NAFTA talks start today in Mexico

WASHINGTON — Canada and Mexico would like nothing more than to sideline the United States and create a bilateral trade agreement that excludes their suddenly unreliable neighbor.

But they can’t create a deal worth the trouble without access to America’s markets, senior officials of both governments concede. And that realization gives a significant advantage to President Donald Trump as he threatens to reopen the bedrock NAFTA partnership.

“Even though it would be easy to reach a bilateral agreement because we have the NAFTA framework, it doesn’t amount to much without the United States,” said Jorge Guajardo, Mexico’s former ambassador to China who is familiar with the negotiations. “That is what made NAFTA powerful.”

As negotiators from the United States, Canada and Mexico kick off a second round of talks today in Mexico City, Trump has been amping up the rhetoric against the 23year-old agreement, threatening to pull out during a rally in Phoenix last week and then again on Monday at the White House.

“NAFTA is one of the worst trade deals ever signed at anytime, anywhere in the world,” Trump declared Monday.

On the record, Mexican and Canadian officials have dismissed this now typical rhetoric as a negotiating tactic: “He’s negotiating in his own particular style,” Mexican Foreign Minister Luis Videgaray told Mexican television.

But officials in Mexico have begun making contingency plans for a future without NAFTA. And it doesn’t look great for their economy, or Canada’s.

While proponents of NAFTA often argue — with evidence — that the United States has much to lose from ending the special trade relationship with Mexico and Canada, those countries would suffer too. Canada relies on the purchasing power of U.S. consumers for a whopping 75 percent of its total exports. American buyers fuel more than 80 percent of Mexico’s total exports.

That’s why Trump’s rhetoric is so unnerving, north and south of America’s borders. A Canadian official said Ottawa was surprised at how aggressive the White House has gotten so early in the discussion.

“This is more of an 11thhour move that people make,” that official said.

Trump’s complaints about NAFTA sound simple, but they are economically complicated.

The president, who says he wants a “fair deal,” often cites the U.S. trade deficit with Mexico — a measure of how much America’s imports from Mexico exceed its exports to Mexico. In 2016, that trade deficit stood at $63 million.

Economists widely agree that carrying a trade deficit is not inherently a bad thing, especially for a developed economy like the United States.