In the end, there’s a moral to this story, but let’s see first what the story is.
In his imaginary trade war against China, maybe U.S. President Donald Trump thought he had killed the Trans Pacific Partnership (TPP) negotiations by pulling his nation out of the multilateral 12-nation trade deal.
The bad news for Trump and his voters is that the TPP is alive and kicking, as it was proven this week with the first gathering of the remaining 11-nations in Chile for a summit.
Organized by the Latin American group of nations — the Pacific Alliance formed by Chile, Peru, Colombia and Mexico — who already boast a multilateral free trade agreement considering that, according to Mexico’s Foreign Relations Secretary Luis Videgaray, “many of the advances made in TPP discussions can now be put to new use. The objective now is not exactly to substitute TPP but to advance in different platforms of trade integration initiatives.”
A special guest at the two-day reviewing conference was China, whose trade representatives took the opportunity to get close to the organizers, especially Mexico.
Videgaray emphasized that for Mexico, “China is a very important trading partner and a nation with which we have an integral strategic association.”
At the same time, and this was an oddity, the recently named U.S. National Trade Council representative Peter Navarro sent messages of love for Mexico in an interview with Bloomberg News that in the upcoming renegotiations of the North American Free Trade Agreement (NAFTA) the Trump Administration would like to form “a regional manufacturing powerhouse” with Mexico.
Mind you, Peter Navarro is the same economist who has been thrashing China, calling them the enemy of the United States and a nation with which the U.S. may eventually engage not just in a trade, but a real hot war fighting for “bread, water and air.” Navarro is also the radical economist who has influenced Trump in this cancellation of U.S. participation in the TPP and even NAFTA.
In the near offing we’ll see how Mexico takes this on, but for the meantime the results of the Pacific Alliance summit on TPP in Chile yielded results.
“It was not just a timely reunion but one that was very productive and a concrete step forwards” Videgaray said, claiming that from now on the Pacific Alliance will be seen as spearheading regional trade integration of the Pacific Ocean nations. Besides the four Pacific Alliance countries organizing the event, 11 other nations attended for a total of 15 nations in the reunion.”
“We agreed that the objective now is not necessarily substitute TPP, but to use many of the concepts already negotiated and advance towards regional integration.”
For one concept, now the Pacific Alliance — with a free trade agreement already in effect — has all the capabilities of welcoming other nations as “associates” with full free trade partnership rights.
“Potential is enormous and we are extremely optimistic that with some nations, in particularly those who were part of TPP negotiations, we have the conditions to advance quickly. Naturally, trade alliances have their own pace but this was the decision made by the four nations that form the Pacific Alliance.”
But beware, the United States is watching closely and Peter Navarro, also the man who is the brain behind the controversial Border Tax Adjustment proposed bill in the U.S. Congress, is now backtracking on NAFTA and as time goes by President Trump seems to be forgetting about “doing away” with the “badly negotiated” treaty and instead, if we take Navarro’s word for it, now Trump would like to integrate Mexico more to the United States.
Navarro let it be known that the idea of NAFTA renegotiation will be to reshape the Rules of Origin clauses under NAFTA in order to increase the number of regional parts and materials. This will surely mean leaving China sourcing out of the renegotiated trade deal.
The change in attitude by Navarro, considered by U.S. economists to be the man who set Trump on an anti-NAFTA electoral campaign, points out to “a good negotiation” that will be beneficial for Mexico in the long run.
The problem is that after this week’s Pacific Alliance treaty members gathering, Mexico may no longer be looking north. Rather, the word now is economic diversification with the many Pacific Rim nations that want to trade with Mexican businessmen in earnest.
The moral of the story is that the Northern Bully is now pulling back from all its threats — except for building the wall — and recognizing that after 23 years NAFTA has been beneficial for trade and indeed is not the “jobs stealing” trade partner Trump sold his voters.
The moral may also just be the old Spanish adage that a “barking dog doesn’t bite” because it’s busy barking.
In the meantime, increased trade with our Pacific Ocean neighbors is a reality.
