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Mexico can go on without NAFTA

Terminating NAFTA will not mean the times of smuggling and contraband will return to Mexico
NAFTA talks - File photo/EL UNIVERSAL
22/10/2017
09:00
Mexico City
Newspaper Leader by EL UNIVERSAL
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Mexico has one of its biggest challenges ahead regarding commerce and trade. Considering 80% of Mexican exports in 2016 were sent to the United States against 5.17% to the European Union; 1.87% to the Pacific Alliance countries (Chile, Colombia, and Peru), and 1.19% to Argentina and Brazil – according to the Bank of Mexico and the Ministry of Economics – it's clear the termination of the North America Free Trade Agreement (NAFTA) will cause economic instability and uncertainty which could, in turn, generate a strong recession in the country if an honest, effective, and realistic containment strategy isn't devised.

A little over two decades after the Agreement first entered into effect, our country irresponsibly centered all its trade objectives on the United States, and it's evident today we urgently need to diversify our trading alliances. It's pointless to say now that this should have been adopted many years ago. Without a doubt, the wave of changes the Donald Trump administration brought to our country was beyond anyone's imagination, yet we can now see the high risk we take when we depend on one market alone.

In our worst-case scenario, terminating NAFTA will not mean Mexico will return to being a closed economy and that the times of smuggling and contraband will return to acquire imported goods. Most of our exports with our northern neighbor are ruled by the World Trade Organization (WTO) and will still be duty-free; only 20% would be subjected to some kind of tax.

Moreover, Mexico has up to date 12 free trade agreements with 46 countries. Through them, we can take advantage of our manufacturing capacity and boost more strongly Mexican exports to regions where we have zero or little presence, such as Latin America, Asia, Middle East, Japan, the European Union, and Africa.

This might sound too ambitious, but we are currently exporting products to Africa, such as corn, wheat, and fertilizers, and we're working on exporting processed foods as well. Likewise, Mexico receives products from Morocco, and in May Mexican traders participated in a fair in South Africa.

Naturally, penetrating and securing new markets will take time, we will not manage to reduce our dependence on the United States overnight. This is why it's important to consider all the possible spaces to develop new production chains. According to the Ministry of Economy, there are more than 40 thousand exporting companies – small, medium-sized and large – capable of finding new markets. The transition will not be simple, but Mexico can go on without NAFTA.

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