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BEGINNING OF NAFTA 2.0 BY THE END OF 2018

By: Alejandro Díaz-Bautista, Economist (PhD)

In the best-case scenario, Mexico’s new trade agreement with the United States and Canada would begin to be implemented by the end of the following year 2018 or early 2019.

The North American Free Trade Agreement (NAFTA) negotiations process is complicated and is likely to extend beyond 2017. “Negotiations are expected to end in December 2017, in order to send an approved draft to the Congresses of each of the countries involved, but that date seems to be very tight, due to the discussion of Chapter 19 and the imposition of measures by the United States that seek to reduce the trade deficit with Mexico, ” said Dr. Alejandro Diaz Bautista, economist, national researcher at Conacyt, as well as research professor at El Colef Norte (El Colef).

The renegotiated North American Free Trade Agreement (NAFTA) could be implemented in the best-case scenario by the end of 2018 or early 2019. It is estimated that Mexico sends over 80% of its exports to the United States, for which it seeks unrestricted access to goods and services in North American markets and looks forward to strengthen the agreement’s dispute settlement mechanisms, among other priorities.

NAFTA has been able to give a boost to exports and imports, which increased by a combined total of more than 200%. Only in the country there is a talk about a percentage of 500 and 350 at a general level, respectively, according to figures from the Ministry of Economy. Mexico is the first or second commercial partner of 29 of the 50 states of the United States.

Likewise, it is estimated that Mexicans contribute about 8% of the Gross Domestic Product (GDP) of the neighboring country. Mexico managed to position itself in global value chains as the leading exporter of manufacturing in Latin America with up to 60% of the total merchandise leaving the country.

The investment of Canada and the United States in Mexico from 1999 to September 2016 amounted to 236,938 million dollars, according to the National Registry of Foreign Investment. The United States is Mexico’s main trading partner with 79 percent of the total trade of the Mexican economy. There are more than 27,000 companies with US capital in Mexico, although most are real estate and trade services, and more than 7,000 are manufacturing firms that could export to the neighboring country.

The Ministry of Economy asserted that in 2015 bilateral trade, that is, from the Mexican market to the US market and vice versa, amounted to 495,590 billion dollars.

Let’s recall that the North American Free Trade Agreement (NAFTA), entered into force on January 1, 1994, when ratification procedure was endorsed by the Legislative Power of Mexico, the United States and Canada, countries who signed it.

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