WHAT HAPPENS (TO MEXICO) WITHOUT NAFTA? - U.S. for economic growth in the region, and particularly for Mexico. • The ... WHAT HAPPENS TO MEXICO WITHOUT NAFTA? ... and more than

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  • WHATHAPPENS(TOMEXICO)WITHOUTNAFTA?

    U.S.MEXICOBARASSOCIATION(USMBA)

    JUANCARLOSPARTIDAPOBLADORSEPTEMBER2017

  • NAFTANUMBERS

    NAFTAwasnegotiated25yearsagoandwithoutquestion,hasbeenakeyinstrumentforeconomicgrowthintheregion,andparticularlyforMexico.

    TheoverallresultsofNAFTAareevident:

    NAFTAcreatedoneofthelargestandmostimportantfreetraderegionsintheworldwithover450millionpeople(7%oftheglobalpopulation),conducting16%oftheglobaltrade.

  • NAFTANUMBERS

    TheoverallresultsofNAFTAareevident:

    Tradeamongthethreemembercountriesgrew6.5timesbetween1993and2016.From117billiondollars(1993)tomorethat760billiondollarsin2016,thankstoeliminationoftariffs.

    NAFTAhascreatedJobsinthethreecountries,andloweredpricesforconsumers.

    Averageannualforeigninvestmentgrewfromapproximately2.5billiondollarsbefore1994toalmost20billiondollarsafterNAFTAcameintoeffect.

  • MEXICONUMBERS

    ExportsfromMexicototheU.S.andCanadagrewfrom$40BilliondollarsbeforeNAFTAtoover$300Billionin2016.

    Importsgrewfrom$46BilliondollarsbeforeNAFTAtomoretan$190Billiondollarsin2016.

    60%ofMexicosglobaltradeisconductedwithitsNAFTApartners;83%oftotalexportsand49%oftotalimports.

  • MEXICONUMBERS

    TheU.S.isMexicosprincipaltradepartner;firstexportmarketandmostimportantsupplier.CanadaisMexicosfourthmaintradepartner;secondexportmarketandsixthmostimportantsupplierofgoods.

    Morethan50%oftheforeigninvestmentreceivedinMexicosince1994comesisofU.S.andCanadianorigin.

  • WHATHAPPENSWITHOUTNAFTA?

    Trade among the three member countries would be regulated solely by therules of the World Trade Organization (WTO), which containcommitments by each party regarding import tariffs.

    Import tariffs to be charged by each country would be pursuant to theMost Favored Nation (MFN) duties, which is the most favorable rate ofduty applied to imports from any WTO Member (except members ofbilateral or regional FTAs).

  • WHATHAPPENSWITHOUTNAFTA? The U.S. would be the most affected if MFN WTO commitments apply:

    Type of Product

    Mexico Avrg. MFN WTO Commitment

    U.S. Avrg. MFN WTO Commitment

    Canada Avrg. MFN WTO Commitment

    Agricultural 14.6% 5.2% 15.6%

    Non-Agricultural

    5.7% 3.2% 2.2%

    All Products (simple average)

    7.0% 3.5% 4.1%

  • WHATHAPPENSTOMEXICOWITHOUTNAFTA?

    Automatic implementation of Most Favored Nation (MFN) duties wouldapply to bilateral trade (MexicoU.S. / MexicoCanada), pursuant to theWTO commitments.

    Under such regime, only 35% of Mexican exports to the U.S., and 36% ofMexican exports to Canada, are duty free. Thus, more tan 60 percent ofthe Mexican products would pay duties upon importation into U.S. andCanada.

  • WHATHAPPENSTOMEXICOWITHOUTNAFTA?

    Most affected sector is the Agricultural sector. Import tariff into the U.S.would be between 5% and 29% (broccoli, asparagus, coleslaw, watermelon,melon, orange juice, etc.).

    Manufacturing products would pay in average 2.5% import duties (TVs Upto 5%).

    Pickup trucks could pay 25% (Not 35%, and not all vehicles. All others8.3%). Still very high duties and would hurt competitivity.

    Most affected States, would be Sonora, Guanajuato, Michoacn, BajaCalifornia, Veracruz, Nuevo Leon, and Chihuahua.

  • WHATHAPPENSTOMEXICOWITHOUTNAFTA?

    Mexico needs to be prepared to live and survive without NAFTA.How?

    Trade Diversification. Mexico has trade agreements with at least 45countries, and more than 30 agreements for the promotion andprotection of foreign investment. Needs to take advantage of it.

    Needs to end dependency with U.S. in trade. Not easy.

  • WHATHAPPENSTOMEXICOWITHOUTNAFTA?

    Continue discussions with TPP11. Strengthen trade relationshipswith Latin American countries (ALADI), and continue modernizing andconsolidating other trade agreements (Brazil ACE 53; Argentina ACE 6;European Union; Pacific Alliance).

    Legal certainty to investment; reduce costs to companies; upgradeinfrastructure for better trade.