Mexico Plays the ‘China Card’
The possibility President Trump will pull out of NAFTA has prompted his Mexican counterpart to court China.
.. This week, while his country is renegotiating the North American Free Trade Agreement, Mexican President Enrique Peña Nieto was in China to pursue his country’s Plan B. Rumblings of a free-trade deal between the two nations have grown since President Trump took office this year, but they’ve mostly been seen as political posturing. But with Trump threatening regularly to dump the deal—even taking time last Sunday, during Hurricane Harvey, to say he “may have to terminate” NAFTA—the possibility of Mexico opening up to China seems ever more real.
.. Peña Nieto’s will participate in the BRICS summit in China, named for its participants, Brazil, Russia, India, China, and South Africa. And he also met with Chinese President Xi Jinping, a sign the two countries are seeking a closer trading relationship.
.. NAFTA changed the waythe U.S. eats, and without NAFTA, consumers stand to lose their perennially fresh and cheap vegetables. But the sector that stand to lose the most is auto manufacturing, because U.S. companies have invested heavily on being able to send car parts to Mexico, assemble them there, then bring them to the U.S. to be sold.
..The WTO tariffs for the auto sector are much higher than for most other industries, so not only would consumers have to pay more for cars, but it would likely disrupt the current chain of manufacturing.
.. if NAFTA did end, it’s trade would likely continue at WTO tariff rates, making many products from Mexico more expensive, but leaving intact the flow of trade.
..Mexico sends about 75 percent of its exports to the U.S., which comes to about $290 billion. By way of comparison, Canada is its second-largest export market at $23 billion, and China its third at $7 billion...And as recently as June, China’s ambassador to Mexico, Qiu Xiaoqi, said his country was open to a free-trade agreement. But while a deal like that could benefit China (and scare the U.S.), it probably wouldn’t benefit Mexico that much. Dussel told me Mexico imports about 14 Chinese products for every one product it exports... “The thing you want to think about is what is Mexico’s competitive advantage,” Adam Collins, a Latin America economist with Capital Economics, a London-based research and consultancy group, told me. “In both cases it’s low wages. So really the place Mexico should look to are other developed countries, like in Europe, and richer East Asian countries. But even that is an uphill battle because of geography, by which I mean Mexico’s other competitive advantage is its location next to America.”