The United States has announced plans to renegotiate the North American Free Trade Agreement with Mexico and Canada. Talks between the three countries could begin in August. During the campaign, President Donald Trump called NAFTA a job-killing "disaster" and vowed a major overhaul. But Miguel Noyola, a partner at Baker & McKenzie LLP who advises firms doing business in Mexico, expects negotiators to focus on technical changes to the 23-year-old deal — and to work fast to reach an agreement before politics heats up next year in Mexico and the United States. The interview has been edited for length and clarity.
Q: Why renegotiate NAFTA?
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This agreement was negotiated in the early 90s. The agreement in many ways was trailblazing in foreshadowing the unleashing of global commercial forces. In those days, you had very incipient Internet, disjointed supply chains. So you fast-forward 25 years or so and clearly the world has changed. So it makes a lot of sense to modernize it in key areas that will be consistent with what multinational companies and companies engaged in global commerce require for the movement of goods and services. Take digital trade. I see several areas where the agreement could be updated. One is on doing away with costly written documentation that could be made electronic — for manifests, certificates of origin, things of that nature.
There are other areas. Take the oil and gas industry. It was largely not covered by NAFTA. In those days, Mexico had a very nationalistic approach to (energy). It was carved out from (allowing foreign investment). Since then, there have been many changes (toward openness) in Mexican regulation that NAFTA needs to account for.
Q: Could we see a renegotiated deal this year?
A: It is possible. (U.S. Trade Rep. Robert) Lighthizer notified Congress of the intent to modernize NAFTA on May 18, which then set a 90-day consultation period. It's reasonable to believe that negotiations will begin in earnest as soon as that 90-day period concludes. I do think it is possible to agree on an updated NAFTA by the end of the calendar year. It's an agreement that the three parties know very well. There aren't any surprises. I don't think there will be much (disagreement) about the areas that need to be updated.
The three teams want to avoid distractions. What you want to avoid is to turn a very technical trade discussion into a political football that will be picked up by political actors — in Mexico ahead of the presidential election down there in the summer of 2018 or in the midterm elections in the fall of 2018 in the United States. The negotiators need to treat it as a deal as opposed to a political discussion.
Q: In America, NAFTA has been called a job killer. Is that a valid charge?
A: I think that's a false charge. It has been a very positive agreement. It tied three economies that no one thought would become a very important trading region. In many U.S. states, Mexico is, if not their most important export market, among the top three. NAFTA has allowed companies to become more efficient as they compete around the world. The North American market has made the three countries, but in particular Mexico, super-competitive in the world market. (Without NAFTA), U.S. companies and jobs would be at a disadvantage vis a vis Asia or Europe.