Mexico City | Reuters — Mexico will leave the NAFTA negotiating table if U.S. President Donald Trump decides to trigger a six-month process to withdraw from the trade pact, three Mexican sources with knowledge of the talks told Reuters on Wednesday.
Reuters reported earlier in the day that Canada was increasingly convinced that Trump would soon announce the U.S. intends to pull out of the North American Free Trade Agreement (NAFTA), sending the Canadian and Mexican currencies lower and hurting stocks across the continent.
“I think it’s indisputable that if Trump announces a U.S. withdrawal from NAFTA, well at that moment the negotiations stop,” said Raul Urteaga, head of international trade for Mexico’s agriculture ministry.
The two other sources, who are involved in the trade talks and asked not to be named, said that Mexico remains firm on its position to get up and leave from the negotiating table if Trump goes through with the move.
While a NAFTA termination letter would start the six-month exit clock ticking, the U.S. would not be legally bound to quit NAFTA once it expires. Washington could use the move as the ultimate sleight of hand as it seeks to gain leverage over Canada and Mexico in talks to update the 24-year-old trade pact.
Trump has long called the 1994 treaty a bad deal that hurts U.S. workers. His negotiating team has set proposals that have alarmed their Canadian and Mexican counterparts.
Among the most divisive are plans to establish rules of origin for NAFTA goods that would set minimum levels of U.S. content for autos, a sunset clause that would terminate the trade deal if it is not renegotiated every five years, and ending the so-called Chapter 19 dispute mechanism.
Though observers in Canada and Mexico have become increasingly gloomy in recent weeks about the upcoming Jan. 23-28 Montreal round, some took heart from a recent speech made by Trump to farmers this week in which he held back from provocative comments about the trade deal.
Urteaga, who was a member of Mexico’s original NAFTA negotiating team in the 1990s, said that Trump’s speech was an “interesting signal.”
“No news, means good news sometimes.”
Michael Sabia, CEO for Caisse de Depot et Placement du Quebec, said Wednesday he believes that if Trump abandons NAFTA, the U.S. would then negotiate a new deal with Canada.
Speaking at a Thomson Reuters Breakingviews event in Toronto discussing predictions for 2018, he said his view is that a U.S. pullout would be “just a prelude to another negotiation.
“We need to think about that in the context of making sure that we handle things in a way that we are well positioned for the subsequent negotiation because it’s hard to imagine that there is never another trade agreement.”
Other factors, such as entrepreneurial activity, could help mitigate the impact of the NAFTA talks failing, he said.
“The future sources of jobs and growth in the Canadian economy are going to come from elsewhere,” he said. “It’s not as though Canada is some baby seal waiting to be slaughtered.”
— Reporting for Reuters by David Alire Garcia, Adriana Barrera and Anthony Esposito; additional reporting by Matt Scuffham in Toronto.