NAFTA Discussions Leave Multinationals in Mexico Uncertain

August 2, 2017 Oscar Caicedo

The first talks on renegotiating NAFTA begin this month, and with continual discussions of a U.S.-first trade agenda, multinational companies with operations in Mexico are left uncertain on what these talks might entail. While no one knows exactly where these negotiations may land, multinationals should have some answers by the end of 2017, as all parties involved have agreed to an aggressive discussion schedule.

NAFTA – the free trade agreement between the United States, Canada and Mexico that facilitates the cross-border transfer of goods and services – was a major platform when President Trump was campaigning. He criticized the agreement for leading to job losses and a $63 billion trade deficit with Mexico, so no doubt will enter the negotiations with a strong hand.

In fact, the administration recently published its goals for the negotiations, including

  • “reciprocal and balanced trade,” which CNN Money reports could open the possibility of tariffs and quotas
  • “trade remedies,” which CNN cites as a potential protectionist strategy that could include tariffs
  • higher labor standards
  • stronger environmental laws, which coupled with changing labor standards, could make Mexico a more expensive place to operate
  • improved protections for intellectual property rights

 

Several industries stand to benefit from a new NAFTA, according to the Harvard Business Review. Ecommerce, for example, was just laying its roots when NAFTA emerged in 1994, and under the current agreement, taxes kick-in after only a $50 online purchase, limiting cross-border e-commerce transactions. Additionally, technology and innovation focused industries, like Health IT and pharmaceuticals, argue that intellectual property protections and enforcement of regulatory standards aren’t currently strong enough. Multinational manufacturers, with their complex supply chains, however, have the most to lose under a renegotiated NAFTA, as new tariffs or quotas could significantly impact operations and/or profit margins.

The discussions begin on August 16, and Reuters reports that U.S. officials aim to have the talks completed this year.

We’ll be watching the negotiations carefully in the coming months. Will you? Tell us what you expect on Twitter.

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