No NAFTA 2.0 signing before steel tariffs end, Mexico says

A senior Mexican trade negotiator is holding firm to his government's position that American steel and aluminum tariffs must end before the new U.S.-Mexico-Canada Agreement (USMCA) is signed.

Juan Carlos Baker, the current undersecretary for foreign trade in Mexico's economy ministry, told reporters in Ottawa Friday he is "working every day" on this issue. The Mexican government changes hands Dec.1.

"We need to solve that issue before the signing takes place," Baker said. Mexico has "exchanged some ideas" with the Americans, he said, but they were "not concrete."

An USMCAsigning ceremony is expected on Nov. 29 or 30, the earliest dates allowed by the fast-trackrequirements ofthe U.S. Congress.

Like Canada, Mexico strenuously objectsto the U.S. tariffs imposed on it on "national security" grounds, particularly giventhe integration of North American manufacturing supply chains.

Mexico, Canada and other countrieshave gone tothe World Trade Organization for arbitration, arguing the tariffs have littleto do with national security and are meant to shield U.S. steelmakers from competition.

Mexico, like Canada and the European Union,brought inretaliatory tariffs onU.S. products. The U.S. is challenging this retaliation at the WTO, arguing it'salso against the rules.

Retaliation put pressure on U.S.

Mexico's retaliatory tariffs put political heat on the Trump administration. Theytarget sensitive agricultural products like pork and cheese, for example.

The U.S. farm community is increasingly angry and anxious, demanding a solutionto damaging tariffs against the agriculture sector that are significantly hurting U.S. exports.

Baker said the U.S. had an "appealing reason to withdraw" its tariffs, since Mexico would then withdraw its retaliation.

However, no formal negotiations have taken place onthe American tariffs, Baker said.

During a visit to Ottawa Monday, the incoming foreign minister for Mexico's next government,MarceloEbrard, said that the U.S. steel tariffs would lift when the USMCAis signed.

At the same press conference, his Canadian counterpart, ChrystiaFreeland, did not speculate on when the tariffs would end,although she said Canada is ready to lift its tariffs when the U.S. does.

Prime Minister Justin Trudeau spoke to incoming Mexican president AndresManuel Lopez Obradorby telephone Thursday. A readout from the Prime Minister's Office said the pair "shared views on the U.S. section 232 steel and aluminum tariffs in effect on exports."

Quotas on the table?

Baker was asked whether Mexicowould give in toaU.S. demand forexport quotas on future steel production in return for an exemption from national security tariffs,as South Korea and Brazil did.

"That's what they did with their particular reality, given the circumstances that those countries had at the moment when they spoke with the U.S.," he said. "In our case,we will see how that discussion takes place on the moment it takes place."

The terms Mexico agreed to for its automotive industry in the USMCA included export restrictions under specified conditions.

Baker said there might be "several ways" to end the tariffs. He didn't reject quotas out of hand.

"We want to solve the issue. There might be several elements that help solve the issue. We need to get these tariffs lifted," he said.

Freelandappeared to rule out accepting quotas forCanadian steel exports in a recent interview with CBCRadio. She metwith steelworkers in Saskatchewan Friday afternoon, although the event was closed to media.

While the Mexicans are communicating with Canada,Baker said no formal talks have been held between all three countriesto lift the tariffs.

'Disappointed' about Canada's steel surtax

Mexico is upset withCanada over a different tariff issue. Emergency safeguard measures have been applied totwo typesof Mexican steel energy tubular products (like the ones pipelines use) and wire rod.

As of Thursday, Canada is adding a surtax of 25 per cent on those Mexican imports, although other types of Mexican steel products are exempt.

The two taxed productsrepresent 20 per cent of Mexico's global steel exports, according to recent statements by Mexico's economy minister.

Canada's emergency safeguards target seven kinds of foreign steel overall. Finance Minister Bill Morneausaid hisunusual movewould protectCanada's domestic steelmakersfrom a sudden influxof foreignsteel displaced from the U.S. by its new tariff measures.

Basically,Canada'sextendedthe Trump administration's tariff wall farther north.

Even before the U.S. tariffs kicked in, global steel production was exceeding demand.

But Canada's construction industry, as well as other domestic manufacturers who need steel, warn of supply shortages and severe damage to their businesses if Morneau doesn'treconsider.Canada's domestic millswill not meet their needs, they say.

"We do not disagree with Canada's objective," Baker said, "which is the overcapacity issue that affects everyone, including Mexico.

"What we disagree with Canada is that Mexico is the source of such excess capacity. We are disappointed that we were not excluded from this measure."

Retaliation not ruled out

Morneau'smeasure is temporary. Mexico has already filed to argueagainst a permanent steel surtax when the Canadian International Trade Tribunal hears the casein January.

Baker said he expects Mexico eventually to be excluded.

Some advocates for Canada's domestic industries suggest Canada was under pressure from the U.S. to take more measures to keep foreign steel out of North America, but it's unclear why these two kinds of Mexican steel would be problematic especially when the pipeline products are in short supply in Canada.

"I cannot speculate on the reasons Canada did what it did," Bakersaid. "The measures that Canada is applying will have some effects in the region, that is without question. That's just basic trade integration results."

Morneautold a House of Commons committee earlier this month that he was not expecting any retaliation over the safeguard measures.

But Baker told reporters Friday that Mexico is considering "every option" to push Canada to lift the surtax.

"Nothing is ruled out as of now,"includingretaliatory tariffs or an additional WTOcase against Canada, he said.