Transcripts For CSPAN3 NAFTA Negotiations 20180104

America. Cspan where history unfolds daily. In 1979, cspan was created as Public Service by americas Television Companies and is brought to you by your cable or satellite provider. Next, former u. S. , canadian and mexican ambassadors discuss the potential consequences of the u. S. Exiting the north American Free trade agreement nafta, including every daikon consequences and u. S. Global leadership. This is hosted by the center for strategic and international studies. Just got the thumbs up. Well begin. Thank you for being here this morning. Welcome to csis. And we appreciate you being here bright and early on monday morning for this important event. My name is scott miller. Im a Senior Adviser and hold the william chair in International Business at csis. This mornings event is production of three csis programs working cooperatively. The program for prosperity and development and the Americas Program. So we welcome you those of you who made it over here. We appreciate that effort. For those of you online, we welcome you. And if you are interested in the rebroadcast of this event, it will be posted on the event page at csis. Org immediately following the program. There is it a lot of programming in this city on nafta for no surprise to any of you who follow this, so we are generuiny delighted that you came and came to our event. So thank for doing that. We have excellent lineup today to talk about subject that we hope will provide context. But our programs are doing that on regular basis. So we urge you to follow us csis programs whether the Americas Program or trade website for continuing coverage of the nafta. To get things started id like to introduce my colleague, Deputy Director of the america it is program hand director of the mexico program. Richard miles. Richard. Thank you, scott. And again welcome to csis. Im rirkd miles director of the u. S. Mexico futures initiative. And you may wonder why we have or we will have a stage full of ambassadors here talking about a possible nafta doomsday scenario. And the way i see it is its really the Job Description of an ambassador to see the big picture, the whole relationship. And so as we look, we wanted to look really beyond trade just by itself, and examine what could happen to the other Strategic Issues involved in these bilater bilateral relationships if indeed the United States or one of the parties exists nafta. So i expect well probably hear about things like Security Cooperation with mexico, about defense cooperation with canada, about cooperation with both countryes on regional issues like venezuela or haiti, about global issues like cyber security. And most importantly canadian and mexico are our neighbors, so the people to people angle that they care a lot about, cultural ties and of course things like immigration. To start this off, we are going to have another ambassador, carla hills, set the stage for us. And carla is one of those people in washington needs no in production but ill give her one anyway. Ambassador hills was born in los angeles, attended stanford, oxford, then yale law school. Started career as assistant u. S. Tornado attorney in los angeles, later Civil Rights Division of department of justice. During the Ford Administration she was secretary of health and urban development. And of course under the George H Bush administration she was u. S. Trade representative during which time she led the negotiations for the north American Free trade agreement. So it would be hard to find a better person in washington to see about what nafta has achieved and what the world could look like without it. So please join me in welcoming ambassador carla hills. [ applause ] thank you, richard. Well, we have a great panel. So im going to be very brief. I think in starting to think about what we lose from a pullout of the nafta, we ought to remember what did the agreement do for us. So let me briefly say it brought together 490 million consumers, and created a 19 trillion market. It eliminated tariffs and all industrial goods and most agricultural goods except for a few with canada. Opened a broad range of Services Including Financial Services and provided National Treatment for our Service Providers across line. It removed significant Investment Barriers and provided protection for our north american investors and provided enforceable protection for trademarks, patent rights, and copyright, with i have become more important in these 20 years since. And as a result, our commercial relationships throughout north america expanded making this region the most competitive in the world. Today, canada and mexico account for onethird of our global trade. But we are not to talk about trade. We are going to talk about what happens if it shrinks. And actually i want to also mention that canada is our largest export destination and mexico is our second largest. And the number of and vibrancy of these relationships have created great bonds. People to people and government to government paying dividends in areas way beyond trade. For example, visitors from canada and mexico constitute the top two sources of tourism, a major industry for the United States. In 2015, contributed 1. 5 trillion to our economy. Today, one out of nine jobs are hinged to tourism. A decrease in tourism has already occurred in this year l as a result of concerns about the breakdrown down in our regional relationship. Another cost of withdrawal would be decrease in inward investment. Our nafta partners have invested 280 billion in the United States and the uncertainty key created by the threat after walking away from the agreement after 24 years without question will reduce interest in investment and jobs connected to investments. And not just from our northern and southern neighbors. Much more broadly. Uncertainty with respect to our future action also effects our job creation. Think of it, in 1993, our jobs connected to mexico totaled 700,000. Today as a result of the nafta, its 5 million. Exiting from the nafta would obviously cause that number to shrink very significantly. And you take the auto sector. We would lose jobs if we break up our highly synchronized supply chains that have made our Auto Industry the most competitive, globally. After a pullout our companies would see their costs increase, adversely affect their global competitiveness, and result in a decrease in our sales, which would mean fewer jobs. Some companies might, and are predicted to, relocate to asia, which, again, would adversely affect jobs. Or take the agricultural sector, we have ten states that are keenly related to what they produce in the agricultural markets. And the tariffs and the food sector, the bound tariffs are above 30 . So our farm states would truly feel the pinch. In addition to the harm done to our regional relationship, we would suffer challenges in maintaining security. For the past two decades, our three governments have worked together to handle the increased flow of trade, trying to separate the ways those items that would create a danger, and so they could focus on facilitating those items which there is no concern. And today we share intelligence and collaborate on confronting challenges, running from narcotics to International Crime to various areas of organized crime, and creating a stronger border requires attention and action on both sides of a border. And pulling out of nafta would most assuredly erode the partnerships in dealing with a broad range of security issues. And, finally, i have no doubt an exit from the nafta could result in serious leadership erosion for our government. Not only