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NAFTA Update - Manufacturers in Mexico

The U.S. Chamber of Commerce told a closed-door gathering of Mexican and American corporate and government leaders that it is aiming to keep Donald Trump from fulfilling his campaign threat to tear up the North American Free Trade Agreement, according to three people with direct knowledge of the matter.

Tom Donohue, head of the biggest U.S. business lobbying organization, told members of the U.S.-Mexico CEO Dialogue in Mexico City on Wednesday not to panic and to wait and see what the president-elect proposes once he takes office, said the three people, who spoke about the private event on condition of anonymity. The audience included cabinet officials from President Enrique Pena Nieto’s administration, U.S. Secretary of Commerce Penny Pritzker, and more than 100 business and government leaders.

Relations between the president-elect and the Chamber were strained during the 2016 campaign when they sparred over trade policy. Trump made what he called the unfairness of the U.S. relationship with its biggest trade partners a central theme of his campaign, and he singled out Nafta, which also includes Canada, as ripe for being gutted or renegotiated.

The discussion around Nafta only added to tensions that had been building between Trump and Mexico ever since he declared his candidacy for president last year, when he called some Mexican immigrants criminals and rapists and later vowed to make Mexico pay for a wall along the border. His comments have been condemned by Mexican business executives, including Mexichem SAB Chairman Juan Pablo del Valle and Cinepolis de Mexico SA Chief Executive Officer Alejandro Ramirez. Pena Nieto likened his rhetoric to that of Adolf Hitler and Benito Mussolini.

The CEO Dialogue, held over two days at the Four Seasons hotel in downtown Mexico City, was attended by General Electric Co. Vice Chairman John G. Rice, Alfa SAB Chairman Armando Garza and FedEx Freight Chief Executive Officer Michael Ducker, as well as Mexican Finance Minister Jose Antonio Meade and Economy Minister Ildefonso Guajardo.

“There is no divide between the Chamber and the president-elect,” Blair Latoff Holmes, the Chamber’s executive director of external communications, said in an e-mail. “We are looking forward to working with the new administration on pro-growth policies that will help American companies and communities thrive.”

Modernizing Nafta

At another gathering of business leaders last month, Guajardo said that he believes Trump will seek to modernize Nafta without completely abandoning the agreement. For instance, issues that weren’t included when the deal was negotiated in the early 1990s, such as e-commerce, could be added to the pact, he said.

Mexico is arguably more dependent on trade with the U.S. than any other major world economy. Trade between the two countries has grown five-fold to more than $500 billion in goods annually since Nafta took effect in 1994, making Mexico the third largest U.S. trade partner, trailing only China and Canada, according to data from the International Monetary Fund. Nafta, which phased out most tariffs among the three countries over the past two decades, has proven crucial to make Mexico manufacturing an emerging powerhouse.

While Trump on the campaign trail called Nafta a disaster for the U.S., his transition team has sent signals that he may not be looking to fully eviscerate the deal. Anthony Scaramucci, a senior adviser on the Trump transition team, said in a speech on Monday that the president-elect was simply "looking to right-size it and make it fairer."

Still, the uncertainty around Trump’s plans has prompted economists to cut forecasts for Mexico’s growth and sent the Mexican peso to record lows.

Powerful Advocate

To make their case, Mexican businesses have a powerful advocate in the Chamber. It’s one of the best-funded lobbying organizations in Washington and spent $29.8 million in the 2016 cycle to benefit Republican candidates in 16 pivotal House and Senate races, according to an analysis by nonprofit advocacy group Public Citizen. But how much clout the group will have with the Trump administration remains an open question.

Donohue was a frequent critic of Trump and his trade policies throughout the campaign and appeared at a White House press briefing earlier this year to promote the Trans-Pacific Partnership (TPP), a trade deal among a dozen Pacific nations that Trump regularly railed against on the campaign trail and has promised to abandon as president.

by Eric Martin
and Justin Sink

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