Mexican Senators Lay Out Six 'Red Lines' for Nafta Renegotiation

A group of senators from Mexico's ruling Institutional Revolutionary Party and its allies on Thursday laid out six "red lines" for the renegotiation of the North American Free Trade Agreement which they said if crossed would lead them to reject a modified deal.

"The modernization [of Nafta] is going to come before the Senate, and for this reason we want to make our worries known," said Marcela Guerra, a senator from the border state of Nuevo León, one of Mexico's most industrialized states.

The comments come as Mexico, the U.S. and Canada prepare for a fourth round of trade talks next week in Washington, D.C., and appear to be an effort by Mexican lawmakers to ratchet up pressure on the U.S. on some of the more controversial issues likely to emerge in negotiations.

Ms. Guerra said the U.S. is being uncompromising in the trade talks and applying protectionist principles that Mexico doesn't share.

"We have a free-trade tradition that has worked for the last 24 years...Mexico is one of the most open countries in the world," Ms. Guerra said. "The Senate is not going to approve a deal that doesn't work for Mexico."

The senators said they won't accept a proposed "sunset provision" requiring that Nafta be revisited every five years, the elimination of tariff preferences for Mexican textiles, or rules requiring minimum levels of national content for the auto-manufacturing sector. They would also reject seasonal protections for U.S. growers against fruit and vegetable imports from Mexico, the elimination of the Chapter 19 dispute resolution mechanism, and a proposal that would allow the U.S. government to favor American suppliers in its procurement.

Most of the items have already been highlighted as problematic by Mexico's private sector and its negotiating team, and the senators emphasized that their comments were for the benefit of U.S. trade officials. "We want to send a message to Washington," Ms. Guerra said.

Under Mexican law, at least 65 of the country's 128 senators must vote to ratify any changes to Nafta for them to take effect. The PRI and its allies in the Green Party currently control 62 votes, and would only need to convince three senators from opposition parties.

The issue of requiring minimum levels of American-made content for vehicles assembled in the Nafta zone was controversial almost from the moment U.S. Trade Representative Robert Lighthizer brought it up in his opening remarks during the first round of renegotiations in Washington, D.C., on Aug. 16.

Mexican officials, including Economy Minister Ildefonso Guajardo, have argued that because Nafta is a trilateral agreement, rules of origin -- which govern where components like auto parts must be made to cross borders tariff-free -- must be consistent for all three countries and can't privilege one country's industry over another.

"The U.S. wants to establish minimum percentages for national content in auto parts, and this would directly affect the production chains in Mexico and the whole automotive industry, and put the Mexican auto industry at a disadvantage," said Ricardo Urzúa, a PRI senator from the state of Puebla, home to assembly plants owned by Volkswagen and Audi, as well as hundreds of auto parts suppliers. "We will not permit this protectionism in the auto industry."

Mr. Urzúa and Ms. Guerra said the Mexican negotiating team has indicated that debate on substantial issues such as rules of origin and commercial dispute-resolution mechanisms are expected to intensify in the fourth round of talks.

José Ascención Orihuela, a senator from the state of Michoacán, which produces the bulk of Mexico's avocados for export and a large portion of the country's berries, said the proposal to impose seasonal regulations on exports to the U.S. is the result of a small minority of U.S. farmers angered by Mexican competition.

"Basically it has to do with production in two U.S. states: Florida and Georgia, where we have production that comes at the same time," Mr. Orihuela said.

He said the PRI-led group rejects any measures in a new trade deal that would limit the free flow of agricultural goods or make it easier for U.S. farmers to impose tariffs or quotas on Mexican crops.

"The flow of products has a long tradition," he added. "We receive fruits from the U.S. for which our production isn't sufficient or in some cases that we don't have because we export the majority of fruits, vegetables and other crops to them."

Write to Robbie Whelan at robbie.whelan@wsj.com

(END) Dow Jones Newswires

October 05, 2017 18:59 ET (22:59 GMT)