with our two neighbors but throughout the hemisphere and beyond. To turn our back on an important agreement with our neighbors over concern about bilateral deficits raises questions with respect to our reliability and our leadership. What other government would want to sit down and negotiate on any topic . A concern would loom that we coup not be relied upon to deliver tomorrow what we promised today. And we have a great panel to talk about in greater detail the costs and consequences of exiting from the nafta. So ill exit the podium and turn it over to our great panel. And i thank you for being here [ applause ] well, good morning, everybody. Thank you for being here. My name is romina bandura, im a fellow here at csis and ill be moderating this pan tell. What a treat to have three former ambassadors here today. Ambassador earl and anthony i wayne from mexico 2011 to 2015. Ambassador sarukhan former to United States from 2007 to 2013. And ambassador michael wilson, hes the former canadian ambassador to the United States from 2006 to 2009. So we are going to talk about the consequences of nafta beyond trade. But of course we can talk about trade as well. Id like to start with putting this topic more to the level of a regular citizen. How do you think regular citizens would be affected by an exit of nafta . What do you tell a regular joe how does that impact them . Maybe we can start with ambassador wayne. Sure. Thanks very much. I think the basic message is things would cost more. Cars could cost a couple thousand sand morse if we went out of north production chain. Winter vegetables from mexico would maybe cost more. We dont know what would happen in this. So daytoday that would probably be the place people would note things. In general, i think we would also see, and well talk about this a little bit more, we would see a reduction inSecurity Cooperation and fighting crime. And thats already a serious crosses the border. Thats already a serious problem that both sides are working together now very collaboratively on. And as we can talk a little bit about more often, i think that cooperation would be negatively impacted if the u. S. Were to exit nafta. All right. Good morning, and thank you for having morning. This is a important week as the socalled intercessional meeting before round six in canada at the beginning of next year kicks off. So well be seeing a lot of discussions as to some of the hot button issues, whether it is root of origin or sun set closes or the issues that are in the conversation. And the one issue that i would add to tonys list of sort of how it impacts the daily lives of americans is cost of cause. If the u. S. Were to impose some of the issues that it would like to impose on rules of origin and the automotive sector, there will be a important impact on the price of automobiles in north america. It is a hard question because if you look at the 2016 president ial campaign, this was a campaign that was won not on Public Policy debate or discussions but on narrative and story telling. So how do you transform very compelling data despite that we seem to live in a factfree washington these days. How do you translate all of these numbers and all of this data into something that connects with americans. One of the ways i think that helps is to continue to underscore there is no bilateral relationship on the face of the earth that touches the daily lives of so Many Americans in relationship with mexico. And yes, it is the avocados but also what happens with scarce Water Resources on either sides of the border, what mexico and the United States have been doing in terms of security collaboration, whether it is regional or extrahemispheric. But there is a very compelling story to be told. The problem is how do we distill all of those numbers and create story telling that will connect with your average joe to underscore how important this is. One of my hopes is that given that one of the sectors that would be severely hurt by the denounciation of nafta by the u. S. Administration which is the ag sector, this will provide real pinch in states that elected President Trump, profoundly red states, agricultural states that would lose significantly if this disappears. So i think and we could go into some of the specifics of all of this, which im sure well do in the panel. But at the end of the day the challenge we have as former officials and think tanks and policymakers is how do we create a narrative which connects to the average citizen and in canada and mexico and the United States, as to what the impact of nafta going south, pun intended, would entail for the daily lives, security prosperity and well being of north americans. A lot has been said, ill try not to repeat it. But in agriculture and cars and textiles, those are the three sectors that would be most severely affected and those are three sectors that the average joe or jane is will feel quite directly. A little bit less directly, there is an uncertainty as to what will happen after nafta and what is going to happen if we have no nafta and there is nothing to replace it with. That is going to affect investment, investment creates jobs. So there will be an indirect affect, very clearly on jobs. If all of this happens, the way that weve been discussing, i would be concerned about an antiamerican sense in both mexico and canada that is going to be damaging for the relationship among all of our countries. We just dont need that. And i think it is it is something that we have to be concerned about. The final point ill make is that 35 states have as the number one export destination is canada and i think that there is a number a number of the other states with mexico and the number two in both cases is usually mexico or canada. So its not just here in washington. It will be felt throughout the United States. Those negative impacts that the three of us have talked about. Thank you very much. Id like to focus more on the security aspects. So the three countries have cooperated in border issues, drugs, and other illegal immigration, how would how would exiting impact those three areas, drug cooperation, immigration, specially from Central American countries and potential terrorist threats . Those are key issues that citizens care about. I think a good place to start is precisely where mike left off which is it bleeds into these issues which is perceptions and you dont need to be kissinger to figure out why of all of the countries surveyed in the recent pugh poll, the country where positive favorable perception of the United States has collapsed the most would be mexico. It went two 66 to 33 in a year. And people say well how does that impact the relationship. When you have a president ial election in mexico, in less than eight months and you see what mexicans are being polled or asked and there is a key question which i would like to put right next to this collapse in favorable perception when you ask whether the Mexican Administration is dealing adequately with the Trump Administration overwhelming majority, 63, 62 say the mexico government isnt responding adequately to the u. S. Administration. So imagine what the negative perceptions and this poll tell you about the maneuverability that a Mexican Government has to do stuff with the United States, as mexico heads into the political electoral cycle of next year. And it impacts everything from what we do on a day to day basis in terms of our southern border with what they believe, it has a profound impact on security collaboration, something that tony and i worked on hand in hand when he was in mexico city and i was in washington, d. C. And