Despite a lot of upbeat talk about upgrading U.S.-Mexican economic relations, there will be one big issue that will be off the table during President Barack Obama’s visit to Mexico starting Thursday — Mexico’s request to be part of ongoing U.S.-European free trade talks.
Since Obama announced his intention to sign an ambitious Trans-Atlantic Partnership free trade deal with the 27-member European Union earlier this year, Mexico has been pressing to be part of the deal. But judging from what I hear from U.S. officials, the White House is not ready for that yet.
Mexican officials say that while their country already has a trade agreement with the European Union and both the United States and Canada is negotiating their own, having separate bilateral agreements with Europe doesn’t make much sense. It would be much better for the three countries to team up and negotiate a North American-European Union trade deal, they say.
But U.S. officials say the Obama administration has its hands full with two very complex ongoing trade negotiations — the Trans-Pacific Partnership with several Asian and Latin American Pacific coast countries, including Mexico, and the Trans Atlantic Partnership with the European Union — and can’t handle anything bigger now.
“For the first time in this administration, you have two huge trade initiatives,” one senior U.S. official told me. “Adding Mexico and Canada would massively complicate negotiations with the European Union.”
Mexicans are not happy about this. A North American-European Union free trade deal would help Mexico, among other things, by allowing it to export duty free to Europe automotive industry products made with U.S. and Canadian components. Under free trade deals’ rules of origin, countries cannot export goods made with significant components from third nations.
“Likewise, the United States would not be able to export goods with Mexican and Canadian components to Europe,” Sergio Alcocer, Mexico’s under-secretary of foreign relations, told me. “It’s better to have a North American deal with Europe, than three separate ones.”
Robert Pastor, an American University professor and author of The North American Idea, a book proposing a closer economic integration between the United States, Canada and Mexico, told me that the Obama administration’s decision not to include Mexico and Canada in its talks with Europe is “extremely short-sighted.”
“There is no better way to enhance American competitiveness in the world than by creating a seamless North American market first,” Pastor said.
During his visit to Mexico, Obama is expected to comply with President Enrique Peña Nieto’s wishes to “de-narcotize” the bilateral agenda, so that the two countries can also focus on improving economic ties.
The two presidents are expected to announce a regular cabinet-level “consultative group” on economic issues that will meet at least once a year, much like an existing group of a half-dozen cabinet members that currently meet annually to discuss drug and security issues.
The leaders are also expected to announce plans to increase student and academic exchanges, including a system to make it easier for Mexican students to earn credits in U.S. colleges, and vice-versa.
Peña Nieto will most likely also ask Obama to help elect Mexican candidate Herminio Blanco as President of the World Trade Organization.
Blanco and Brazil’s candidate Roberto Azevedo are the finalists for the job after several rounds of voting by WTO member countries. The winner is to be announced by Wednesday.
Both Mexico and Brazil are actively campaigning for their candidates. Mexico argues that — unlike Brazil, which follows more protectionist policies and has signed few free trade deals — Mexico is an open economy and has signed 44 free trade agreements.
My opinion: Obama deserves credit for traveling to Mexico and Costa Rica, and for paying attention to the region after having spent little time on it during his first term.
But Pastor is right: in a global economy where countries take advantage of regional blocs to build supply chains and produce competitive goods, Obama should focus on upgrading the 1994 North American free trade deal with Canada and Mexico.
Instead of unilaterally launching an ambitious free trade deal with Europe, Obama should first give a new push to North America — which would also help solve U.S. immigration, drugs, border environment and energy issues — and then negotiate a North American-European Union free trade agreement.