Mexico will be unable to ratify a new North American trade deal unless the US scraps the steel and aluminium tariffs it imposed last year, the country’s top North American trade official has said.
Without removal of tariffs “it may be inevitable to delay” ratification of an accord that would replace the 1994 North American Free Trade Agreement, said Jesús Seade, North America undersecretary at the Mexican foreign ministry and a veteran trade negotiator.
“Sentiment is very strong in our Senate on steel,” he said.
Mr Seade will meet US trade tsar Robert Lighthizer in Washington on Thursday and Friday, as they seek to resolve an impasse that threatens to shelve the United States-Mexico-Canada Agreement for months or even years.
The USMCA deal, signed late last year by US president Donald Trump, Canadian prime minister Justin Trudeau and then Mexican president Enrique Peña Nieto, would govern $1.2tn in annual trilateral trade. Chuck Grassley, chair of the finance committee in the US Senate, recently wrote an article for the Wall Street Journal saying: “If these tariffs aren’t lifted, USMCA is dead.”
Canada is also pushing to end the tariffs announced last year by Mr Trump, when he imposed levies of 25 per cent on imported steel and 10 per cent on aluminium.
Democrats in the US Congress had made improved labour rights in Mexico a precondition for discussing the USMCA deal that has yet to be ratified by any of the three countries.
Mr Seade insisted that the sweeping labour reform law that was voted through the Mexican Senate this week meant the country had fully complied with its side of the bargain, leaving the tariffs issue the biggest outstanding hurdle.
The labour overhaul seeks to end decades of opaque and politically motivated union practices, guarantee freedom of association and allow workers to vote via secret ballots. President Andrés Manuel López Obrador signed into law on Wednesday*.
Some Democrats and US and Canadian labour unions fear the new rules may not be enforced tightly. But Mr Seade, who joined the USMCA negotiating team last year, insisted Mr López Obrador’s leftwing administration fully embraced US concerns on labour issues.
“We want to go in the direction they want us to,” he said. “This is central to the political platform of [Mr López Obrador]. We are soulmates, bringing their ambition to fruition.”
He added: “What’s frustrating and certainly very puzzling is the lack of appreciation for the scale of changes on labour. It is very difficult to imagine what else could have been done. Nothing is missing from the best practice book of the International Labour Organization.”
Mr Seade said he was upbeat that a tariff deal could be reached this week. “I know Lighthizer completely supports negotiating and finding a way out of the steel problem,” he said.
Mexico wants USMCA ratified before the US Congress goes into recess in August, and Mr Seade said it would be a mistake if it ended up being delayed until after the US presidential election in November 2020.
“It is not out of the question to do it this autumn,” said Mr Seade. “It would be terrible to delay until after the US elections.”
Nancy Pelosi, the top Democrat in Congress, has been weighing the political cost of handing Mr Trump a legislative victory in the form of USMCA ratification ahead of his 2020 re-election bid.
While Mr Trump blasted Nafta as the “worst deal ever”, US officials have hailed USMCA as a template for future trade deals that will lead to increased wages for Americans, improved worker rights and better protection of intellectual property.
Mr Seade will be back in Washington next week hoping to meet Wilbur Ross, US commerce secretary, as he seeks to resolve another trade dispute — this time over Mexico’s more than $2bn tomato exports.
Under pressure from the powerful Florida tomato industry and Republican politicians in the crucial swing state, the US said in February that it would reinitiate an antidumping investigation into Mexico’s tomato industry on May 7. That investigation has been on hold since 1996 pending a series of price agreements between the two countries.
Mr Seade said he did not see any kind of deal in the form of Mexico bending to the demands of Florida tomato growers in exchange for steel tariffs being lifted.
But he will travel to Washington with a delegation of tomato industry officials and the governor of Sinaloa state, one of Mexico’s top producing regions, which, thanks to jailed drug lord Joaquín “El Chapo” Guzmán, is also notorious for another kind of export.
“We basically want to ask them: Do you want us to send you tomatoes or narcotics?” said Mr Seade.