there is already a challenge because as the u. S. This is not the to discuss whether we agree or dont agree, whether we think it is a good thing or bad thing, but as the u. S. Moved domestically in a defacto legalization of cannabis, many in mexico are saying why should mexico be investing its chill illan quota in eradicating weeds and eradicating marijuana if the United States have legal idsed cannabis for recreational use. So there is a tension there that is relevant and if you add u. S. Administration that decides to invoke 22 article 2205 of nafta and denunsy ate the agreement, it will have a profound impact on how mexico has articulated a number of policies, whether it is the regional by lateral or hemispheric level. And it is not that mexico will become an antiamerican country. It simply the maneuverability and the ability to do stuff that we have been doing for the past decade and a half on issues like security would go out the window. Ill give you a very pressing example. Given now that immigration immigration was one of the third rails of the gop primary, it is played such an Important Role in these months and we have the decision over d. R. E. A. M. Ers and daca. When the gang of eight bill was being developed on capitol hill, which later was approved in the senate and then failed in the house, some of you who follow these issues closely remember there was debate over what w was called a touchback, and what do you do with the 11 Million Immigrants in the United States to allow them to to legally be in the United States. So there was a discussion on capitol hill as to how you would make these 11 Million People leave the country and then come back legally to be able to then start whatever process of immigration legalization was put on the table for them. In mexico at the time told congress we would be willing to take in because one thing is mexicans are wellively close but if you are from india or china or poll land, go back and then come in. It is a bit of a challenge. So mexico said we would be willing to take in 11 Million People if you could process them in 48 hours across the border in mexican consulates and then cross back into the United States and that way we could help this ensuring those individuals in the countries without papers could come back in with a legal status so they could get that issue off the table. That debate what wa that was happening in 2010, 2009. Today in the current circumstances despite how important it would be to be able to help move the needle forward on the domestic immigration debate in the United States is off the table. No one it would be political suicide for anyone in mexico today to put that on the table. So that is an example of how this use of mexico as a political electoral pinata added to the potential of nafta going down the drain because of a unilateral denunsiation and how this could impact what weve been doing on mill to mill cooperation and narcotics on Regional Security and challenges in the caribbean and in south america where weve been working hand in hand. Just to finish on that one and then maybe please invite canada, it is important to remember that in the 1980s canada not canada, the United States and mexico were called distant neighbors. And that is because they didnt cooperate on very much. They were individual friendships but it wasnt a cooperative relationship between the two governments. After naft you a nafta, what happened over the 25 years, is gradually we developed more mutual trust and understanding and we started expanding the area where we were able to cooperate. It started in the trade and then financial area. Arturo and i wrote a paper about it in the Foreign Policy era, how long it took. It took up through the first decade of the 2000s and beyond to get us to a point where we were willing to look at collaborating around the world in other places an the same is true in the security area. There was just not mutual trust or understanding between the security agencies. They would Work Together on specific cases. But it was limited. And the aim thing on the border. Up until just a few years ago, people were still shouting to each other across the border finger pointing. Pointing fingers and what they did is they moved to ashared paradigm of shared responsibilities. We share the responsibility for solving these really difficult problems. Neither of us can do it by ourselves. In the Law Enforcement security area, starting in 2008 with the initiative and moving forward increasingly every year there was better collaboration. They didnt solve all of the problems. But they found new ways to address those problems that were more effective. A lot of that is in endangered by what arturo was talking about. That Public Attitude in both countries really, but also in mexico where you just dont have the space to do those kind of steps forward and youre own Law Enforcement people are going to be less trustworthy because of what they perceived to be clear insults and not against the criminals but against mexico in general. And the mexican people in general. And so the big danger here is were going to see significant steps backward. And the most worrisome part is that the nafta generations, the young mexicans who grew up in nafta, who came to see real values in the United States, that they admired are now changing their opinions. And thats evident in the overall poll. But it is evident in what im sure arturo and i have both heard from our friends who say, my kids are coming to me and theyre really, really critical of the United States now. And they just have a whole different attitude. It is like theyre pulling out the old views that were held by me when i was younger or by my parents, the mexicans talking of the United States. And that is just not the kind of relationship we want to have with a neighbor. I think tony is said something that is very, very important. What nafta has done has brought our three countries together. Not just mexico and the United States, but also canada, mexico and the United States. After nafta termination, that will dissipate. No question of that. So we are concerned about that. Not to the same extent, because we arent as directly affected. But we are concerned about a disipation of the strong relationship that has beld over the last 25 years between canada and or between mexico and the United States. The other point, dallas it i broader point what is the message to the rest of the world. If the United States cant get along with two neighbors, mexico and canada, and they have to destroy a trade agreement which has done Tremendous Positive results for all three countries, if they cant get together with their two neighbors, how are they going to be able to get together with other countries and other parts of the world. And carla made that point a little bit earlier on on a trade agreement with another country. How can you count on the United States . So i think there is there is that affect. The third point id make is on Border Management. One of the when i was ambassador, after 9 11 and one of the real challenges that we had was Border Management. And if there is a break down in the attitudes toward managing a border in a positive way, were going to get affected in canada almost as much as it would affect mexico. So that is something that i think that weve got to be concerned about as well. Final point in 2011, president obama and Prime Minister harper launched something i think it is beyond the borders, is the name of the negotiation. Any way, it focused on Border Management and harmonization of regulation. And a lot of that was done very quietly, below the radar screen but