Tag Archives: NAFTA

Mexico, Canada seek U.S. soft spots to bolster NAFTA defense

FILE PHOTO: Canada's Prime Minister Justin Trudeau (R) and Mexico's President Enrique Pena Nieto arrive at a news conference on Parliament Hill in Ottawa, Ontario, Canada on June 28, 2016. REUTERS/Chris Wattie/File Photo

By Dave Graham and David Ljunggren

MEXICO CITY/OTTAWA (Reuters) – From launching a data-mining drive aiming to find supply-chain pressure points to sending officials to mobilize allies in key U.S. states, Mexico and Canada are bolstering their defenses of a regional trade pact President Donald Trump vows to rewrite.

Trump has blamed the North American Free Trade Agreement (NAFTA) for the loss of millions of manufacturing jobs and has threatened to tear it up if he fails to get a better deal.

Fearing the massive disruptions a U.S. pullout could cause, the United States’ neighbors and two biggest export markets have focused on sectors most exposed to a breakdown in free trade and with the political clout to influence Washington.

That encompasses many of the states that swept Trump to power in November and senior politicians such as Vice President Mike Pence, a former Indiana governor or Wisconsin representative and House Speaker Paul Ryan.

Prominent CEOs on Trump’s business councils are also key targets, according to people familiar with the lobbying push.

Mexico, for example, has picked out the governors of Texas, Arizona and Indiana as potential allies.

Decision makers in Michigan, North Carolina, Minnesota, Illinois, Tennessee, Wisconsin, Ohio, Florida, Pennsylvania, Nebraska, California and New Mexico are also on Mexico’s priority list, according to people involved in talks.

Mexican and U.S. officials and executives have had “hundreds” of meetings since Trump took office, said Moises Kalach, foreign trade chief of the Mexican private sector team leading the defense of NAFTA. (Graphic:http://tmsnrt.rs/2oYClp2)

Canada has drawn up a list of 11 U.S. states, largely overlapping with Mexico’s targets, that stand to lose the most if the trade pact enacted in 1994 unravels.

To identify potential allies among U.S. companies and industries, Mexican business lobby Consejo Coordinador Empresarial (CCE) recruited IQOM, a consultancy led by former NAFTA negotiators Herminio Blanco and Jaime Zabludovsky.

In one case, the analysis found that in Indiana, one type of engine made up about a fifth of the state’s $5 billion exports to Mexico. Kalach’s team identified one local supplier of the product and put it touch with its main Mexican client.

“We said: talk to the governor, talk to the members of congress, talk to your ex-governor, Vice President Pence, and explain that if this goes wrong, the company is done,” Kalach said. He declined to reveal the name of the company and Reuters could not immediately verify its identity.

Trump rattled the two nations last week when his administration said he was considering an executive order to withdraw from the trade pact, which has been in force since 1994. He later said he would try to renegotiate the deal first and Kalach said the lobbying effort deserved much credit for Trump’s u-turn.

“There was huge mobilization,” he said. “I can tell you the phone did not stop ringing in (Commerce Secretary Wilbur) Ross’s office. It did not stop ringing in (National Economic Council Director) Gary Cohn’s office, in the office of (White House Chief of Staff Reince) Priebus. The visits to the White House from pro-NAFTA allies did not stop all afternoon.”

Among those calling the White House and other senior administration officials were U.S. Chamber of Commerce chief Tom Donohue, officials from the Business Roundtable and CEOs from both lobbies, according to people familiar with the discussions.

PRIME TARGET

Mexico has been the prime target of NAFTA critics, who blame it for lost manufacturing jobs and widening U.S. trade deficits. Canada had managed to keep a lower profile, concentrating on seeking U.S. allies in case of an open conflict.

That changed in late April when the Trump administration attacked Ottawa over support for dairy farmers and slapped preliminary duties on softwood lumber imports.

Despite an apparently weaker position – Canada and Mexico jointly absorb about a third of U.S. exports, but rely on U.S. demand for three quarters of their own – the two have managed to even up the odds in the past by exploiting certain weak spots.

When Washington clashed with Ottawa in 2013 over meat-labeling rules, Canada retaliated by targeting exports from the states of key U.S. legislators. A similar policy is again under consideration.

