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NAFTA: A lesson learned?

Although Mexico is the country with the most trade agreements in the world, its economy depends on the US
NAFTA: A lesson learned?
Trumo threatened to end NAFTA – Photo: Evan Vucci/AP
28/08/2018
09:05
Mexico City
Newspaper Leader
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During his campaign, Donald Trump rallied his followers by offering to end the NAFTA because it was “unfair” and for being the “worst trade deal in history”.

Now installed in the White House, his discourse toughened and he threatened to end the trade agreement any day. Suddenly, one morning, he announced his decision to leave the Trans-Pacific Partnership (TPP). Would NAFTA be next?

The consequences were immediate: the Mexican peso depreciated, the national and foreign investment sank; Mexico's economic projection turned dark. As Trump wouldn't reveal his intentions, everyone was expecting the worst. In the end, in May 2017, the US government suggested a renegotiation of the NAFTA, and it began in August 2017.

The demands made by the US and the perception that Mexico was a weak negotiator created turmoil in the economy and with good reason, as 70% and 80% of national exports are sent to the US.

That's when the Mexican government regretted relying on the US. Although Mexico is the country with the most trade agreements in the world, its trade is not diversified. On the contrary, it depends on the US economy.

Yesterday, after a long and bitter negotiation, both countries finally reached a satisfactory agreement. Mexico and the US reached a preliminary trade deal to follows the path of the free trade agreement from 1994. This time, Canada's inclusion is pending; the differences with Donald Trump's administration distanced the Canadians in the last minute, who will review the terms to define whether they will join or not.

Did Mexico learn its lesson? Every economy will always be at risk if three-quarters of its commerce depend on one market. The moment that market experiences a crisis or a new President takes office with a radical point of view, the economy of the dependent country will also go into a crisis.

And there's more: Mexico can't aspire to be part of a trade deal while offering cheap labor as its biggest competitive weapon, instead of betting on innovation or national industries, this also turns into an obstacle for people to have a better quality of life.

The year of uncertainty came to an end, but no one knows if they agreement could waver. Did they learn from their mistakes?

gm

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