a lot of good things has come out of that over the course of this time. I would worry that that the momentum that we had that arose from that 2011 agreement would decline and possibly we might see things in reverse. So not as direct an impact between canada and the United States as between the United States and mexico. But we would not be immune from the concerns that have been expressed by arturo and tony. Thank you. My other question is we have mexican elections in july. How would this process be the nafta exit impact dollars and human rights and all of those issues. If u. S. Pulls out. Ive seen a lot written about this. It is a bit of a gobledygook. Lets be clear, the mexican election will not be won or lost depending on what happens with nafta. Not even this country determines its electoral outcomes based on Foreign Policy issues with a couple of exceptions. But it will have an impact in the sense of attitudes and opinions which weve talked about. And it will have an impact because then there will be the question of who lost nafta. Which will be utilized electorally. But i dont think regardless of whether nafta is still alive by the time mexicans go to the polls on july 1st, whether it is already been denunciated by the president by then, i dont think mexicans will go to the polls and cast their vote depending on what happened with nafta. The drivers are impunity, corruption, Public Public insecurity and that will be based on which mexicans choose as the next president. So there isnt a direct correlation of what happens between nafta and on july 2nd, but it will have an impact on in terms of the bandwidth of which this government until december 1st, we have this horrendously long transition that goes from july 1st to december 1st. So well have a lame duck president for almost five months and president elect at the same time. And this will be a very difficult moment to articulate forward looking policies regarding a strategic relationship like the one we have with the United States. If nafta is no longer there, then imagine the complications that will trigger as the new government starts to device its policies toward the u. S. Where i think the collapse, the derailment of nafta does play a very Important Role is in an issue where most americans dont stop and think about which is that nafta in mexico had an impact beyond the trade agenda. Yes, our trade to the United States quadrupled, yes, we support 5 million u. S. Jobs directly in states that are linked to nafta. Yes were your second largest buyer of exports after our canadian colleagues, all of numbers are there and point to what a resounding trade success nafta has been for the twoway bilateral relationship. But in eterms of mexico. Nafta had a profound institutional footprint, in terms of rule of law, in terms of predictability, in terms of investment, in terms of how the country became much less auto ommic before nafta and in the way mexico linked its destiny to the United States in terms of economic and trade prosperity. It created a level Playing Field for u. S. Businesses and u. S. Investment in mexico. It anchored many of the changes that we have seen in mexico. In fact, some of the policies that are being articulated by this administration hark back to how mexico would manage its economy before nafta was approved. So in many ways there is a larger institutional footprint that nafta has developed in mexico which might be lost and where the center regarding investments and business footprints, i can mention one big area where this is critically important energy. Because when we negotiated nafta back in 1991, car law and michael remember this, the u. S. And mexico each vetoed one issue that our two presect piv countries put on the table. Mexico wanted to talk about Labor Mobility which continues to haunt the relationship as it fits into the larger immigration debatearound the u. S. Said no can do and the u. S. Wants to put energy on the table but they werent ready to do that because mexicos internal domestic laws were such that you couldnt have private dom or Foreign Investment in the energy field. What is happening in the last years as to the Energy Reform in mexico and the impact that this has for the north American Energy footprint in terms of efficiency, security, independence, if nafta is lost, you lose if you are a u. S. Oil major or a Transnational Oil major, you lose a lot of legal ser tan ty in the market place. It is about trade but in the case of mexico, where there is still a symmetry between the rule of law and transparency and accountability with the two north American Partners, this is at a very important affect which could be lost if nafta were to disappear. So just to add to that, it will if the u. S. Pulls out of nafta before the election, it will change the it will change the tenure of the debate. The estimates are that mexico could lose anywhere between 900001 900,000 and at 1. 2 million jobs. That is something candidates will have to take a position on. Theyll have to change that agenda. And if jobs rise up in the agenda and people are fearful about the future of their economy, that means other things will be relatively less important. I think arturo is right that those main anticorruption themes are going to be right up there in front and then i think violence and crime in the country, but you are going to have next to it a whole different debate about what do you do about the future economy of mexico. How quickly can you develop new export sources. What impact is that going to be to have on mexican citizens and you wont have anybody championing choop championing cooperation with the United States and even though those that personally believe that, they wont have the space to do that. And those who may personally not believe it any way, will be a bit more aggressive and nationalistic in their response because you are protecting your ele electorate, your american citizens. Im not going to talk directly about the u. S. Or the mexican election because others have commented on it before. But what i would say is that if there are if the things arise that both arturo and tony have talked about, that is going to raise uncertainty about investment into mexico by canadians and one of the things that happened in the last few years, it was slow in coming was canadian investment into mexico. And i would hate to see that slow down because we are were just getting at the degree of momentum and a number of investments or potential investments are related to the Energy Reform that has taken place. And if there is any slowdown or reversal of that, then that type of investment will stop. One of the great areas of potential for the three countries working together is in the energy area. If we could ever get to a region wide Economic Energy policy, it would be put this region, the north american region, in a very strong position. We would be self sufficient in oil and natural gas, in electric power, Nuclear Power and be really the model for the rest of the world. And that is something that would you be very concerned about. We wouldnt be able to achieve that if we had some setback electorally in mexico. So uncertainty related to the mexican political scene is not going to be good for a very wide range of reasons and we already touched on that in earlier comments. I would like to add what to what mike has just said here, because a lot of this conversation has been sort of gravitating around the either the u. S. Mexico axis or the canadau. S. Access even though mike just mentioned some of the impact this could have in terms of mexicancanadian relationship. And there is a a larger what implosion