New NAFTA terms get thumbs up from Mexico's biggest bank

Source: Xinhua| 2018-09-20 12:52:05|Editor: Yang Yi

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MEXICO CITY, Sept. 19 (Xinhua) -- The renegotiated terms of the North American Free Trade Agreement (NAFTA) meet Mexico's objectives, the country's biggest bank said Wednesday.

An agreement in principle reached at the end of August between the United States and Mexico succeeds in minimizing the impact of the proposed changes to the trade deal that came into force in 1994, BBVA Bancomer financial group said.

Carlos Serrano, chief economist of BBVA Research for Mexico, said the agreement signed on Aug. 27 is even-handed, ensuring opportunities for both sides.

"It doesn't have a negative impact on value chains, investment or trade exchange taking place as of now between the two nations," said Serrano.

The agreement "limits uncertainty and is a good outcome" of the renegotiation of the NAFTA, he added.

One of the biggest points of contention between the two countries was a U.S. proposal to tighten rules of origin for the automotive industry, by raising the ceiling of regional content for vehicles manufactured in North America. The two finally agreed to increase the percentage from 62.5 percent to 75 percent.

Both sides also agreed that at least 70 percent of the steel and aluminum used to make a car must come from North America, and that between 40 and 45 percent of an automobile must be made by workers earning at least 15 U.S. dollars an hour, a demand that low-wage Mexico has been resisting.

However, "Mexico will continue to be competitive in producing and exporting vehicles," said Serrano. "These rules don't entail structural changes to the sector," he added.

Additionally, the agreement takes into account a possible U.S. tariff of 25 percent on light vehicles for reasons of national security or withdrawal from the World Trade Organization (WTO), and would exempt 2.4 million Mexican vehicles from import tax. The figure accounts for about 40 percent of Mexico's current total exports.

Canada, also a NAFTA partner, has trade issues of its own with the United States, and is in the process of separately reviewing the agreement.