NAFTA's not dead: US and Mexico Close To Reaching Deal

The United States and Mexico look close to resolving key differences on the North American Free Trade Agreement and may have a complete deal worked out by as early as Monday, according to sources close to the talks.Three people familiar with the progress told Bloomberg that there have been significant breakthroughs over the past few days on issues ranging from automobiles to energy, although it is unclear if any of the progress will be made public as Mexico’s Economy Minister Ildefonso Guajardo has said the country won’t make an announcement on NAFTA until Canada also signs on to a new deal. Despite Trump’s oftentimes contentious relationship with Mexico, his administration and that of outgoing Mexican President Enrique Peña Nieto have been working for the past five weeks to iron out their bilateral differences so Canada can rejoin the talks to update NAFTA. Both countries want to finalize an agreement this month so that it can be signed ahead of Mexican President-elect Andrés Manuel López Obrador’s inauguration in December. One of the biggest issues on the negotiating table deals with car manufacturing jobs, as the Trump administration pushes for a deal that would boost factory employment in the U.S.

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If the two countries do free and fair trade then there would be no extra retaliatory costs to bear....

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Just now, jpZelabal said:

If the two countries do free and fair trade then there would be no extra retaliatory costs to bear....


Even after a U.S.-Mexico deal, there would still be a bunch of issues related to Canada left to deal with. Things are not always as simple as it looks.

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Yep. Pretty interesting situation. Now it looks like the U.S. and Mexico have a deal and Canada will need to take it or leave it.

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I will believe that when Mexico / USA release a written memo of understanding laying out the agreement in principle and signed by authorized representatives of both governments. NAFTA without Canada then it's not NAFTA..

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I don't think Canada is out of anything. Who knows, maybe Canada and Mexico are working behind the scenes in tandem...Will see.

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A bilateral (trilateral) negotiations free trade agreement free of tariffs! It may be wishful thinking, but how much worse can it get!

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Mexico quickly turned its back on Canada by agreeing to a bilateral negotiation. This weakened Canada' position for a better deal. It really hurts

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2 hours ago, jpZelabal said:

If the two countries do free and fair trade then there would be no extra retaliatory costs to bear....

This is false.  Free trade is never fair trade unless the two nations peg each others currencies to the other.  Even when there is free trade, one nation can always retaliate against the other by weakening their currency.  For instance, look at the trade war with China.  Right now, the Chinese are beating the daylights out of Trump.  So far, both sides have placed $50 billion in tariffs on the other; however, the Chinese have devalued their currency which has neutralized the effects of the US tariffs.  Current score:

Chinese: 50,000,000,000

Trump: 0

 

Trump can win the trade war easily by imposing another $500 billion.  The question is whether the American people are willing to let Trump win.  

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Mexico & USA finished negotiations this morning, it was announced by Pres Trump. Canada  was not in this last announcemt, stil waiting for Canada

 

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Canada will have to come to its senses in trade terms and try to re-join the new agreement. There will be an exponential energy industry business boom for the US selling to Mexico and trading energy with Mexico. Mexico is in serious need of energy security in terms of liquid fuels and natgas. That side of the business is already growing rapidly.

Mexico is offering all kinds of concessions and 'special tax structures' for US energy companies to build petro-products and natgas pipelines into Mexico for their domestic use as well as offering concessions and favorable tax structures for using Mexico as an export route for US energy products to Asia from their Pacific Coast. It will save everyone a lot of time and $$$ and also be environmentally beneficial in terms of ocean shipping emissions.

Canada , could be part of this as well helping the US export along with their resources from the Pacific Coast, production from Bakken etc.

Could be an energy and resources powerhouse 3tri-partite agreement that will benefit everyone.

 

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On 8/27/2018 at 12:10 PM, Epic said:

This is false.  Free trade is never fair trade unless the two nations peg each others currencies to the other.  Even when there is free trade, one nation can always retaliate against the other by weakening their currency.  For instance, look at the trade war with China.  Right now, the Chinese are beating the daylights out of Trump.  So far, both sides have placed $50 billion in tariffs on the other; however, the Chinese have devalued their currency which has neutralized the effects of the US tariffs.  Current score:

Chinese: 50,000,000,000

Trump: 0

 

Trump can win the trade war easily by imposing another $500 billion.  The question is whether the American people are willing to let Trump win.  

