The new US-Mexico-Canada trade agreement will be “game-changing” if the US Congress approves it quickly, according to the Mexican finance minister.
The trade agreement, which replaces the existing Nafta, was signed on October 1, 2018. Mexico’s Congress approved it on October 1 this year, and the Canadian parliament is expected to do so as soon as the US gives the green light.
“A real game-changer would be if [the deal] is ratified within the next six weeks,” said Arturo Herrera, finance minister since the resignation of Carlos Urzúa in July, at the IIF meeting in Washington this week. “Given the worldwide uncertainty, a very clear path for the North American region would be a way for investments to be focussed here, while the rest of the world is in a wait-and-see position.”
Herrera warned that global trade tensions were having a big impact in Mexico, highlighting volatility in the peso and oil prices when US president Donald Trump slapped tariffs on Chinese imports.
“These trade tensions are not a fact of life and go against a long term trend of economies opening, agreements being reached, and multilateral organisations [being] used as a way to reach consensus,” he said.
Trump’s renegotiation of Nafta alarmed its neighbours, but the Mexican government has taken the approach that an update was necessary.
“A lot has happened in the economy in the last 20 years,” said Herrera. “The digital economy, in particular, is very different to what it used to be, and we and the business community feel pretty comfortable about [the renegotiation].”
Mexico has officials attending the US Congress to clarify doubts and smooth the process. But investors fear the minister may be disappointed.
“I am not expecting the deal to be ratified soon, as I don’t see much getting through Congress in the US in the current environment,” Jan Dehn, global head of research at Ashmore Group, told GlobalMarkets. “It is hard to see Nancy Pelosi [speaker of the House of Representatives] passing any of Trump’s projects.”
After impeachment proceedings were launched at Trump in September, the president claimed this could derail ratification of USMCA.
Research firm Capital Economics warned then that the “risk of the deal being caught up in US domestic politics is probably rising” as the 2020 election approaches, even though Trump’s opponents played down the fears.