Mexico is taking a leaf out of a 2011 trucking dispute to identify U.S. interests that are most exposed, such as $2.3 billion of yellow corn exports.

Mexico is also targeting members of Trump advisory bodies, the Strategic and Policy Forum and the Manufacturing Council, led by Blackstone Group LP’s Stephen Schwarzman and Dow Chemical Co boss Andrew Liveris respectively.

Senior Trump administration officials and Republican lawmakers in charge of trade, agriculture and finance committees also feature among top lobbying targets.

Canada has spread the task of lobbying the United States among ministries, official say, and is particularly keen to avoid disruption to the highly-integrated auto industry.

A core component of Mexico’s strategy is to argue the three nations have a common interest in fending off Asian competition and exploring scope to source more content regionally.

The defenders of NAFTA also say that it supports millions of jobs in the United States, and point out that U.S. trade shortfalls with Canada and Mexico have declined over the past decade even as the deficit with China continued to climb.

Part of IQOM’s mission is to identify sectors where NAFTA rules of origin could be modified to increase regional content.

For example, U.S., Canadian and Mexican officials are debating how the NAFTA region can reduce auto parts imports from China, Japan, South Korea or Germany, Mexican officials say.

“The key thing is to see how we can get a win-win on the products most used in our countries, and to develop common manufacturing platforms that allow us just to buy between ourselves the biggest amount of inputs we need,” said Luis Aguirre, vice-president of Mexican industry group Concamin.

Graphic: Trade battles – http://tmsnrt.rs/2pAdPcp

(Additional reporting by Michael O’Boyle Alexandra Alper, Ana Isabel Martinez, Ginger Gibson and Adriana Barrera; Editing by Tomasz Janowski)

U.S. coaxes Mexico into Trump plan to overhaul Central America

A member of the military police keeps watch during a routine foot patrol at El Pedregal neighbourhood Tegucigalpa, Honduras, May 3, 2017. REUTERS/Jorge Cabrera

By Gabriel Stargardter

MEXICO CITY (Reuters) – The United States is plotting an ambitious attempt to shore up Central America, with the administration of President Donald Trump pressing Mexico to do more to stem the flow of migrants fleeing violence and poverty in the region, U.S. and Mexican officials say.

The U.S. vision is being shaped by Department of Homeland Security (DHS) Secretary John Kelly, who is due to give a speech about his goals for Central America in Washington on Thursday.

Kelly, who knows Honduras, Guatemala and El Salvador well from his time as chief of the U.S. Southern Command, helped the administration of former President Barack Obama design his Alliance for Prosperity. That $750-million initiative sought to curtail Central American migration through development projects as well as law-and-order funding to crack down on the region’s dominant gangs.

Kelly aims to re-tool the Obama-era alliance without a large increase in American funding by pressing Mexico to shoulder more responsibility for governance and security in Central America, and by drumming up fresh private investment for the region, U.S. and Mexican diplomats say.

“What we’re going to see is … greater engagement directly between the Central Americans and Mexican government … (and) a more intense effort to integrate the economic side of this effort with the security side,” William Brownfield, the U.S. assistant secretary for International Narcotics and Law Enforcement Affairs, told Reuters.

“We’re going to see a strategy that has already been developed, but it is going to be pushed harder and more aggressively in the coming year, and the year after.”

The reshaped alliance stands in contrast to some of the isolationist views jostling for power in the White House. Still it’s consistent with Trump’s foreign policy efforts to pressure China to do more to tackle the North Korea nuclear threat and to get European allies to pick up more of the tab for NATO.

The plan also puts Mexico in a delicate spot. President Enrique Pena Nieto has repeatedly expressed his desire to preserve the North American Free Trade Agreement (NAFTA), which has become a pillar of Mexico’s economy.

But he must avoid the appearance of capitulating to Trump, who has enraged the Mexican public with his threats to withdraw from NAFTA and force Mexico to pay for his proposed border wall.

“We want to be on good terms with them, because we’re dealing with a much more important issue,” said a senior Mexican diplomat who was not authorized to speak publicly. “In return, we want a beneficial NAFTA renegotiation.”

Neither Kelly nor the DHS responded to requests for comment.

