Nafta's End Wouldn't Be End of World for Mexico: Business Envoy

(Bloomberg) -- As negotiators entered their third day of talks to update the North American Free Trade Agreement, the top representative for Mexico’s private sector said the nation needs to be prepared for all scenarios, including the possible end to the deal.

Most Mexican products exported to the U.S. would face a low average tariff of 2.5 percent and 5 percent if Nafta were to disappear, said Moises Kalach, the trade head for the national business chamber known by its Spanish abbreviation, CCE. That would leave Mexico no worse off than Europe, China and Japan, who trade more than $1 trillion in total with the U.S. each year despite lacking a free-trade agreement, he said.

Mexico sees a clear opportunity for a Nafta update that also benefits the U.S. and Canada, and the chances of reaching a deal have been improving over time, but the possibility of its end can’t be ruled out, Kalach said in an interview Friday in Washington. Mexico should make changes in its own domestic law to provide foreign companies with legal certainty and protection of their investments in Mexico similar to those that they have under Nafta, he said.

The end of Nafta "would be the loss of a very valuable instrument, a hard hit for Mexico, an unwanted hit, but we would have to move forward," he said. "We’re a country, we’re not going to disappear. If our situation changes, we need to take steps, regroup, and have a clear vision" for going forward.

President Donald Trump isn’t looking for a “mere tweaking” of the Nafta and will be seeking a major overhaul to a deal he believes has failed Americans, his top trade official said Wednesday. While the U.S. is focused on protecting American workers and improving its trade balance, Mexico and Canada have emphasized the need to preserve the broad gains of trade to all three nations.

This week’s talks are set to wrap up Sunday, with the next round set for Mexico in September. While U.S. Trade Representative Robert Lighthizer on Wednesday signaled that a Nafta update could require the use of "substantial U.S. content” for products made in the region, Mexican Economy Minister Ildefonso Guajardo said such a requirement on a national rather than regional basis could be "highly complicated." Guajardo said he expects dialogue over time to help close the differences between the U.S. and Mexico in the talks.