Mexico prepares for possibility of U.S. withdrawing from NAFTA

MEXICO CITY — Mexico is taking President Donald Trump’s threats to pull the United States out of the North American Free Trade Agreement more seriously as a second round of talks opens Friday in Mexico City on renegotiating the 1994 trade pact.

In the aftermath of Trump’s Sunday tweet saying that Mexico and Canada are “both being very difficult, may have to terminate,” Mexico now says it is developing a “Plan B” in case Trump withdraws from the trade pact.

“Is there a possibility we could hit an impasse that we can’t overcome? That cannot be discounted,” Mexico’s Economy Secretary Ildefonso Guajardo told the country’s Senate.

“We have to have an alternative plan perfectly prepared,” he said. “A scenario without NAFTA is something we have to think about.”

Guajardo said key sticking points include U.S. demands to modify NAFTA’s dispute resolution process and tighten labor standards. In comments to Mexico’s Senate, he said that about 15 of the 25 negotiating groups have run into differences after the first round of talks started Aug. 16 in Washington.

“There are 10 working groups where we are starting to see difficulties, the chapter on labor issues, electronic commerce, franchises,” Guajardo told Mexico’s Senate this week.

One significant clash is over NAFTA’s method of resolving disputes.

The current agreement allows binational panels of private experts to decide differences, making it harder for one nation to unilaterally impose tariffs on another.

The United States wants to eliminate those panels, but Canada and Mexico fear that would allow the U.S. to throw its greater weight around.

On Wednesday, Trump appeared to leave open the possibility of leaving NAFTA and negotiating new accords with Mexico and Canada to replace it.

“We’ve got to change this deal, and hopefully we can renegotiate it, but if we can’t we’ll terminate it and we’ll start all over again with a real deal,” Trump said.

Mexico says it, too, is leave if necessary.

“If the result of the negotiations isn’t beneficial for Mexico, of course Mexico won’t stay,” Foreign Relations Secretary Luis Videgaray said Wednesday. ready to