Trudeau heads to Mexico after blunt talk about alternatives to NAFTA

Prime Minister Justin Trudeau's visit to Mexico City today may include some uncomfortable moments, coming the day after a visit to Washington that included discussion about creating a new free trade deal without Mexico.

During talks at the White House Wednesday, President Donald Trump suggested the possibility of replacing NAFTA with a new U.S.-Canada deal that would leave Mexico out in the cold.

The proposal came during a meeting at the White House between the two leaders and eight of their most senior advisers.

According to a source close to the talks, Trudeau told Trump his preferred option was to modernize the continental accord that exists today. But speaking to media after the talks, Trudeau also appeared to signal openness to a new two-country accord if that is what it takes to save free trade between the U.S. and Canada.

Now Trudeau travels to Mexico for meetings with President Enrique Pena Nieto.

NAFTA minus Mexico?

The original free trade agreement signed between the United States and Canada in 1988 did not include Mexico.

Mexico joined in 1994 and has been a full member of NAFTA ever since.

But Mexico has always been the odd man out in the sense that it is the only developing country in the pact, with wages far lower on average than the other two member-states.

That disparity has made Mexico a target for NAFTA critics from the left as well as from the populist right represented by Trump. Labour unions, such as the Canadian union Unifor, have lobbied hard for the NAFTA renegotiation to address those disparities.

One of the few areas where there is broad agreement between the Trump and Trudeau governments is that Mexico needs to raise labour and environmental standards in order to even the playing field.

And though the Trump administration's trade actions so far have targeted Canadian airplanes and lumber more than anything produced south of the Rio Grande, the rhetoric of the administration and the anger of the Trump base have been focused on Mexico, not Canada.

Mexico angry but resolute

The Mexico Trudeau visits Thursday is a different country in some ways than it was when Trump took the oath of office in January.

Trump was deeply unpopular in Mexico already. But the sense of trepidation in the country has given way to anger and resolve.

Comments this week by the two senior ministers handling the NAFTA and Trump files for Mexico suggest a growing realization — and even acceptance — that NAFTA could be over for Mexico.

"Mexico is much bigger than NAFTA," Foreign Minister Luis Videgaray told the Mexican Senate on Tuesday. "We have to be prepared for the different scenarios that could come out of this negotiation."

And in what sounded like a direct shot at Trump, he said: "We're not negotiating this treaty on social media or through Twitter. We're doing it with professionals, acting in good faith, and we'll only continue with this treaty if it's in the national interest."

Mexico's Trump whisperer

It was quite a change of tone from the man who once had to resign from cabinet to take the blame for Pena Nieto's ill-considered invitation for Trump to visit Mexico during his presidential campaign.

Indeed, Videgaray's recent career trajectory provides an insight into Mexico's tumultuous relationship with the U.S. president.

Shortly after Videgaray was fired for his perceived closeness to Trump, Trump won the U.S. election, and Videgaray — the only senior Mexican politician who had any relationship with the new U.S. leader — returned to cabinet with a promotion to foreign minister.

Those were the days when Mexico still believed the relationship could be salvaged. Since then, the PRI government has seen its approval levels plummet, mostly because Pena Nieto was perceived by Mexicans to be weak in his dealings with Trump.

The government has learned that being friendly with Trump has a high domestic cost but produces few tangible benefits for Mexico, and so has moved to align itself more closely with Mexican popular opinion. That is why Videgaray chose to speak more about Mexico's "sovereignty and dignity" at the Senate, than about co-operation and shared interests.

"The goodwill and constructive spirit of our negotiators should not be confused" he warned, "with a decision to abandon the causes and interests of our nation."

NAFTA's value seen as declining

Economy Secretary Ildefonso Guajardo is the man in charge of Mexico's NAFTA team, and he said this week that Mexico has advanced to a point where it can live without the accord.

NAFTA "no longer has the value it once had in terms of market access," he said Tuesday, because tariffs have fallen worldwide.

As an example, Guajardo said Mexico's share of the U.S. textile market had actually fallen to half of its pre-NAFTA level, because even though the U.S. lifted tariffs on Mexico, it also lowered them on China and Vietnam.

"Without a doubt, there's life after NAFTA," he said, "and that's what gives us strength in the negotiations."​