“As far as the U.S. firms in the CEEG go, from the first day of the new U.S. administration they’ve stated their great interest to continue operating in Mexico (and) their great interest to continue investing in Mexico,” he said.

However, they had done so in such a way as to preserve their interests with the U.S. administration, Garcia added.

(Editing by Diane Craft)

In blow to Trump, GE backs NAFTA and voices support for Mexico

Mexico's President Enrique Pena Nieto smiles with Jeffrey R. Immelt, Chief Executive of General Electric at Los Pinos presidential residence in Mexico City, in this undated handout photo released to Reuters by the Mexican Presidency on May 12, 2017. Mexico Presidency/Handout via REUTERS

By Dave Graham

MONTERREY, Mexico (Reuters) – General Electric <GE.N> on Friday praised Mexico as a big part of its future and said the company is “very supportive” of the North American Free Trade Agreement (NAFTA) that U.S President Donald Trump has threatened to ditch.

GE Chief Executive Officer Jeff Immelt said on a visit that Mexico had great potential and was not properly understood. He touted the conglomerate’s Mexican operations and the trade deal binding Mexico, Canada and the United States.

“GE as a company, we’re very supportive of NAFTA,” Immelt told employees at an event to mark the expansion of operations in the northern city of Monterrey. He said the trade accord could be modernized, as Mexico has argued.

Immelt sits on a Trump-appointed manufacturing council that Mexico has targeted for lobbying as Mexico and Canada push U.S. business leaders to defend NAFTA.

The GE boss said trade meant “win-win” opportunities across North America.

“We will continue to work constructively in the context of wanting to see a close relationship between the U.S. and Mexico,” he said, noting that GE’s exports to the rest of the world from Mexico were worth $3 billion.

“We’re optimistic about Mexico, we’re optimistic about what we can do here,” Immelt added, saying Latin America’s no. 2 economy would be a “big part” of GE’s future.

Earlier this month, Immelt urged the Trump administration to avoid protectionist policies, calling on it to level the playing field for U.S. companies with tax reform, revived export financing and improved trade agreements.

Trump touts a “Buy American” policy and has railed against U.S. companies moving operations to Mexico. He has threatened to ditch NAFTA, a lynchpin of the Mexican economy, if he cannot rework it to secure better terms for the United States.

Unlike some U.S. companies, GE has not backed off plans in Mexico, risking broadsides from Trump on Twitter.

Earlier, the Mexican presidency said in a statement that GE had stated an interest in doubling purchases from Mexican suppliers next year. Immelt did not mention this.

Vladimiro de la Mora, CEO for Mexico, said the figure came from an announcement last year and did not mean GE aimed to double purchases between this year and 2018.

On Thursday, GE said it had won a contract to provide plants producing two new gigawatts of power in Mexico and secured a separate $120 million, multi-year service deal.

De la Mora said GE could not yet reveal details of the 2 GW deal, but it was “likely” the value of the total investment in the power plants would exceed $500 million.

(Reporting by Dave Graham in Monterrey, Additional Reporting by Mexico newsroom in Mexico City; editing by Grant McCool and David Gregorio)

Mexico presses Trump to uphold NAFTA for good of both nations

U.S. President Donald Trump arrives aboard Air Force One at JFK International Airport in New York, U.S. May 4, 2017. REUTERS/Jonathan Ernst

MEXICO CITY (Reuters) – Mexico made a pitch to U.S. President Donald Trump on Wednesday to uphold the NAFTA trade deal, arguing that unwinding economic integration would hurt both nations, damaging U.S. exports, risking American jobs and hitting consumers north of the border.

Responding to a March 31 executive order by Trump for a review of the U.S. trade deficit, Mexico said its trade surplus with the United States was misunderstood and that the real hit to U.S. manufacturing jobs came with China’s accession to the World Trade Organization (WTO) in 2001.

Last year’s U.S. deficit with Mexico of $63.2 billion also reflected a weak peso after it was battered by uncertainty over the future of bilateral trade relations, according to a document published by the Mexican Embassy in Washington.

“The increasing integration of our economies makes Mexico critically important to the U.S. economy, not only as an export market, but also as a partner in production,” the director of the embassy’s trade and NAFTA office, Kenneth Smith, wrote.

Mexico was responding to the U.S. Commerce Department’s request for public input as it prepares a report for Trump on the United States’ $500 billion annual trade deficit. The report and public comments will be sent to Trump in June.

Mexico said that, without NAFTA, the average tariff on Mexican exports to the United States would be 3.5 percent, or about half the average tariff on U.S. exports to Mexico, because of the “most favored nation” clause that would apply under WTO rules.

U.S.-Mexican trade relations have been strained by Trump’s repeated vow to scrap the North American Free Trade Agreement if he cannot secure better terms for U.S. workers and industry.

Trump has cited the U.S. trade deficit with Mexico as proof that the United States was the loser in the relationship, saying the Americans would be better off if the two nations did not trade at all.

However, Mexico said 75 percent of its exports to the United States are inputs in U.S. production processes and that the United States has an $8 billion surplus in services.

“Workers on both sides of the border work together in the production of goods to successfully compete in global markets,” Smith said.

The U.S. energy industry also relies on exports to Mexico, which is now the biggest export market for U.S. refined oil products and natural gas, Smith said.

(Reporting By Frank Jack Daniel, Writing by Dave Graham and Mitra Taj)