Commissioner Malmström's comment on "the wall" was not among the most important of her many points but it was eye catching. We'll deal with that first and then move to bigger issues. If she had stopped after the first sentence "not the way to make anyone's country great again," she would have been better off. One doesn't have to agree with the sentiment to recognize that it expressed a bond between Ms. Malmström and her audience. The comparison with the Berlin Wall, however, was a bit of a stretch, unless you think that locking your door at night is the same as being under house arrest.
The more important issues, of course, are the politics and the economics of these new agreements - the upgrade of the EU-Mexico Agreement that has been under way now for more than a year, and the renegotiation of NAFTA, which, we assume, will begin later this summer. We are not sure how large a role the negotiations with Mexico will play in European politics. We assume that Brexit and other issues loom much larger there. In North America, however, the prospect of renegotiating NAFTA is a big deal in all three countries and likely to get bigger.
We are a babe in the woods where Mexican politics are concerned, but here are a few considerations worth keeping in mind as the NAFTA talks unfold.
On July l, 2018,
Mexicans will go to the polls to elect a new president. At the moment, the front runner is the challenger
Andres Manuel Lopez Obrador, known as
Amlo. His left leaning party, the National Regenerational Movement or MORENA is quite new but clearly doing well, and reportedly Amlo is no fan of NAFTA. President
Enrique Peña Nieto of the Institutional Revolutionary Party (PRI) cannot succeed himself, and it is not clear (not to us anyway) who the PRI candidate will be. In short, one could easily read too much into Amlo's current lead in the polls.
June 4, 2017, is the date Mexico's political world is watching now. That's the date for the
gubernatorial election in the State of Mexico, the largest of Mexico's 32 states, which surrounds but does not include Mexico City. In that race, the MORENA candidate,
Delfina Gomez Alvarez is neck-and-neck with the PRI candidate,
Alfredo del Mazo Maza. Mr. del Mazo is President Peña's cousin and the State of Mexico is the PRI's home ground. A win by Ms. Gomez Alvarez on June 4 would be widely read as greatly strengthening the prospects of Almo becoming the next president of Mexico. To say the least, that change of parties at the top of the Mexican government could complicate any trade negotiation with Mexico that hasn't already been put to bed.
In a short but helpful Forbes article last week, Kenneth Rapoza summed up the situation this way:
If Gomez wins, Washington should take heed and hammer out a workable timeline for a NAFTA do-over soon, but so far there seems to be no hurry. If negotiations get stuck between presidencies, everyone could end up going back to square one. Amlo is the Joker to Trump's Batman.
We'll conclude with two small points, one statistical and the other atmospheric. The statistical point has to do with trade balances and deficits. Whether or not trade balances are meaningful economically, they are part of the discourse of any trading relationship. The European Union consistently runs a solid trade surplus with Mexico, about $15 billion in 2016.
Finally, those in North America who care about NAFTA may feel a touch of envy in reading Commissioner Malmström's remarks in Mexico. Certainly, it is better to see the next step, the next deal, as a continuation in a positive journey than a correction in a flawed one. But rhetorically those are the cards that have been dealt.
Still, we are optimistic. We are optimistic because we believe that, each in its own way, Canada, Mexico, and the United States all know how important NAFTA is to their own economies, how high the cost of failure would be, and how critical it is to get the renegotiation right.