“The prosperity and security of Central America … represent a priority of Mexico’s foreign policy,” the country’s foreign ministry said in a statement.

“The Alliance for Prosperity … is a valuable tool that can be strengthened with the participation of other governments.”

A MAN WITH A PLAN

The new-look Alliance will be firmed up in Miami next month, when U.S., Mexican and Central American officials will meet to negotiate various issues, including Mexico’s role, according to a draft U.S. schedule obtained by Reuters.

Mexico’s Foreign Minister Luis Videgaray has said publicly Mexico is willing to work with the United States in stabilizing Central America, without giving much detail.

In private, though, local officials say cash-strapped Mexico lacks the money to invest significantly in the region – a fact that hasn’t eluded the United States.

“We do not have significant expectations of major … financial contributions by the government of Mexico at this time,” Brownfield said.

However, he said it was reasonable to expect Mexico to help train Central American officials, and deepen coordination along its southern border. Mexican government agencies could also work more closely with their southern counterparts, he added, citing the example of Colombia, which is training Central America’s police forces at the United States’ behest.

Brownfield said the re-designed plan would be executed by the State Department and development agency U.S. AID, working closely with the DHS. The Inter-American Development Bank (IADB) is working with U.S. AID to design mechanisms for luring fresh investment, he added.

IADB President Luis Alberto Moreno told Reuters the Miami meeting, coordinated with DHS officials, aimed to deliver “an investment shock” to create jobs and prevent migration.

However, the Mexican diplomat who requested anonymity expressed concern the new plan could presage a deeper militarization of Central America. The region’s armies have launched violent attacks on the powerful “Mara Salvatrucha” and “Calle 18” gangs, sparking accusations of rights abuses.

Mexico, which is also grappling with widespread violence, is open to training Central American security forces, the diplomat said, but won’t send troops to fight the gangs given its long-standing policy not to intervene in foreign conflicts.

The “Alliance for Prosperity” was cooked up by the Obama administration after a 2014 surge in child migrants from Central America. It aimed to stabilize Central America with funding for security and development. But critics say the focus skewed heavily toward funding for tackling drug smuggling and gangs.

Brownfield pointed to falling homicides in Honduras, where the murder rate has dropped to 59 killings per 100,000 people last year from 90.4 in 2012, as evidence it is starting to yield results. Still, Central America remains one of the most violent regions on earth.

Mexican diplomats say U.S. and Central American officials for years quietly pressed Mexico to join the alliance – pressure they ignored until Trump was elected, threatening to scrap NAFTA.

“Now we’re facing a different scenario because we have an American government pressuring us on lots of issues,” said the Mexican diplomat. “We want to be on good terms with the United States.”

(Additional reporting by Patricia Zengerle in Washington; Editing by Frank Jack Daniel and Marla Dickerson)

Trump says was ‘psyched to terminate NAFTA’ but reconsidered

A truck heads towards the United States at the Lacolle border crossing in Lacolle, Quebec, Canada April 26, 2017. REUTERS/Christinne Muschi

By Jeff Mason and David Lawder

WASHINGTON (Reuters) – President Donald Trump told Reuters on Thursday that he was “psyched” to terminate the NAFTA trade deal with Canada and Mexico, but changed his mind after their leaders asked for it to be renegotiated instead.

Trump said in an interview with Reuters that he will not hesitate to change course again and pull the plug on the North American Free Trade Agreement if the negotiations become “unserious.”

His comments came at the end of a long 24 hours during which Ottawa and Mexico City were whipsawed over the Trump administration’s intentions over the 23-year-old trade pact.

“You know I was really ready and psyched to terminate NAFTA,” Trump said.

He decided that it would be better to terminate the trade deal after hearing about Wisconsin farmers’ struggles with new Canadian dairy rules that were shutting out their milk protein exports.

“You saw that, you wrote about it,” Trump said. “And I said I’ve had it. I’ve had it.”

But after administration officials said a withdrawal order was being prepared, Trump said he received phone calls from Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau asking to renegotiate the pact.

“I’m not looking to hurt Canada and I’m not looking to hurt Mexico. They’re two countries I really like,” Trump said. “So they asked to renegotiate, and I said yes.”

