Protecting Mexico's Energy Reforms
Director Duncan Wood on the NAFTA negotiations and Mexico's energy reforms.
When President Salinas Gortari signed the North Atlantic Free Trade Agreement for Mexico in 1992, he provided certainty and stability for investors hoping to benefit from Mexico’s emerging manufacturing base. The trade deal locked in the benefits of domestic economic reforms and liberalization introduced in the late 1980s and early 1990s. The steady flow of foreign investment that followed turned Mexico into a manufacturing powerhouse.
When negotiators from Mexico, Canada, and the United States start talks on Wednesday to renegotiate aspects of the 23-year-old agreement, they too hope to lock in recently won gains in Mexico that are of enormous interest to all parties. One priority must be to defend hard-won reforms in Mexico’s energy sector -- reforms meant to change a sector that was closed and monopolistic for 75 years. Since U.S. President Donald Trump’s inauguration in January, a broad-based movement has emerged that aims to defend two decades of free trade in the region and to insist on the urgency of “doing no harm” during renegotiation. NAFTA’s defenders have managed to influence a change in language: Where commentators once spoke of renegotiating a pact Trump characterized as the worst trade deal signed by the United States, the negotiations are now widely framed as an opportunity to modernize a venerable trade deal so that it more accurately reflects the needs and priorities of the 21st century economy.
The North American energy sector has adjusted its own approach. Oil and gas companies pushed hard to leave the agreement untouched, but once Trump notified the U.S. Congress that he intended to enter into talks, there emerged an unrelenting focus on the need to protect key elements of NAFTA. Early in the Trump administration, there was a fear that Congress might approve measures leading to a 20 percent tax on oil entering the U.S. market, and risking retaliatory measures from Mexico. Initially lauded by President Trump and the Republican Party, this option was recently discarded by Congress and is unlikely to be resurrected soon.
About the Author
Duncan Wood
Mexico Institute
The Mexico Institute seeks to improve understanding, communication, and cooperation between Mexico and the United States by promoting original research, encouraging public discussion, and proposing policy options for enhancing the bilateral relationship. A binational Advisory Board, chaired by Luis Téllez and Earl Anthony Wayne, oversees the work of the Mexico Institute. Read more
