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NAFTA In A Land Of Uncertainty: A Perspective From Mexico

Author:Mr Andres Alvarez, Arcie I. Jordan, Elsa Manzanares, Marcos Carrasco-Menchaca, Michelle Schulz and Alejandro N. Gómez-Strozzi
Profession:Gardere Wynne Sewell LLP
 
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Potential reactions to trade measures that may be undertaken by U.S. president-elect

The U.S. president-elect has proposed to renegotiate or withdraw from NAFTA and impose a 35 percent tariff rate on imports to the U.S. from Mexico. The Mexican government has remained largely silent and expectant regarding such claims. While the Mexican government has not disclosed potential retaliatory measures, Mexico is not helpless and has some options in the event such proposals become reality under the new administration.

In a previous alert, we analyzed the possibility of a U.S. withdrawal from NAFTA. Below we address potential responses from Mexico in the event of a NAFTA renegotiation or other restrictions on imports to the U.S. from Mexico.

What can the Mexican government do to counteract measures from the Trump administration?

The Mexican government has measures available to counteract tariff increases and nontariff barriers on imports from Mexico to the U.S., which would have the practical effect of blocking certain U.S. exports to Mexico. These actions range from an increase in import duties on U.S. products coming into Mexico to the establishment of nontariff barriers on imports from the U.S.

Mexico is no stranger to non-tariff barriers. In fact, Mexico has increasingly used them to protect certain sectors of its domestic industry. Some of these measures include:

Minimum import reference prices for textile and footwear imports Limiting entry ports for textiles Requiring advance import-notices for steel products Requiring prior permits for steel and iron ore Establishing import quotas for toys and clothing The use of antidumping duties has also been on the rise, even though antidumping investigations involve a lengthy and adversarial process in which U.S. exporters can, contrary to the previous measures, opine and argue on their behalf.

Some non-tariff measures can be unilaterally imposed by the Mexican Ministry of Economy while others may require coordination with other Mexican agencies. In either case, implementation is relatively swift because it simply requires the approval of a multiagency, non-binding opinion body (the Foreign Trade Commission, or COCEX in Spanish) and publication in the Diario Oficial de la Federación. Such steps could be accomplished in weeks, or even days, if the Ministry of Economy determines the matter to be urgent.

The Mexican government could also enhance the existing relationship with other trading partners, such as the EU...

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