Mexican Civil Society Demands an Entirely Different Agreement

Corn field

When tens of thousands of Mexicans marched in mid-August to protest the opening of the NAFTA talks in Washington DC, they did so with a clearly articulated Declaration on a very different approach to trade and investment policy. The opening two sentences of the Declaration, in our translation establish the document’s analytic tenor: “Accelerated NAFTA negotiations imposed mainly by Trump are, on the part of Mexico, a surrender. Mexican negotiators are so fixated on keeping NAFTA and completing its modernization before entering fully into the [Mexican 2018] electoral cycle that they are willing to give in to any demand of the US government and transnational corporations.” (The Trump administration and its corporate backers are likewise anxious to complete NAFTA negotiations before they can become a campaign issue in the 2018 congressional elections.)

As in the U.S., exactly what the Mexican government will surrender is not public. An August 2 press release outlined four general negotiating priorities, including “repositioning North America as one of the most competitive regions.” President Enrique Peña Nieto’s administration has not published its negotiating objectives. The Declaration demands the publication of those objectives and notes that the government has consulted with foreign investors and given them a seat at the negotiating table, while keeping the Mexican public in the dark about what is being negotiated in their name. According to a March 2017 poll cited in the Declaration, just four percent of Mexicans express strong approval of Peña Nieto’s administration, so it can ill afford to disclose and debate its negotiating objectives and red lines.

(U.S. Secretary of Commerce Wilbur Ross has said that the text of the Transpacific Partnership Agreement (TPP), from which President Trump withdrew to keep a campaign promise, is the starting point of the NAFTA re-negotiations. The U.S. Trade Representative is presumably tabling large sections of TPP text to accelerate the negotiations, although the exact content of the U.S. negotiations text remains a secret, except to the USTR security cleared advisors, mostly corporate lobbyists.)

The nine-page Declaration includes six and a half pages of “Guiding Principles” for negotiating not another free trade agreement, but “a Complementarity and Cooperation Agreement in North America that benefits the peoples of the three countries.” (bold in the original) Noting that trade and investment in Mexico will continue under other rules, including those of the World Trade Organization, the signatories to the Declaration state, “If the US government does not accept this negotiating framework, we should not be afraid if NAFTA ends. It is better to have no agreement than a worse agreement.” Indeed, in response to President Trump’s latest threat to withdraw the United States from NAFTA, Mexican industrial executives said in late August that the end of NAFTA would not be catastrophic for their industries, which would trade according to WTO tariff schedules and rules.

It is unlikely that Mexico or the U.S. will pull out of NAFTA. However, the abysmal economic performance of NAFTA in Mexico—particularly for the 55 percent of Mexicans living in poverty in 2014, an increase of 20 million since 1994, according to the Center for Economic and Policy Research—will surely be among the reasons that NAFTA will be a Mexican electoral issue, regardless of whether or not the NAFTA re-negotiations are concluded prior to the beginning of the U.S. and Mexican 2018 electoral campaigns. Moody’s, the U.S. credit rating service, is already warning that it will downgrade Mexico’s credit rating and financial markets will downgrade the value of the peso, if the likely opposition presidential candidate wins in July 2018.

Part of the Declaration’s genesis came from a tri-national meeting of civil society organizations in May in Mexico City, which IATP reported. Some of the Declaration’s “Guiding Principles” are similar to the “benchmarks for a new NAFTA,” set out by food and farm groups including IATP, Food and Water Watch, the National Farmers Union, the National Family Farm Coalition, the Rural Coalition and R-CALF, the independent ranchers’ group.  For example, both the Declaration and the benchmarks call for broad consultations with the public about negotiating objectives, public disclosure of draft negotiating texts, and other measures to improve negotiations transparency.

Both documents call for elimination of the Investor State Dispute Settlement mechanism, an arbitration practice preferred by corporations over litigation in public courts.  The ISDS enables private investors, e.g. the Mexican subsidiary of a U.S. headquartered corporation, to sue governments for actions that reduce anticipated corporate or investor profits. Labor, environment, consumer and many other civil society organizations from the three countries are unified in these demands.

However, the Declaration’s “Guiding Principles” go beyond the benchmarks, not only because of the breadth of the signatories’ interests and the legal character of “Complementary and Cooperation Agreement,” but because of the subjugation of the Mexican economy and society to U.S. corporate interests, formulated in the euphemistic language of “further economic integration.”  So, for example, under the principle for national sovereignty, the Declaration states, “We therefore reject the Mexican government’s intention to include petroleum in the renegotiation of NAFTA. The sovereign right to define our own energy policy must be made explicit, emphatically excluding any energy annexation.”  

Because much of the purported increase in trade under NAFTA consists of intra-corporate component exchange that bans any requirements for national content in traded goods, the Declaration calls for the right of all nations to develop an economic policy to meet national needs, including trade rules that require national content in the components exchanged by or within corporations. “Nations must be able to retain the possibility of an economic and industrial policy that meets the needs of the domestic market and fosters high national content and domestic value added to exportable products. To do this, the rules of origin necessary for export tariffs should require national content, not just regional content.” In contrast to Trump’s “America First!” ideology, the Declaration asserts the right of all nations to develop a trade policy that is subordinated to the needs of the domestic economy.

Some of the “Guiding Principles” concern issues that are germane to Mexico and other developing countries, but that may be novel to U.S. readers in a trade policy context. For example, the Declaration responds to money laundering by U.S. headquartered banks—such as Citigroup, which paid the Trump Justice Department a paltry $97 million fine (in 2016, Citigroup reported about $1.8 trillion in assets) to end an investigation into its Mexican subsidiary.  The signatories agree, “It is imperative to improve enforcement mechanisms not only to prevent money laundering, but also the control of illicit flows and tax evasion and to end tax havens and the lack of transparency over real earnings. Prohibitions on capital controls in NAFTA and other agreements contribute to facilitating illicit capital flight.”

While the stereotype of NAFTA is reducing “impediments to trade” in goods, the big killings for Wall Street are to be made in the transfer to U.S. banks of financial capital—whether legal, unregulated and/or illegal. Despite U.S. Federal Reserve Bank’s Chairwoman Janet Yellen’s warning last week against the Trump administration’s initiatives to eliminate U.S. regulations put in place after the global bank crisis, the USTR is determined to export U.S. financial services deregulation and non-regulation to NAFTA.

The Mexican Better Off without Free Trade Agreements Convergence, which led the drafting of the Declaration, will be present at the NAFTA talks starting this weekend in Mexico City. Not at the talks themselves, which likely will take place in a luxury hotel (we haven’t been able to find out which one) but in the streets, at the Mexican Congress and in unity with its allies in the three countries.