Officials
from the United States, Mexico, and Canada said this week that the
negotiations for the North American Free Trade Agreement (NAFTA) would
extend into 2018. The extension is not an auspicious sign for a deal,
and the Trump administration has already said that he will “probably”
end up terminating the agreement.
In
U.S. circles, thoughts on NAFTA’s long-term prospects have become more
grave of late, but the tone is very different south of the border. As
some U.S. business leaders lobby for NAFTA, their Mexican counterparts
have already completely moved on — months ago.
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“Psychologically,
Mexico has already accepted that NAFTA is coming to an end,” said Jorge
Guajardo, former Mexican ambassador to China from 2007 to 2013 who now
consults for both Mexican and American companies. “You have President
Trump posturing and negotiating as if Mexico’s life depends on NAFTA.
Mexico is like, ‘we’ve already walked away.’”
This
week, Guajardo met with three prominent CEOs of Mexican multinational
conglomerates who were in Washington, D.C., to speak on a pro-NAFTA
panel.
“They
couldn’t be more blasé about the whole NAFTA pullout,” he told Yahoo
Finance. Despite the CEOs’ reason for coming, they were circumspect. The
attitude was that “Mexico will take a little beating, but we’re used to
it — dealing with economic crisis,” Guajardo said.
The
Mexican population writ-large may not view NAFTA particularly favorably
— many see it as a bad deal in a history of bad deals with its bullying
northern neighbor. But business leaders in Mexico generally have a
favorable outlook on the agreement, said Guajardo, making their attitude
even more striking.
Mexican companies will be fine
For an example of how companies in Mexico will fare, Guajardo pointed to Grupo Alfa (ALFAA.MX),
a massive conglomerate whose portfolio is incredibly diverse. Thanks to
NAFTA, the company imports 20% of the U.S. total production of turkey
legs and boneless chicken to be processed. If and when the agreement
founders, it will simply source that from somewhere else and open those
markets. It’s much easier now to do that, Guajardo said, because many
countries like Brazil and Argentina are now far more open to free-trade.
Guajardo
also pointed to the automotive business. “Half the cars in the North
American region has a component made by [Grupo Alfa’s] auto parts
business,” he said. “They have six foundries in the U.S. and eight in
Mexico. Nobody else has that product.”
Even
without NAFTA, American car manufacturers will still have to buy the
parts and produce in Mexico. Only now, Guajardo said, with a tariff that
will be passed on to the U.S. consumer. “The economy will suffer,” said
Guajardo. “No one denies that. But on a company basis, they all seem to
be saying: ‘we’ll be okay.”
This is not a new attitude
This attitude may be surprising to those north of the border, but Guajardo said that this sentiment has been present for months.
“In
the U.S. you still find opinion pieces making the case for NAFTA,” he
said. “You don’t find this in Mexico. Everyone’s like, ‘let’s move on.’”
In
January, Guajardo, who regularly makes trips back and forth from D.C.
to Monterrey, saw “doom and gloom, a feeling of helplessness.”
Monterrey,
one of Mexico’s largest cities, has benefited from NAFTA, and Guajardo
expected pessimism. “That’s not what I saw. Everyone started to think
about worst-case scenarios and realized it’s not so bad and started
moving on.”
American companies, some of which Guajardo also advises, have not reached this point, he realized.
“They’re
still trying to find a way and work something out. But in Mexico, it’s
like, ‘meh, it’s over,’” he said. “It’s an underreported story in the
U.S. how much Mexico has moved on. Nobody’s talking about [saving NAFTA]
down there.”
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