Why NAFTA 2.0 bodes ill for Mexico's AMLO

August 31, 2018
Mexican President-elect Andres Manuel Lopez Obrador.

Mexico’s next president, Andres Manuel Lopez Obrador (AMLO for short) is still three months away from taking office, but some of his campaign trail promises already seem distant, writes Ryan Mallett-Outtrim from Puebla.

Back in July, AMLO became the first left-wing candidate in Mexico’s modern history to win a presidential election, though he has to wait until December 1 to take office.

On August 27, the outgoing government of President Enrique Pena Nieto announced a sweeping new deal with the United States that aims to pave the way to replace the infamous “free trade” North American Free Trade Agreement (NAFTA), introduced in 1994.

The deal has been dubbed “The United States-Mexico Trade Agreement” by US President Donald Trump, although pundits are already calling it NAFTA 2.0.

“The name NAFTA has a bad connotation because the United States was hurt very badly by NAFTA,” Trump said.

Voters turn on NAFTA

As the old saying goes, even a broken clock is right twice a day. On NAFTA, Trump happens to be right — after 24 years, both US and Mexican voters have soured on NAFTA.

In fact, both Trump and AMLO appear to broadly agree that under NAFTA, too many of North America’s once dignified manufacturing jobs have been funnelled onto the immiserated sweatshop floors of northern Mexico’s export-focused maquiladora factories.

Today, nearly 1 million Mexicans are employed in these factories, which pump out industrial and consumer products bound for foreign markets — mostly the US. This export industry has proven profitable for multinational corporations looking to cut labour costs, but neither US or Mexican workers have benefited. US manufacturing jobs remain in a long term decline, while south of the border, maquiladora workers are paid as little as US$0.50 an hour.

That rate might initially sound appealing to the migrants from southern Mexico who leave their rural communities to flock to the northern factories. When they arrive, however, they’re unprepared for the north’s high cost of living. They work up to 75 hours a week, living in sprawling shantytowns lacking running water and electricity.

Across Mexico, traditional communities face population collapse, while their youth are exploited for pocket change.

This is the real reason NAFTA has a bad name. It is part of the reason AMLO rode a wave of national discontent to win the presidential election. Of all major candidates, AMLO took the toughest line on NAFTA and Trump. He fiercely condemned Pena Nieto’s handling of trade negotiations with Washington.

“Pena is too quiet and Donald Trump speaks very loudly,” AMLO stated. He added: “One doesn’t beg for liberty, one seizes it.”

He vowed to renegotiate NAFTA better than Pena Nieto — and place Mexican interests first.


With the new, renegotiated NAFTA deal close to clinched, you’d be forgiven for assuming it is the product of Pena Nieto’s notoriously weak-handed negotiating. The deal appears to largely be a series of concessions to the Trump administration, with a few bones thrown to Mexican industrial interests.

The centrepiece is an agreement on automotive manufacturing, guaranteeing finished cars contain at least 75% US or Mexican-made parts. US parts already account for about 40% of the value of all Mexican-made cars exported northwards. Under NAFTA 2.0, this will rise, with competition from Asia pushed to the sidelines.

Furthermore, NAFTA 2.0 imposes stricter requirements on the use of US-produced materials, such as steel, aluminium, glass and plastics. It further requires at least 40% of a vehicle’s finished value to be produced by workers being paid at least US$16 an hour — in other words, poorly-paid Americans.

Together, these measures may help convert some low-paid manufacturing jobs in Mexico to relatively low-paid work in the US.

Both the Trump administration and Pena Nieto have welcomed the deal.

Pena Nieto’s office said in a statement: “The understandings reached regarding the NAFTA between Mexico and the United States are the result of a successful negotiation, reflecting a balance between the interests of both countries and providing certainty for economic agents.”

Indeed, some Mexican interests were considered. For example, Trump’s demands for no sunset clause in the deal was rolled back to a 16-year lifespan, to be renewed every six years. The deal also lacks a key demand from Trump for trade barriers to protect some seasonal US fruits and vegetables.