Sooner or later China has to come to an agreement with the US on trade balance at various levels. Maybe there could be a trade agreement with China broken down by industry sector, agricommodities (including food products for people and animal feed), petchem, energy, industrials, building and construction, transport, electronics and so on.

China has a huge population that is dependent on energy and food and food for their livestock... China needs US more in terms of exports and forex revenue than the otherway around in terms of critical sustainable good and products.

When the bitter winter arrives in China, they need more fuel and more fuel products and they need more wheat, corn, rice, soybeans, meats (beef, chicken etc) to feed their people. China knows how critical it is , they are going on a limited calculated tariff war. If they could do without the US they would have gone head on.

Wait and see game ...... but they will try to comprise and reach a somewhat mutually agreeable trade arrangement with the US.

It is the thing if the Chinese people are willing to pay much much higher costs of food and heating etc during those bitter cold months than American people having to pay more for electronic gadgets? Will Chinese leadership be willing to put their population through a winter of "starvation", "food shortages, very high food costs" and let them freeze and also pay very high energy costs for them to be comfortable?

 

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" but they will try to comprise and reach a somewhat mutually agreeable trade arrangement with the US. "

compromise not comprise , sorry

3 hours ago, ceo_energemsier said:

Sooner or later China has to come to an agreement with the US on trade balance at various levels. Maybe there could be a trade agreement with China broken down by industry sector, agricommodities (including food products for people and animal feed), petchem, energy, industrials, building and construction, transport, electronics and so on.

China has a huge population that is dependent on energy and food and food for their livestock... China needs US more in terms of exports and forex revenue than the otherway around in terms of critical sustainable good and products.

When the bitter winter arrives in China, they need more fuel and more fuel products and they need more wheat, corn, rice, soybeans, meats (beef, chicken etc) to feed their people. China knows how critical it is , they are going on a limited calculated tariff war. If they could do without the US they would have gone head on.

Wait and see game ...... but they will try to comprise and reach a somewhat mutually agreeable trade arrangement with the US. 

It is the thing if the Chinese people are willing to pay much much higher costs of food and heating etc during those bitter cold months than American people having to pay more for electronic gadgets? Will Chinese leadership be willing to put their population through a winter of "starvation", "food shortages, very high food costs" and let them freeze and also pay very high energy costs for them to be comfortable?

 

 

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2 hours ago, ceo_energemsier said:

Wait and see game ...... but they will try to comprise and reach a somewhat mutually agreeable trade arrangement with the US.

 It is the thing if the Chinese people are willing to pay much much higher costs of food and heating etc during those bitter cold months than American people having to pay more for electronic gadgets? Will Chinese leadership be willing to put their population through a winter of "starvation", "food shortages, very high food costs" and let them freeze and also pay very high energy costs for them to be comfortable?

Your are correct, it is a wait and see game.  The Chinese will wait two years and see if the US public is incompetent enough to kick Trump out of office.  Anyone with even the most rudimentary understanding of trade deficits will realize how important it is to have balanced trade, and Trump is the first president who has sought this esteemed goal since Reagan.  But Americans, based upon their wild opinions of Trump, most certainly demonstrate their lack this understanding concerning deficits.  They prefer Netflix over knowledge, and ESPN over justice.  If you are a US voter, then ask yourself this: when was the last time you read the Federalist Papers?  Then ask yourself this: when was the last time you watched Netflix? 

The mighty men who founded the great nation that is the USA would spend their hours, their days, and their years reading and studying the operations of various types of governments throughout history.  It was only by this vast quantity of collective knowledge that they were able to establish the American form of government; but we, today, have lost the way. Our greatest strength is the liberty that our forefathers gave to us, and that strength is our ability to choose for ourselves.  But we have chosen Netflix, and as a result, we have turned our greatest strength into our greatest weakness.  

So, back to the trade deficit with China, from which stems the trade war...  Through this trade deficit, the American people are selling the future of their children to the Chinese, and what precisely are the Chinese doing with it?  Well, they are turning the future of America into rubble.  Here is a first hand account of that rubble:

https://www.youtube.com/watch?v=XopSDJq6w8E

China's greatest weakness is their lack of an ability to choose.  If they had the ability to choose, they would build things that they and their children actually need.  They would create an energy infrastructure and a farming base.  Never in a million years would they build cities for ghosts that fall apart in 3 years.  But their greatest weakness is also their greatest strength: food shortages, check.  High food costs, check.  Starvation, check.  Freeze to death, check.  The Chinese will march on, and they will do so because they have no other choice.  