does to a north american footprint worldwide. And what it does to the ability of the three north American Partners to compete strategically and economically in the 21st century. Visavis china. If there is so much agitation about what china means and entails for National Security and foreign and economic policy, im convinced that the 21st century can be a north American Century if we get this renegotiation right. If we end up modernizing and revamping nafta to 21st century standards. This is what allows north korea mer north america and in terms of the Energy Revolution in canada and the United States and what happened because of mexico decision to open up the energy sector, if you add energy to the template you suddenly have the potential of 21st srnts truly being a north American Century in terms of our ability to compete with asiapacific particularly with china. So there is a much larger piece here and there is also something which is been very deer to my heart which i work with both my canadian and u. S. Friends which is how do we deepen the security collaboration between the three countries that are regional and global level. How do we engage on issues that matter to us, whether it is Disaster Relief and collaboration to respond to Central America or to the caribbean, we started to discuss for example the prepositioning of material and equipment and troops and to be able to respond quickly to natural emergencies in the caribbean and the Central American regions. Mexico has finally moved into p. K. O. After decades of keeping Peace Keeping operations at arms length. And we did it because we started a slow process of engaging with our canadian friends where there were less for hist oral reasons that you will understand, they were less antibodies on working with our canadian friends than with our u. S. Friends. But this allowed us during my tenure to finally bring navy and army liaisons to colorado springs, there is the whole debate of if one day mexico should and i think it should become a member of norad. But this discussion that has been slowly moving forward in ways that would have been unthinkable 20 years ago is something that north america could lose and which i think would be the detriment of the Strategic Interests of the region going forward. Let me just pick up on arturo mentioned china. And the north America Region versus the asia china region and we have the competition of the third Major Economic region in the world today. If the United States is thinking strategically here, the main challenge economically in trade, finance other related issues, is not mexico, not china and not canada, but it is going to be china. China is the where the main challenge is going to come. So lets look at the major sector that the United States is targeting in this renegotiation of nafta. The automotive sector. The deficit or the surplus that mexico has in auto and parts is about 80 of the deficit, the surplus. So that is a major focus. And something has to be done to address that. But lets be careful about addressing that. China has car production today car and small truck production of 28 million vehicles. North america, the three countries, it is slightly over 20 million. So they have the capacity to move into this market where they have not moved to date. Ive just come back from a couple of weeks over there and it is very clear that china is going to is targeting to come into the north america market, primarily the u. S. Market, within five years. And they have the capacity to do that and they are developing the technology. Quality isnt quite there now. But if you go back to japan 20, 30 years ago, and korea 15 years ago, we said that the quality isnt there now but what do we see . We see a lot of japanese and korean cars. I happen to pick up a copy of the south China Morning post. And what caught my eye was this this is i looked at it and i said, that looks like a corvette. And i looked a little bit more closer and i said well that is a pretty splashing fancy car. And i read a little bit further, it is not a corvette, it is a chinese car. It is reputed to be the fastest electric car in the world today. China has as we read about tesla, china has 43 of the Global Market for electric vehicles. So that is the basis on which they will come into this market. So here we are in this negotiation, were trying to weaken the north America Automotive production. This as you heard from others earlier today is drawn together by the supply chain of north America Supply chain where the best of the United States, of canada and mexico is brought together to make this a very competitive reason region. We should be looking at how we can strengthen this north America Region against the challenges from both europe and china rather than weakening it in the major competitive auto production area. So weve got to get away from the win on the small scale wins well get at the that were trying to get at the negotiating table and get our minds on the strategic level where it is extraordinarily important that we Work Together as three countries to be able to address the competition which is bound to come from asia and for asia and china because there the dominant country over there. That is where we have to be. And have a strategic overview guiding these negotiations as opposed to a transactional approach at the negotiating table. Thank you ambassador. That is a great segue for my last question. How do you visualize a modern nafta, what are the what is the best alternative to we talked about exit. But lets be positive. What are the elements that we need to strengthen to be a big north america block. Well i think taking up michaels comments, we need to focus throughout this negotiation on the future issues that are going to make countries more competitive or not. And rather than looking backward to the economies of the past, how is industry going to transform over the next ten or 15, 20 years and how do we make sure the rules that we write in this new nafta are flexible and open enough to take care of these kind of changes. Right now were trying to catch up with the last 20 years on data, on e services and all sorts of things that werent happening when nafta was written. And but we have to leave that space for what is coming. What we know is that all economies in the world are going to be hit by the waves of new technology. Were going to have to have workers who have if they dont lose a job, theyre going to have part of their job redefined. So how do we Work Together to have that space be open for Workforce Development in all three countries . How do we have the space for the new services . How do we encourage our will to compete with china in the future . And not just china but with germany and japan and they also have these regional models that help them produce things competitively. And so it really is about strategic vision, not very narrow specific vision. There is a place for fixing things in the trade agreements that havent worked. But the opportunity is creating a trade agreement that will take us 20 years into the future and serve all three of these economies well. And if i could just add and that is the same thing on the security front also. The vision for a lot of people at the height of this collaboration was extending security to and beyond north america because of the cooperation between the three countries. Youre not just thinking your national borders, youre thinking how collaboratively can we expand this security look to other areas and not just border areas, but who is coming in. How can we Work Together to keep terrorists or keep radicals and others out and that was really the potential of where we were going and it was transforming borders both between the u. S. And canada and the u. S. And mexico in their very nature to make them a creative place where you are providing security but facilitating all of that good traffic and doing it in the context of a network of information sharing that really lets you know who is coming and going. And that vision is also in danger if we move back to an isolated idea of the three countries sort of getting along with each other but not really taking advantage of all of the potential that is there. I think the scene coming up with an upgraded 2. 