News of the possible U.S. pullout from NAFTA rattled financial markets on Wednesday. Relative calm returned on Thursday after Trump’s comments, and the Mexican peso strengthened 0.86 percent against the U.S. dollar, while the Canadian dollar was flat versus the greenback.

Mexico, Canada and the United States form one of the world’s biggest trading blocs, and trade disruptions among them could adversely affect farm, automotive, energy and other sectors in all three countries. NAFTA removed most trade and tariff barriers between the neighbors, but Trump and other critics have blamed it for deep U.S. job cuts.

Trump campaigned for president last year on a pledge to pull out of NAFTA if he could not renegotiate better terms. The United States went from running a small goods trade surplus with Mexico in the early 1990s to a $63-billion deficit in 2016.

Asked by Reuters what would make NAFTA a fair deal, Trump said: “Open markets. Open borders for trade” and “Fairness, no government subsidies so that it makes it impossible for our people to compete.”

He added that if the NAFTA negotiations “become unserious, I will terminate.”

As Trump spoke, a new trade irritant between the United States and Canada emerged, as Boeing Co asked the U.S. Commerce Department to investigate alleged price dumping and unfair Canadian government subsidies for Bombardier Inc’s new Canadian-made CSeries jetliners.

‘GET TO WORK’

Trudeau told a news conference in Saskatchewan he had urged Trump not to withdraw from the trade pact and warned that doing so “would cause a lot of short- and medium-term pain.”

“That’s not something that either one of us would want, so we agreed that we could sit down and get to work on looking at ways to improve NAFTA,” Trudeau said.

Canada sends 75 percent of its exports to the United States. On Tuesday, Trump said he did not fear a trade war with Canada, a day after his administration moved to impose tariffs on Canadian lumber.

In Mexico City, Mexican Foreign Minister Luis Videgaray said Pena Nieto had called Trump on Wednesday and spoken with him for about 20 minutes in a conversation focused exclusively on the looming talks over NAFTA’s “renegotiation and modernization.”

Trump has accused Mexico of luring away American factories and jobs with cheap labor and other advantages enabled by NAFTA. During the presidential campaign he accused Mexico of sending rapists and criminals into the United States, and as president plans a U.S.-Mexico border wall.

One of Trump’s first major acts after becoming president in January was to pull out of the 12-nation Trans-Pacific Partnership, negotiated by his Democratic predecessor Barack Obama.

Several agriculture lobby groups in Washington were told U.S Agriculture Secretary Sonny Perdue, confirmed by the Senate on Monday, met with Trump on Wednesday evening to dissuade him from withdrawing from NAFTA.

American Soybean Association President Ron Moore said, “When you’re talking about $3 billion in soybean exports a year, any threats to withdraw from agreements and walk away from markets makes farmers extremely nervous.”

Formal NAFTA talks likely will not get started until August. The U.S. Trade Representative’s office must first send Congress a notice that starts a 90-day consultation period preceding any negotiations.

A USTR spokeswoman said the notice would not be sent until the Senate confirmed Trump’s nominee for trade representative, Robert Lighthizer.

(Additional reporting by Stephen J. Adler, Jeff Mason, Steve Holland, Susan Heavey and Mohammad Zargham in Washington, Veronica Gomez and David Alire Garcia in Mexico City, David Ljunggren in Ottawa, and P.J. Huffstutter and Mark Weinraub; Writing by David Lawer and Will Dunham; Editing by Nick Zieminski and Clarence Fernandez)

Captains of German industry to accompany Merkel on Trump trip

Germany's Chancellor Angela Merkel briefs the media during a European Union leaders summit in Brussels, Belgium March 9, 2017.

By Georgina Prodhan

FRANKFURT (Reuters) – Bosses of German companies including engineering group Siemens and car maker BMW  will travel with Chancellor Angela Merkel to meet U.S. President Donald Trump this week, sources familiar with the matter told Reuters.

Faced with Trump’s “America First” policy and threats to impose tariffs on imported goods, the captains of industry will stress how many U.S. jobs are tied to “Deutschland AG”.

Trains-to-turbines group Siemens employs more than 50,000 people in the United States, its single biggest market, where it makes 21 percent of its total revenue, while BMW’s South Carolina plant is its largest factory anywhere in the world.