Your post seemed to imply that the Chinese should care more about food than Americans should care about shiny electronics, but I think you are overestimating how much the Chinese care about food and underestimating how much the American cares about fancy baubles.  After all, the Chinese could buy food and energy, but instead they build cities that crumble, and where is the uproar from their citizens?  Yet, Trump speaks one word about tariffs, and the Americans begin shouting the word impeachment from the rooftops.  The US voter elected Obama, and they can do it again.  I added this link to remind us all of that fearful fact:

https://www.youtube.com/watch?v=P36x8rTb3jI

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Four significant natural gas pipelines are expected to kick off operations by the end of the year, significantly increasing US natural gas exports to Mexico, according to the Energy Department. Natural gas exports across the southern border are already hitting highs, reaching over 5 billion cubic feet a day last month.

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6 hours ago, ceo_energemsier said:

It is the thing if the Chinese people are willing to pay much much higher costs of food and heating etc during those bitter cold months than American people having to pay more for electronic gadgets? Will Chinese leadership be willing to put their population through a winter of "starvation", "food shortages, very high food costs" and let them freeze and also pay very high energy costs for them to be comfortable?

I believe the Chinese should and will play this game out as long as necessary, get or preserve as many benefits as possible, and then diplomatically back down.  Yes, I said back down, although the Chinese people won't see it as backing down.  When you control all levels of government, the armed forces, and most importantly the media, you also control what the population thinks just went down.  They will declare victory and retreat when the time is right.  I would go as far as predicting that the basic plans for a joint new conference are already in place so that both the U.S. and China can declare victory.  How that news conference is presented to the Chinese people will be quite different than what is presented to the international community, and even that will be controlled as much as possible by the Trump administration.

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11 hours ago, Epic said:

Your are correct, it is a wait and see game.  The Chinese will wait two years and see if the US public is incompetent enough to kick Trump out of office.  Anyone with even the most rudimentary understanding of trade deficits will realize how important it is to have balanced trade, and Trump is the first president who has sought this esteemed goal since Reagan.  But Americans, based upon their wild opinions of Trump, most certainly demonstrate their lack this understanding concerning deficits.  They prefer Netflix over knowledge, and ESPN over justice.  If you are a US voter, then ask yourself this: when was the last time you read the Federalist Papers?  Then ask yourself this: when was the last time you watched Netflix? 

The mighty men who founded the great nation that is the USA would spend their hours, their days, and their years reading and studying the operations of various types of governments throughout history.  It was only by this vast quantity of collective knowledge that they were able to establish the American form of government; but we, today, have lost the way. Our greatest strength is the liberty that our forefathers gave to us, and that strength is our ability to choose for ourselves.  But we have chosen Netflix, and as a result, we have turned our greatest strength into our greatest weakness.  

So, back to the trade deficit with China, from which stems the trade war...  Through this trade deficit, the American people are selling the future of their children to the Chinese, and what precisely are the Chinese doing with it?  Well, they are turning the future of America into rubble.  Here is a first hand account of that rubble:

https://www.youtube.com/watch?v=XopSDJq6w8E

China's greatest weakness is their lack of an ability to choose.  If they had the ability to choose, they would build things that they and their children actually need.  They would create an energy infrastructure and a farming base.  Never in a million years would they build cities for ghosts that fall apart in 3 years.  But their greatest weakness is also their greatest strength: food shortages, check.  High food costs, check.  Starvation, check.  Freeze to death, check.  The Chinese will march on, and they will do so because they have no other choice.  

Your post seemed to imply that the Chinese should care more about food than Americans should care about shiny electronics, but I think you are overestimating how much the Chinese care about food and underestimating how much the American cares about fancy baubles.  After all, the Chinese could buy food and energy, but instead they build cities that crumble, and where is the uproar from their citizens?  Yet, Trump speaks one word about tariffs, and the Americans begin shouting the word impeachment from the rooftops.  The US voter elected Obama, and they can do it again.  I added this link to remind us all of that fearful fact:

https://www.youtube.com/watch?v=P36x8rTb3jI

Latest new is that the newly (well not so newly merged) Chinese state owned and approved power and coal companies , that had signed an 87bil $+ deal for investment in energy, shale gas etc with WV is back on and they are still proceeding with that investment. It shows China has greater need for energy diversification and security and food security . Just like they left the US crude oil off the tariff list goes to show their need for US produced energy. Without abundant and low cost energy they cannot be an industrial giant (and with China wanting to curb enviro pollution from burning "too much coal", again a public relation and health safety disaster for their populace) and keep up their exports and forex revenues ; and without having to pay "higher" food prices to feed their population , the very same people that are the back bone of their industrial growth and their exports , they cannot sustain playing tough. If energy costs are too high and they dont have energy security they cannot produce all the "shiny" gadgets Americans chase like game fish, and their cheap plastics goods and cheap plastic fibers clothings, shoes etc , their costs go up and add on that tariff... they put a plug on their own exports.

