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Latin America Roundtable Series: The Renegotiation of NAFTA – Mexico City

Having been forced to postpone this roundtable last September, when a significant earthquake struck Mexico City, there were a few nervous moments when another quake occurred just days before the re-scheduled event, but finally our invitees arrived at sponsor-firm Holland & Knight’s Paseo de la Reforma offices, overlooking the Ángel de la Independencia, to discuss the current renegotiations of the North America Free Trade Agreement (NAFTA / TLCAN).

Just using the word ‘renegotiation’ in this context is charged with significance, this term being favoured by the US trade team, as opposed to Canada and Mexico’s preference for ‘modernization’. Obviously, with the roundtable’s postponement, the scenario had moved on considerably. The sixth round of talks had been concluded in late January and the seventh are scheduled for Mexico City in late February. Our discussion opened with a consideration of “the state of play” in the wake of the sixth round, particularly as regards continuing tensions over rules of origin (primarily in relation to the automotive industry), and the possible elimination of the Investor-State Dispute Settlement (ISDS) mechanism enshrined in the Agreement to date. Other US proposals regarded as problematic by its erstwhile trade partners include the removal of Chapter XIX of the agreement (which established arbitral panel review of domestic anti-dumping and countervailing duty decisions – Canada reportedly regards this as a ‘make-or-break’ issue); the dollar-for-dollar scheme that would cap access to US Government contracts; and the “sunset” proposal under which the entire NAFTA accord would automatically expire if all three nations did not expressly agree to its extension. Positive news was limited to the -not insubstantial- announcement of a new NAFTA chapter: ‘Transparency and Anti-corruption’; little detail regarding this has been made public to date, although ironically it appears to involve the establishment of a new dispute resolution mechanism even as others are being done away with.

With a range of attendees including Praxair, Eutelsat, JTI, SAP, Peñoles, Novartis, Axa Seguros, representatives of the automotive sector, such as Ford de México and Continental, and the all-important financial sector, including AlphaCredit, FINSA and Engenium Capital, conversation soon gained momentum. If it was immediately clear that primary concerns differed by sector: labour matters; IP, e-commerce and data privacy; rules-of-origin; and the dollar-for-dollar scheme, for example, were all critical to various industries and economic sectors, all were in agreement that if ones’ clients are affected by NAFTA, so would ones’ own business, albeit with a possible time lag. On the private-practice side we were fortunate to count not only on the presence of our sponsor firm’s senior counsel, Carlos Vejar, who has over 20 years’ public sector experience in international trade and customs matters, but also the office’s new managing-partner, Luis Rubio, who was involved in the negotiations of the original NAFTA treaty in the late 80s and early 90s.

Arguably, of greater interest than the specifics of the negotiations themselves were the myriad political issues surrounding the process and which could completely derail or change the course of the renegotiations: most immediate is the possibility that the ongoing discussions will continue into the period of the Mexican presidential election campaign (the elections are scheduled for 1st July and one candidate has already declared his protectionist leanings), with a further horizon constituted by mid-term elections in the US in November. Opinions differed radically as to whether this would drive negotiations to a rapid conclusion (the same week as our discussion Mexico’s Secretary for the Economy, Ildefonso Guajardo, suggested the country was ‘very near to being able to close the NAFTA renegotiations’), and whether, in such a situation, the current Mexican President would sign-off on an agreement rather than leaving it to his successor; concurrently, an eighth round of discussions is already being projected for Washington DC, but dates have yet to be established.

I would like to thank all our attendees - especially the representative of Microsoft who came in person to excuse her inability to attend at length - as well as sponsor firm Holland & Knight: all played an integral part in what one participant regarded as “a very interesting and enlightening breakfast meeting” where we could “productively share our different views with colleagues of the same as well as different industries”.

Please scroll down to see pictures of the event:

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