Nafta can be discussed, but not renegotiated, says Mexico

"Canadian_Mind" said
If they are unwilling to negotiate, it will be scrapped.

"Canadian_Mind" said
I thought the FTA was negotiated by the Mulroney government?

"herbie" said
I thought the FTA was negotiated by the Mulroney government?

"shockedcanadian" said
Well there is a fall back position if I recall, I believe we had a much less robust free trade agreement with America before the signing of NAFTA which then added Mexico to the mix. I'm not sure, but I thought I read awhile ago that if NAFTA somehow disappeared that the old trade agreement from the 70's or 80's would revert back in place.

Mexico would be SOL, but we would maintain a healthy, though seemingly far more narrow two state trade agreement.

Scenario 1: A trade war.
What worries economists most is the prospect of a trade war.
Let's say Trump kills NAFTA and imposes a 35% tariff on at least some Mexican imports as he's threatened to do. The NAFTA implementation law, which would remain in effect until Congress repeals it, appears to give the president the power to levy tariffs on Mexico and Canada without Congressional approval, Horlick said.
This would hurt many American firms, such as GM, IBM and Coca-Cola, which manufacture parts and products in Mexico and ship them back to the U.S. Among the most popular imports include auto parts, flat-screen televisions, telephones and refrigerators.
Related: Chamber of Commerce leads Big Business attack on Trump over trade
"We've developed a vast network of supply chains and we'd be interfering with it," said Robert Lawrence, a professor of international trade and investment at Harvard's Kennedy School of Government. "It's suicide for both sides."
Also, American consumers would have to shell out more for these goods since the tariffs would add to their cost. The U.S. imported $259 billion in manufactured products from Mexico last year.
Related: Trump's tariffs will cost Americans thousands, report says
On top of all that, Mexico would likely respond with tariffs of its own, hurting sales of American products south of the border, which would likely curtail their purchases and hurt manufacturers here. Mexico, which is America's second largest market for exported goods, bought $214 billion in manufactured products from American companies last year. Among the top exports are machinery, vehicles and plastics.
Mexico generally imposes a tariff of 7.5% on goods from countries that it lacks a free trade agreement with, but it depends greatly on the product.


Scenario 2: Trump negotiates an amazing deal!
Trump has said he would only withdraw from NAFTA if he can't renegotiate the terms of the agreement to get a better deal for workers. "And I don't mean just a little bit better, I mean a lot better," he said.
But the details remain scarce. Trade experts said they don't know what Trump wants to do.
"It's not clear what that better deal would be," said Hufbauer.
Also, reopening a trade agreement is not an easy task. Both President Obama and Hillary Clinton talked of reopening NAFTA to improve labor standards during the 2008 campaign, but the effort didn't go far because it would have been hugely disruptive, Lawrence said.
Robert Scott, director of trade and manufacturing policy research at the left-leaning Economic Policy Institute, said he'd like to see NAFTA "fixed" to raise income for Mexican workers so "there is more demand for products made in the U.S."
The Trump campaign did not return a request for comment.
Related: Is trade really killing middle class jobs?


Scenario 3: Not much impact, at least initially.
Though Mexico was more closed before NAFTA, it's not likely it would put up a wall to outside companies. The country benefits greatly from foreign investment.
Prior to NAFTA, direct investment from the U.S. in 1993 was $2.5 billion. That grew to $9.3 billion in 2014, according to the United Nations Conference on Trade and Development.
"I don't know why Mexico would push [U.S. companies] out the door," said Scott.
Related: Why it would be tough for Trump to bring jobs back from China
Also, let's say withdrawing from NAFTA simply meant that Mexico would now be subject to normal trade relations tariffs. That on its own may not significantly dent American manufacturers' current production there, but it may dissuade them from adding to their investments. On some of the most popular imports, such as cars and auto parts, the tariff is only 2.5%, according to VanGrasstek. And items such as computers, silicon chips and some medical products are generally duty free.
Regardless of how it exactly plays out, it's not likely that withdrawing from NAFTA will do much to help American workers. Higher tariffs would wipe out much of the advantage of U.S. companies manufacturing in Mexico. Some of those jobs could in theory go back to America, but higher labor costs would weigh on profits of U.S. companies. More likely, American companies would seek to produce in other countries with low wages.
"Ending NAFTA wouldn't bring back jobs to the U.S.," Scott said.