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24 minutes ago, ceo_energemsier said:

Latest new is that the newly (well not so newly merged) Chinese state owned and approved power and coal companies , that had signed an 87bil $+ deal for investment in energy, shale gas etc with WV is back on and they are still proceeding with that investment. It shows China has greater need for energy diversification and security and food security . Just like they left the US crude oil off the tariff list goes to show their need for US produced energy. Without abundant and low cost energy they cannot be an industrial giant (and with China wanting to curb enviro pollution from burning "too much coal", again a public relation and health safety disaster for their populace) and keep up their exports and forex revenues ; and without having to pay "higher" food prices to feed their population , the very same people that are the back bone of their industrial growth and their exports , they cannot sustain playing tough.

These are all great points.  Both you and I (and the Chinese) know they cannot sustain playing tough. 

But that was never the question.  The real question is whether they can sustain it long enough to outlast the Americans.  Maybe.  Maybe not.  We will know for sure by November 3rd, 2020.

In either case, I really hope you are correct.

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Just now, Epic said:

These are all great points.  Both you and I (and the Chinese) know they cannot sustain playing tough. 

But that was never the question.  The real question is whether they can sustain it long enough to outlast the Americans.  Maybe.  Maybe not.  We will know for sure by November 3rd, 2020.

In either case, I really hope you are correct.

I hope so too for the benefit of all involved.

https://asia.nikkei.com/Business/Business-Deals/Chinese-state-owned-company-advances-84bn-US-shale-gas-deal

 

 

And now with this headline

"

Incoming Mexican Govt Mulls Suspending Oil Auctions Indefinitely "

 

Means that Mexico energy production will decline and they will need more US energy products 

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On 8/27/2018 at 11:19 AM, jpZelabal said:

If the two countries do free and fair trade then there would be no extra retaliatory costs to bear....

... and the extra profitability would go a long way towards paying for the wall.

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On 8/27/2018 at 2:10 PM, Epic said:

This is false.  Free trade is never fair trade unless the two nations peg each others currencies to the other.  Even when there is free trade, one nation can always retaliate against the other by weakening their currency.  For instance, look at the trade war with China.  Right now, the Chinese are beating the daylights out of Trump.  So far, both sides have placed $50 billion in tariffs on the other; however, the Chinese have devalued their currency which has neutralized the effects of the US tariffs.  Current score:

Chinese: 50,000,000,000

Trump: 0

 

Trump can win the trade war easily by imposing another $500 billion.  The question is whether the American people are willing to let Trump win.  

That's a very strange interpretation of economics.  With devalued currency, China can buy less and their people suffer.

Nothing happens in economics without consequence, a fact politicians are immune to admitting but real nonetheless.

You are right that Trump will probably win this too though.  The Mexico deal directly hurt China by jointly agreeing to require a greater percent of vehicles within North America at an agreed to minimum wage.  That cuts China out of a big cookie.  If Canada comes on board with a similar deal China's market share will be stiffly curtailed - and they need us (the world's largest market) more than we need them.

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10 hours ago, Jonathan Galt said:
On 8/27/2018 at 1:10 PM, Epic said:

This is false.  Free trade is never fair trade unless the two nations peg each others currencies to the other.  Even when there is free trade, one nation can always retaliate against the other by weakening their currency.  For instance, look at the trade war with China.  Right now, the Chinese are beating the daylights out of Trump.  So far, both sides have placed $50 billion in tariffs on the other; however, the Chinese have devalued their currency which has neutralized the effects of the US tariffs.  Current score:

Chinese: 50,000,000,000

Trump: 0

 

Trump can win the trade war easily by imposing another $500 billion.  The question is whether the American people are willing to let Trump win.  

That's a very strange interpretation of economics.  With devalued currency, China can buy less and their people suffer.

