Trump's rhetoric has Mexico bracing for worst in NAFTA talks

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The second round of renegotiation of the North American free-trade agreement opened on Friday in Mexico City in a setting designed to reinforce the aura of globalization entrained by the 17-year-old deal.

In the posh Polanco neighbourhood, which houses the Hyatt Regency, where negotiators hunkered down, Mexicans sip Starbucks lattes, invest their money at the Bank of Nova Scotia and chow down on U.S. fast-food.

But the agreement is under unprecedented threat. U.S. President Donald Trump's two-year long rhetorical assault on Mexico has whipped up public furor and emboldened domestic opposition to NAFTA. And his escalating threats to terminate the deal – or tie it to his demand that Mexico pay tens of billions of dollars for his promised wall along the border – has the Mexican government preparing for the worst.

"Mexico is taking the position that it is not willing to negotiate at any cost," Andres Rozental, a former high-ranking Mexican diplomat who was involved in the original NAFTA talks, said in summing up the mood in the country. "And if these threats continue, if the talks are under a sword of Damocles, Mexico is prepared to get up and walk away rather than negotiate under these circumstances."

Mexico and Canada are renegotiating the pact at Mr. Trump's behest, after the President said repeatedly on the campaign trail that it moved U.S. factory jobs out of his country. But in Mexico, the renegotiations are about more than economics: The President's NAFTA complaints are intertwined with his portrayal of Mexicans as criminals, his promises to deport undocumented immigrants and his contention that illegal drugs are "pouring" across the border.

The government of President Enrique Pena Nieto wants to preserve the deal, but faces a public backlash if it is seen as too soft on Washington. Just 5 per cent of Mexicans trust Mr. Trump, according to a Pew Research poll.

In recent days, Mexican Foreign Minister Luis Videgaray has warned Mexico would walk away from talks if Mr. Trump makes good on his threats to start the withdrawal process. And Economy Minister Ildefonso Guajardo has said the country must be ready for the possibility of a future without NAFTA.

Mexico's business community hopes it does not come to that.

Armando Ortega, president of the Canadian Chamber of Commerce in Mexico, says the deal has been crucial to entrenching the country's economic reforms of the past 30 years, as the government has increasingly cut red tape for business and opened the market to investment.

"NAFTA is absolutely a vital piece of the modernization of the country," he said in an interview. "It is the most valuable international trade asset, and should be defended and modernized."

Mr. Trump has "poisoned the environment in Mexico," even as the country has come to increasingly accept the value of the deal.

Mexico's left has long been critical of NAFTA, and Mr. Trump's attacks on the country have only made that view more popular. Andres Manuel Lopez Obrador, a former mayor of Mexico City and NAFTA critic, is leading polls to wrest the presidency away from the governing Institutional Revolutionary Party next year.

On the sidelines of a labour rally outside the lower house of Mexico's Congress on Friday, Hector de la Cueva said NAFTA had failed to live up to its promises of better wages and working conditions for Mexicans. Auto workers, for instance, make about one-fifth of what their counterparts in the United States and Canada earn.

Mr. de la Cueva, who works for a trade union umbrella group, said he feared Mexican workers would be hit even harder if the deal is overhauled to suit Mr. Trump's "America first" agenda.

"It's not true what Trump said that Mexico is the country that has most benefited [from NAFTA]. It's a lie," he said. "We are afraid now that this negotiation could get a worse treaty than NAFTA."

Canadian labour leader Jerry Dias, who addressed the rally, argued the solution is to use the renegotiations to build ironclad labour rights into NAFTA. If this cannot be done, he said, Canada should walk away from the bargaining table.

"The Mexican workers that work in your auto plants can't afford to buy the cars that you build. That is an absolute disgrace," Mr. Dias, president of Unifor, Canada's largest private-sector union, told the cheering crowd. "We all deserve the same amount of money."

NAFTA's supporters pin their hope to avoid the worst on the fact that U.S. business lobbies are almost entirely behind the deal.

Agriculture in the United States – largely based in heartland states that form part of Mr. Trump's Republican base – has done particularly well, shipping trainloads of corn, barley and soy south.

"The free-trade agreement has helped us get to where we are," said Floyd Gaibler, director of trade policy for the U.S. Grains Council. "If the administration wants to grow the U.S. economy, free-trade agreements are one of the ways to do that."