Trump will meet Merkel, Europe’s longest-serving leader, for the first time on Tuesday in Washington.

Merkel told business leaders in Munich on Monday that free trade was important for both countries, while a German government spokesman confirmed at a press conference that the two leaders would also meet with German business executives.

German chancellors have a long tradition of taking groups of business leaders along with them on trips to important countries. The other business leader accompanying Merkel will be the chief executive of ball-bearings maker Schaeffler.

The three chief executives will cross the Atlantic for a single scheduled meeting of less than an hour with Trump. They will brief the president on the German practice of training workers on the job while also sending them to classes at a vocational school to obtain formal qualifications.

Such training is traditionally offered by large German companies both at home and in their foreign operations, and is particularly prized in emerging economies, where it helps German corporations win business.

Sources of tension between Berlin and the new U.S. administration include an accusation by a senior Trump adviser that Germany profits unfairly from a weak euro, and Trump’s threat to impose 35 percent tariffs on imported vehicles.

The United States is Germany’s biggest trading partner, buying German goods and services worth 107 billion euros ($114 billion) last year while exporting just 58 billion euros’ worth in return.

“The accusations of President Donald Trump and his advisers are plucked out of thin air,” the president of Germany’s VDMA engineering industry association, Carl Martin Welcker, said in a statement on Monday.

He said 81,000 people were employed in German-owned engineering firms in the United States with almost 30 billion euros in total revenue, while German export successes were linked to the high quality of goods, not foreign-exchange effects.

As part of a bid to bring jobs to America, Trump has urged carmakers to build more cars in the United States and discouraged them from investing in Mexico, where German and other carmakers have big plants.

Trump’s order banning citizens of some majority-Muslim countries from entering the United States, and a threat to tear up the NAFTA free trade deal between the United States, Mexico and Canada, have also unnerved business leaders.

Siemens chief executive Joe Kaeser expressed concern last month about developments in the United States since Trump took office, saying: “The new American president has a style that’s different from what we’re accustomed to. It worries us, what we see.”

BMW’s Chief Executive Harald Krueger said last week that introducing protectionist measures and tariffs would not be good for the United States.

The carmaker is expanding its plant in Spartanburg, South Carolina, to have a capacity of 450,000 vehicles, with 70 percent for export.

It is also building a new plant in Mexico, where it plans to invest $2.2 billion by 2019. Mexico’s lower labor costs and unique free trade position mean it now accounts for a fifth of all vehicle production in North America.

“America profits from free trade. We are supporters of free trade and not of protectionism,” Krueger told reporters at the Geneva auto show.

(Additional reporting by Irene Preisinger in Munich, Erik Kirschbaum, Andreas Cremer and Andreas Rinke in Berlin, and Edward Taylor in Frankfurt; Editing by Catherine Evans and Susan Fenton)

Mexico warns it will end NAFTA talks if U.S. proposes tariffs

Mexico's Economy Minister Ildefonso Guajardo delivers a speech during a "Made in Mexico" event in Mexico City, Mexico,

(Reuters) – Mexico’s economy minister Ildefonso Guajardo warned that his country will break off negotiations on the North American Free Trade Agreement (NAFTA) if the United States were to propose tariffs on products from Mexico, Bloomberg reported on Monday.

“The moment that they say, ‘We’re going to put a 20 percent tariff on cars,’ I get up from the table,” Guajardo told Bloomberg in an interview.

U.S. President Donald Trump has vowed to scuttle NAFTA, the 1994 trade accord which also includes Canada, if he cannot recast it to benefit U.S. interests, raising the risk of a major economic shock for Mexico.

Mexico, which is preparing to discuss changes to some trade rules under the NAFTA, has however expressed confidence that Trump will not be able to impose harsh barriers on imports anytime soon.

Mexican officials expect talks to start in June, Bloomberg reported.

Trump spoke positively about a border adjustment tax being pushed by Republicans in Congress as a way to boost exports in an interview with Reuters last week.

Trump has sent conflicting signals about his position on the border adjustment tax in separate media interviews last month, saying in one interview that it was “too complicated” and in another that it was still on the table.

The White House and the Mexican government were not immediately available for comment.

(Reporting by Kanishka Singh in Bengaluru; Editing by Sai Sachin Ravikumar)