0, or 3. 0 Free Trade Agreement is to jettison my way or the highway approach and the zeros on the mechanics with which this administration has approached the issues in the negotiation itself. You have to get rid of sunset clauses. It is on surd. A sunset clause it runs counter to why you have a Free Trade Agreement in the first place. Youre not going to sign a Free Trade Agreement if you are a company and invest, you are not going to do it if every five years you have to renegotiate the agreement. So youve got to get rid of the sunset clause. And you should do no harm. You should do no harm to the joint supply and production platforms that weve created in north america which have a loued us allowed us to compete and assure that not more jobs have been lost in the american heartland. It also means that we do what we were trying to do with tpp. Tpp, when canada and mexico decided to join tpp, the reason why they joined was that this was the best way to upgrade nafta without having to renegotiate nafta, because bien dearing to 21st century standards that didnt exist when we negotiated nafta, tony mentioned it, ecommerce and digital and ipr and biotech issues, by modernizing tpp and having canada and mexico and the United States be tpp members, it would automatically renewed the Regulatory Framework with which we trade without having to even say nafta and renegotiate in the same sentence. The fact that many of the disciplines that the negotiators looking at today come from the tpp itself, i think it is an indication of what a modernized upgraded Free Trade Agreement that improves our ability to compete looks like. So i think this is a very important on the issue that tony mentioned. And mike and trade facilitation. The paradigm is not a wool, it is membranes. They allow the good stuff to come in and filter the bad stuff out. We have the ability to do this. Not only in terms of what our security and intel agencies have been doing together since 9 11, despite what you hear on the campaign trails, the collaboration that has occurred between mexico and the United States and canada post9 11 in terms of passenger and ensuring that no one who has been denied a visa could shop for a visa in canada or mexico and enter the north American Space or awareness is a very important piece of all of this. So all of these are pieces of a puzzle that if brought together could really upgrade add modernize our tri lateral relationship. So all i would probably end up by saying is that oscar wild used to say when the gods wish to punish us, they listen to our prayers and in an americanized version of that is bee careful what you wish for and i think the administration has to be careful what it is wishing for on the nafta front because the trade and National Security affects on the tri lateral relationship as a whole. What should a modern trade agreement look like . I think the basics of approaching a trade agreement among three countries who are friends, allies, neighbors, is to look at the broad region and then identify what can be done in the critical sector. Weve talked about energy. Weve talked about digital. Weve talked about automotive. And transportation is another area. And then decide how can we best design a trade agreement that looks at the strength of the three countries in the key areas and how do we put together a trade agreement that will allow them those those various sectors to work more closely together to develop a Strong National a strong north America Region. And that i think is the big challenge. I think there is another point here. The whole focus of the administration has been on the trade deficit. Economics 101 will tell us that a trade deficit does not is not based on a specific trade agreement here or with whatever other country. It is based on the structure of the of the u. S. Economy. The u. S. Economy has has afy federal government deficit, High Consumer spending, 70 of gdp as opposed to 60 in most other Comparable Companies that produces a low saving rate and an automatic current account deficit, the trade deficit being a significant part of that current account deficit. So weve got to realize that hammering away at one country or another country on a trade agreement such as nafta is not going to solve the u. S. Trade deficit. It is a red herring. A red herring. Its something that the United States has head for 40, 45 years now. So it is not going to happen it is not going to be resolved just by making a change to nafta structurally there has to be a change and that will be extraordinarily difficult. The thing that i worry about the most on this is that if we revert to the old ways of lets have a trade noti negotiation where i hammer you and you hammer me and we even try to get a win at the table. The implications of this or the messaging that this extends to the to the World Trade Organization and any future discussions around that table, it is very negative. Weve got to be looking at trade in a positive way. And if the three countries, if our three countries cant Work Together to find that more modern way forward, it sends a very negative message to members of the w. T. O. Thank you very much. We have about 20 minutes for q a from the audience. So ill take two questions. Please identify yourself. The lady here and the lady over there. Yes, the microphone. Thank you. Patricia meehan. My question is about the possibility that the u. S. Pulled out of nafta, the Mexican Government has stated that it might reduce Security Cooperation if this happens. How credible is that warning . To what extent is nieto just bluffing but not really willing to reduce Security Cooperation. Thank you. Good morning. Sun ching joy. Latin partners. You mentioned about two key issues for nafta as six round you mentioned first sunset clause and then origin but you have not touched on issues of [ inaudible ] and ambassador just mentioned about wto, ill be interested in your views. And [ inaudible ] youre the finest minister and the administration [ inaudible ] so would you offer your views on u. K. Would Brexit Issues e. U. And it appeared they made a first round [ inaudible ] so next year they have to do a new trade agreement. It appeared to me Single Market is out and custody is out. Is there any u. K. How you can made a Free Trade Agreement with the european union. Thank you very much. Two parts two questions. One what happens if the u. S. Pulls out. It is a very interesting question. My understanding is policy of the government of canada, think it is the Mexican Government but i cant speak for that, but it is that nafta will continue. There is provisions for nafta to continue without a member country. So we would be continuing to work with mexico and if that is the case, mexico would have advantages coming into canada and likewise canadians coming into mexico, which the neighbor in the middle would not have and that is going to create some tension, i would have thought, within this country. Particularly in the agricultural sector. So that is that is something that