In exchange, Mexican officials agreed they would seek to boost imports of US agricultural products.

AMLO approves

Despite opposition from the left of AMLO’s Morena party, the president-elect joined the chorus of support for NAFTA 2.0.

“This step gives economic and financial stability,” he said, arguing the deal protects Mexican energy sovereignty — itself a key campaign issue.

It is not clear whether the deal does guarantee Mexican sovereignty over its own energy resources, as the full text is yet to be made public. But it’s already clear NAFTA 2.0 is largely a story of Mexican concessions to Trump.

To add salt to the wound, these concessions weren’t just committed by Pena Nieto’s outgoing administration. AMLO’s own trade advisors worked with the Pena Nieto team to craft a deal that would be supported by the new government on December 1.

In other words, AMLO has blessed NAFTA 2.0 in both words and practice, despite its failure to deliver a clear win for Mexican workers.

NAFTA isn’t the only AMLO let-down since he won the election in July. After initially calling for a demilitarisation of Mexico’s drug war, in late August he announced soldiers would remain on the streets to fight crime.

“It would be very irresponsible on my part to tell the soldiers and marines to go back to the barracks,” he said.

Rewind the clock a year-and-a-half, and AMLO had a very different opinion on the use of military for law enforcement. “You can't solve anything using the army, the marines, the police, with jails and iron-fisted threats,” he said in December 2016, criticising Pena Nieto’s use of the military to fight the drug war.

Then there’s AMLO’s migration policy, which day-by-day is morphing into a carbon copy of Pena Nieto’s.

In July, AMLO’s transition team announced the president-elect had issued a letter to Trump, calling for support for a plan to curb migration from Central America. Under the proposal, the US and Mexico would team up with Central American states to establish a joint fund to support economic development and regional security.

According to AMLO, 75% of the fund would be dedicated to economic development in Central America, while 25% would go towards border security.

If any of that sounds familiar, then it’s probably because AMLO’s proposal reads much like existing US policies aimed at exporting border control to Mexico and Central America. Since 2015, the US has pumped more than $180 million into the Alliance for Prosperity, which packages economic aid with security funding for Central American states.

The general idea is to support and encourage governments in the region to crack down on migrants and refugees, stopping them long before they reach the US-Mexico border. The plan has been supported by both the Trump and Obama administrations, and now operates alongside another security program, the Merida Initiative.

Of course, on the ground it’s an open secret that exporting US security interests to Mexico and Central America has done little to make ordinary people safer. On the contrary, in Mexico alone, the extensive network of migrant checkpoints and beefed-up border security has led to widespread allegations of human rights abuses. Refugees and migrants passing through Mexico now routinely complain of extortion, rape, robbery and kidnapping for forced labour.

Rather than protecting migrants, human rights advocates have accused Mexican security forces of complicity and active involvement in these abuses. More border security means more human suffering, and more suffering means more refugees.

Enduring commitments

AMLO may have contradicted himself on NAFTA, security and migration, but he hasn’t abandoned all the promises that brought him to power. He appears committed to cutting salaries of top government figures, including the presidency.

When he comes to power, AMLO insists he will cut the presidential salary by 60%. He also recently doubled down on a pledge to abolish Pena Nieto’s controversial education reforms, which have been staunchly opposed by unions. In early August, AMLO likewise reaffirmed his commitment to a swath of popular proposals during Morena’s national conference.

These proposals include: doubling the retirement pension; new pensions for about 1 million poor and disabled people; an expansion of free public healthcare services; the creation of more than 100 new universities; and establishing a paid apprenticeship plan and a series of infrastructure initiatives.

Nonetheless, it’s hard to shake the feeling that the AMLO of today isn’t entirely the same man who led a movement to victory in July. Who he’ll be by December, when he takes office, is another question again.

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