Nothing happens in economics without consequence

I wasn't clear before, so please allow me to clarify:

Chinese Government and Chinese Businesses: 50,000,000,000

Trump and American Businesses: 0

Chinese People: -50,000,000,000

 

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On 8/28/2018 at 8:29 PM, ceo_energemsier said:

Canada will have to come to its senses in trade terms and try to re-join the new agreement. There will be an exponential energy industry business boom for the US selling to Mexico and trading energy with Mexico. Mexico is in serious need of energy security in terms of liquid fuels and natgas. That side of the business is already growing rapidly.

Mexico is offering all kinds of concessions and 'special tax structures' for US energy companies to build petro-products and natgas pipelines into Mexico for their domestic use as well as offering concessions and favorable tax structures for using Mexico as an export route for US energy products to Asia from their Pacific Coast. It will save everyone a lot of time and $$$ and also be environmentally beneficial in terms of ocean shipping emissions.

Canada , could be part of this as well helping the US export along with their resources from the Pacific Coast, production from Bakken etc.

Could be an energy and resources powerhouse 3tri-partite agreement that will benefit everyone.

 

Canada has no spare capacity to accommodate US Midwest exports of anything, either oil or grains.  There is only one pipeline, the second line is stalled by the courts, and the rail system is clogged up with Canadian grains.  So Canada has nothing that it can put on the table as far as transport goes.  All jammed up. 

Can Canada build additional rail capacity?  Against the capital might of Warren Buffett and his competing BNSF railroad?  Nope. 

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On 9/3/2018 at 12:34 PM, Jonathan Galt said:

That's a very strange interpretation of economics.  With devalued currency, China can buy less and their people suffer.  Not really; the Chines can buy the same, they just have to pay more.  There are two economic groups in China: poor peasants  (who consume foodstuffs), and the prosperous, who have plenty of money and can easily (and do) pay more.  Specifically, vast chunks of downtown Toronto real estate, i.e. condominium apartments, are now owned by Chinese and left empty - as a refugee shelter, mostly, when things collapse in China.  The result is that local Canadians cannot afford to live downtown, as the competing Chinese with their wealth have pushed them out.   Think about the implications of that.

Nothing happens in economics without consequence, a fact politicians are immune to admitting but real nonetheless.

You are right that Trump will probably win this too though.  The Mexico deal directly hurt China by jointly agreeing to require a greater percent of vehicles within North America at an agreed to minimum wage.  That cuts China out of a big cookie.  If Canada comes on board with a similar deal China's market share will be stiffly curtailed - and they need us (the world's largest market) more than we need them.

China's big foot in the auto business is not final assembly, but auto parts. Lots and lots of parts are built there.  If Trump insists that Mexican-assembled cars are built with US parts, then China takes a big hit. 

China, it should be noted, cannot afford to go toe-to-toe with trump on anything, it needs open access to the big US market.  China has this vast population labor pool, and if that gets unemployed, then it faces internal strife.  The Chines govt is horrified of that prospect, and will then have to shift to vast internal infrastructure spending, which now accounts for perhaps 25-30% of Chinese GNP.  You have these huge canals being dug from the rainy South rivers to the parched North, the projects to beat back the expanding Gobi Desert, the projects to tie the Tibet Plateau into China (remember, Tibetans are not Chinese, that was all taken at gunpoint in the 1950's by Mao), all these internal problems.  The Chinese workshops, the vast pool of factories outside Hong Kong and up the Pearl River Delta, need to keep working.  The USA is the big "dumping ground" for that output, and Trump is not happy with the dumping.  The steel tariffs were the first part of building a barrier to the vast over-supply of China, which built those plants specifically to maintain "throughput."  So: if you are a Chinese leader:  now what?

Don't get spooked by the hyperbole of Chinese tariffs against wheat and soybeans and pork.  that is all propaganda, not there for the longer term.  The Chinese cannot feed themselves and either buy from the USA or suffer sharp declines in caloric intake.  They cannot buy substantial quantities from Canada as the Canadian rail system is already clogged to the Westcoast ports, and the Rockies are a formidable barrier to expanded rail. Brasil has limited export port capacity.  Australia is entirely dependent on rainfalls in the interior, which is problematic.  Where is this replacement grain going to come from?  Maybe the Ukraine?  OK, that would work, but pay in dollars, no yuan, that is not a convertible currency. You see the problems.  OK, so you want to struggle with The Donald; fine, drop your peoples' caloric intake by say 500 or 600 calories, see how that works out.  Not so great, in my view. 

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