i pointed i point that i think needs to be made. The dispute settlement, in 1987 at 8 15 p. M. I personally told jim baker that we had a real problems with what the United States was proposing. And we finally got an agreement because he realized that we were not going to have a deal if we didnt have a dispute settlement mechanism. And he overrode he took a strategic view and i made this Strategic Point earlier so i wont repeat that, but he took a strategic view and it was important for the United States to have an agreement with canada, trade agreement with canada and he overrode his negotiating team. Which were taking the same position that is being taken by the United States in this. So that is one less that people at the strategic level do have an ultimate responsibility to get a deal if they see the deal is appropriate for their country. And i think that we can easily come up with that combination. Weve got professional negotiates. They could come up now what are the Lessons Learned . There has been work done analyzing what happened with the dispute settlement mechanism. And in some cases the United States wins and in some cases the canadians win. But they have small amounts in the terms of overall trade relationship between the two countries. Very small amount. And i hesitate to say this in the United States, but the United States is a somewhat more litigious country than canada is, and i could tell about some nodding of the heads that there is a little bit of agreement on that. So there were more challenges from the United States and people will say that okay, that shows that that the system is working in canadas favor. I would say it is working exactly like the system should work. So that we take the litigious politically motivated actions and reduce those two an objective arbitration where we have some independent outside of both of our countries, some independent result or some independent participation. And that then comes up with a reasonable solution and i would say that people who look at these from an objective reasonable way without trying to put numbers on things and you could see these the decisions that have been taken have been good. So i wont say anything more than that except it was extra a extraordinarily important for us because you know some of the politically motivated actions that have been taken and some actions currently between bullying and bombard it was outside of the normal trade dispute procedures. We have to have some protection against that. The United States is a lot bigger than both mexico and canada. And if were going to not be disadvantaged because of that size, and the litigious nature, they have we have to have that balancing item which is a dispute settlement mechanism. Ill address the two respective issues on nafta first and then go to the mexico specific question. As mike just said, mexico and canada have one thing in common. We both live next to an elephant but it is much better to be on top of the elephant than underneath the elephant. What one of my previous predecessors used to say is that there is too much bush and hills between us. Excuse me. There is no doubt and i didnt mention dispute resolution mechanisms and Government Procurement simply because of time but there is no doubt that the canada round in january will hinge on the rules of origin and the sunset clause which weve discussed and Government Procurement and dispute resolution mechanisms. These are the four big items that could break or make the negotiation. I think the mexican and canadian government in the last round here no in mexico city, round five, i think respond started responding and pushing back on some of the issues, particularly Government Procurement was a big one in the last round where the Mexican Government put the first formal counter proposal on the table regarding Government Procurement. Again, i would remind u. S. Tiara that they better be careful for whatter wishing for on Government Procurement because if mexico were go down the tit for tat route, the way the u. S. Plays in Government Procurement in mexico, i know who the big loser would be if this were to go down the tit for tat route. On the issue of what happens if there is a u. S. Denunsiation. Both the mexico and i think canadian governments have signaled that the moment President Trump presses the Nuclear Button and invoked article 2205, mexico and canada will walk away from the negotiating table. Because unfortunately i think there is some voices in washington thinks in a negotiating tactic. That by invoking 2205 this will force mexico and canada to accept some of the issues that the u. S. Has put on the table and think both the Mexican Government, the position that i know for obvious reasons better have clearly said that is the scenario where mexico and the u. S. Walk away. Because there has been pressure in mexican Public Opinion as some of these these my way or the highway positions by the u. S. Were tabled, there were many in mexico saying, mexico should leave the negotiating table. Were not going to do that and hand the u. S. The excuse to torpedo an agreement by having at least mexico i cant speak for canada, walk away from the negotiating table because we dont like something tabled but i think there has been a rubicon drawn is if the u. S. Does denunsy ate, then canada and mexico will walk away. As michael said, this doesnt mean that nafta is over in mexico and canada. We could maintain nafta. In fact i think the position of mexico from the outset was to make sure this was a trilateral negotiation despite some go it alone voices in canada and saying they should strike their own deal because of the fear of mexicanization of the United States and i think the mexican and canadians positions have converged that we will continue to always ensure that there is a trilateral discussion and approach and obviously nafta would still be in force for both canada and mexico, despite a u. S. Denunsiation. And michael talked about the impacts this would have. Whether the Mexican Government is bluffing or not. I dont know. You should ask them. I think it is in earnest. I think there would be significant political pressures in mexico not to respond to unilateral denunsiation of nafta. But at the same time, lets be real. There are direct consequences of toning down, dialing down daytoday collaboration with u. S. Law enforcement and intelligence agencies in the fight against organized crime for example, mexico has depended on intel support from the United States, particularly in terms of signals an its intelligence to confront organized crime. But there is a shift occurring in mexico and think people in washington would be making a mistake if they dont consider this. Which is for decades, for the many, many im a career diplomat and im a u. S. Hand which means ive done all of my diplomatic career in regards to the u. S. Mexico bilateral relationship. Since nafta, the key paradigm with which mexico and the United States engage one another is that we would not contaminate the bilateral relationship as a whole of a sing lal specific disputes in different issues of the agenda and the logic being this was such a complex and many moving part relationship if we disagree on tomatoes and use that to leverage security collaboration, the whole relationship would stall. So for 20 years the paradigm that drove the u. S. Mexico relationship was noncontamination and keeping the silos so the disagreement in one area would not contaminate the agenda as a whole. After a lot of prodding and pressure because it is the only way for a country with power symmetry like the one we have with the United States