MEXICO CITY (AP) — Mexico has faced criticism lately for serving as a conduit for Chinese parts and products to North America, and officials here worry that a re-elected Donald Trump or politically struggling Canadian Prime Minister Justin Trudeau could try to leave their country out of the US-Mexico-Canada Free Trade Agreement.
Mexico’s ruling Morena party is so fearful of losing the trade deal that President Claudia Sheinbaum said Friday the government has launched a campaign to push companies to replace Chinese parts with locally made parts.
“We have a plan that aims to replace these imports that come from China and produce the majority of them in Mexico, either by Mexican companies or mainly by North American companies,” Sheinbaum said.
Trusted news and daily treats, straight to your inbox
See for yourself: The Yodel is the source for daily news, entertainment and feel-good stories.
Although Sheinbaum claimed that Mexico had been working on this effort since the 2021 global supply chain crisis — when factories around the world were stalled by a lack of parts and especially computer chips from Asia — it appears to be an uphill battle. Even the United States has faced major challenges in moving chip production home, despite billions in subsidies and incentives.
Mexico gained tens of thousands of jobs when U.S. and foreign automakers moved their factories to Mexico under the free trade pact to take advantage of much lower wages. But the idea that Chinese parts — or even entire cars — could piggyback on that scheme to further erode the U.S. auto industry has infuriated some people north of the border.
So Mexico is trying to convince private companies to move parts production here.
“Next year, God willing, we will start making microchips in Mexico,” Mexican Economy Minister Marcelo Ebrard said on Thursday. “Of course they are not yet the most advanced chips, but we are going to produce them here.”
Mexico’s nationalist ruling party, normally fiercely resistant to being seen as bowing to U.S. demands, is also struggling in other ways.
The ruling party is eliminating half a dozen independent regulatory and supervisory bodies created by former presidents. This includes anti-monopoly, transparency and energy regulatory bodies. Together with reforms to ensure that all judges stand for election in Mexico, this has raised concerns in the US and Canada.
Countries are required under the agreement to have a number of independent bodies, in part to protect foreign investors. For example, they could prevent a government from approving a monopoly for a state-owned company, which could force competitors out of the market.
So the ruling parties’ lawmakers are essentially rewriting the proposed laws to precisely mimic the minimum accepted requirements of the trade deal.
“What is being done is to implement a reform that is almost exactly similar to what exists in the United States so that we can clarify that,” Ebrard said.
It’s all part of a highly legalistic defense of the trade deal, signed in 2018 and approved in 2019. Mexico hopes the deal’s rules will prevent the US or Canada from simply walking away when the trade deal comes up for review in 2026. agrees and says the deal is unlikely to be completely abandoned.
Gabriela Siller, director of economic analysis at the Banco Base financial group, notes that if a country is dissatisfied with the trade deal during the periodic reviews, such as in 2026, there is a clause in the pact saying that every year they will request a can request a review. to work out a solution, and to continue to do so for ten years while the agreement remains in force.
“That means they wouldn’t be able to get out until 2036,” Siller said. “I think they will play hard against Mexico in the 2026 evaluation.”
Like any marriage, if the pact no longer works for one party, it may drag on for years, but it is death by a thousand cuts.
C.J. Mahoney. who served as deputy U.S. trade representative in Trump’s first administration, said in a speech to the Texas-based Baker Institute in September that the United States would likely not terminate the trade deal. But as the pact’s critics become increasingly vocal, its renewal could take years.
“The costs of not renewing immediately are actually quite relatively low,” Mahoney says. “I think the urge to just kick the can down the road is going to be pretty strong.”
Because many companies will not make major investments in production facilities without certainty, this could be a serious, if not fatal, blow to the pact.
How much is Mexico actually buying from China? Mexican officials say they import fewer Chinese parts and products than the United States. But given the huge difference in size between the two countries’ economies, this is a true but weak argument.
In July, the US imposed tariffs on steel and aluminum shipped from Mexico that were made elsewhere, in an effort to stop China from avoiding import taxes by moving goods through Mexico. It includes a 25% tariff on steel not melted or cast in Mexico, and a 10% tariff on aluminum.
Senator Sherrod Brown, an Ohio Democrat, has called for a halt to Mexican steel imports, saying “the alarming increase in Chinese steel and aluminum entering the country through Mexico… is unsustainable and a threat to American jobs, as well as our economy. and national security.”
Ultimately, Mexico may be forced to crack down on Chinese imports, but that won’t be easy.
“Reducing dependence on Chinese imports will not be achieved in the short or medium term,” said José María Ramos, professor of public administration at the Colegio de la Frontera Norte in Tijuana.