to sort of more or less level the Playing Field was after much prodding this government articulated a policy of linkage. As a result of the pressures on nafta. That is that mexico would be approaching the negotiation related to nafta as a whole of bilateral relationship approach. And that we would be putting issues of security collaboration and immigration and enforcement on our southern border and others on the table to leverage and level the Playing Field with the United States. Whether the Mexican Government does or does not do that at the end of the day, i dont know. But what i can tell you is that it will be very important public and political pressure from the Mexican Government now that it has stated that as its negotiating position to do so if it decides not to do it once nafta collapses. So first just to take off from where arturo left, there is also a very practical question about security koom security between the two kurnlts countries. This year the Trump Administration and the Mexican Government designed a strategy for combatting Drug Trafficking and organized crime. It is going after every point along the chain of drugs from production to the sale, and crossing the border, the sale, the money coming back. If you are going to successfully implement that kind of cooperation, you need to have more information exchanges, more trust and more confidence between the workers on both sides. And both governments. All of those agencies have to be comfortable with each other. I dont believe that is going to be possible if were in a situation where the two countries are distancing themselves from each other on a project that involves millions of workers in mexico and is going to have such high cost and additionally where mexico is being maligned as it has been maligned. And it will be on two levels. One level is the one that arturo laid out, political level and the other level is from the point of view of the actors who have to implement this. Why am ien dangering myself going after this powerful wealthy killing machine of a Drug Trafficking group for people who are calling us murderers and criminals and and its going to dampen hope at that higher level. There will be continued cooperation. But to get to a new level of cooperation to be more effective is going to be very, very, very difficult, i believe. And just to take up a bit on the we havent on the rules of origin issue. Its very interestling. The proposal put forward by the United States has succeeded in uniteling u. S. Industrial, mexico and canada, all in their opposition to it and their statement of we dont really understand where it came from and how its going to improve jobs. In falct a study by the autopars industry said its going to cost up to 25,000 u. S. Jobs. And so even in this key area, theres clearly a lot of need for Getting Better analysis, working through the facts, working together to find a solution to this complex problem and there may indeed be a solution and you can have more north american content. But you have to understand the economics of it and the industrials in getting together. So right now you have u. S. Industry saying this is a dangerous proposal. And we have to somehow in a number of these areas get beyond where we are right now to a very serious no gaucheiation thats talking win, win, win, not win lu lose, lose. I dont think what were facing is mexico and the United States going back to a relationship like we had when u. S. Invaded mexico in the 19th century. But it is going to back to when he wrote the book distant neighbors. It was at best, touchy. So do we go back to what this relationship looked in the 70s and 80s or do we continue to slowly build upon this pragmatic shift driven by first nafta and then the National Security imperatives of 9 11 and thats whats at stake here. We have ret me just make one because both tony and arturo have talked about this. The u. S. , canada National Security relationship has been extraordinarily strong and i. Its more important. And i touched on this earlier in my comments. I worry about more the north American Call it an opportunity lost. Weve seen terrific work happening the last 15 20 years between mexico and the United States and that has benefitted us in canada as well. We worry about it opportunity lost if some of the things that they have talked about do happen with the loss of mexico. We have time for two quick questions. The gentleman over there and the gentleman over here. Hi there. Reporter with inside trade. I know you touched on the tpp 11 briefly. So obviously mexico and canada are parties to that agreement. What does the panel think of the implics for north america and how that will effect mekts co and canadas strategy as they negotiate nafta, their being parties to that deal . We would just we heard talkeds about compromise. They talked about a weve heard about compromise on the chapter 19. Can we expect something similar regarding the rules of origin dispute . Let me comment on the tppl canada would be very anxious to continueen the discussion of that. As we have done with seta, ourgreement with europe, we would be looking to expand it external relationships that we have ttp laev wou11 would be vea part of that. O one. One of the reasons i think theyve been so emphatic about moving forward with ttp 11 minus 1 is not only bah because we profoundly believed in the agenda, despite hurdles and issues that caused heartburn, i think mexico and canada truly believe it would deliver a 21st century rules paradigm can we think is important for the comcompetitiveness and economic well being of both. And what mexicos been doing with it chile, columbian partners. Its part of this multilateral trading arc. Its our version of a Free Trade Coalition of the willing, if you like. But now with the discussion of the probability of President Trump pressing the Nuclear Button, probably as soon as the sixth round in canada, this become as plan b. Its one of the reasons mexicos been looking at argentinean and brazilian markets for grain and beef, widened the discussion with canada in these sectors. Why were about to conclude the modernization of the upgrade of our 17 18yearold Free Trade Agreement and where tpp plays a key role, precisely if we have to have a plan b. This is a very important piece of that equation. So i think thats how you should be thinking of how mexico looks at tpp minus 1 in the coming weeks and months. Are there comp romiscompromises . Yes. Some of the willingness, from mexicos side, is because mexico is trying to prove that its the adult in the bilateral relationship with the United States, that its behaving like an adult in the negotiations and conversation. There could be some room for compromise on rules of origin. But again it will be contingent on the u. S. And ustr jet zning my way or the highway and this zero sum approach. Either i get everything in a maximalest approach, this idea of 50 u. S. Content within the heightened north american content, which is not going to go anywhere. But i think there are areas and youve seen it in tell co and e commerce where the parties are moving forward where there could be an Early Harvest of success stories, specifically in d. C. If they can wrap up some of those chapters, my hope would sent an Important Message to know u. S. And canada, despite some voices arent playing to wind the clock down. But concessions and comp rupresident compmize had compromises will be possible if its jet zn. Thank you so much for coming and for our panelist and ambassador ilhads. Please welcome excuse me, a round of applause. Thank you. [ applause ] hi, im john feral. This year we visited 24