Our trade architecture which had been a winning architecture since the end of world war ii was to make wins and increase the econom it is also timely because we are in imminent danger of dismantling the north american t and its predecessor. Those rules of the road have brought us to the kind of economic level that we have had today. Instead of tension and rekrim nation and reproach. T has fossterd a safe boundary and 1. 5 billion crosses. Reyeoh grand. The past two decades created a unique era of trust between the nation that has brought unprecedented security cooperation, intelligence sharing, antinarcotics enforcement, antiterrorism security, happened daily. Proof of the reality of this partnership is found at mexicos askedwith guatemala where our request mexicos efforts to stem the flow of essential american refugees take an enormous burden off our order control. Todays rhetoric is forcing mexicans everywhere to question the unquestionable. Did the country make a mistake 25 years ago by betting its future on a north america . We saw massive marches last weekend against the United States. Hasleftist candidate locked in the top spot in national polls. If we continue to antagonize mexico we risk our neighbor turning its back on us. Turning its back on decades of strategic cooperation. Arrive in secretaries mexico and in the coming months this center will continue to play a constructive role to move this relationship forward. On march 7 we will welcome margaritas of assad to discuss strategies for the future. As we kick off todays discussion about the way forward, but he can continue to do that job better than our very distinguished guests, some buddy who knows a thing or two about trade and u. S. Jobs. Carlos gutierrez. Thank you for opening this event. The secretarys remarks will be followed by a panel discussion, captained by my dear colleague. The center of the latin america growth initiative. We are lucky to have a panel of impressive experts. All of stern, our Atlantic Council board member in fairburn chairwoman of the International Trade commission. Mackay, for minister of canada. In professor at mexico city and the school for citizenship and public affairs. Secretary gutierrez needs no introduction but very quickly, he served as secretary of commerce from 20052009 under president george w. Bush. During his times there, he helped advance economic relationships, enhance trade, promote u. S. Exports, signature a good year as is now chair of the all right stovers Group Previously he spent 30 years with the Kellogg Company area a marker of wellknown food brands becoming the chief executive officer in 1999. The youngest ceo in the companys 100 year history. Welcome carlos gutierrez. [applause] good afternoon. Thank you very much for having me on this very timely meeting. It is a pleasure to be here with peter mackay. I want to thank Peter Schecter and Jason Marsalis for the invitation. The discussion is about nafta. We know that there is a big elephant in the room that is called immigration policy. Cannot going to get into that but i think it is important that we realize that we are talking about our freetrade agreement with mexico and canada and the backdrop is this new immigration executive order that should be finalized very soon. Of the details are out but that is going to add a level of complexity to this. Are fullyink we knowledge and. Acknowledging. Mexicofocus mostly on because it seems like that is the epicenter of what is going on here. It is important to step back. We are going to talk a lot about the details and whether we renegotiate tort updates and whether it is the labor chapter or the environmental chapter only rules of origin. Those are very important things obviously. I want to step back a little bit because theres a lot more at stake than just the rules of origin and who wins or loses on a specific category. We are talking about a big strategic issue. I remember being in mexico city a couple of weeks ago and just thinking about how the relationship has evolved and how there is a certain confidence in it islationship, whereby becoming somewhat bilingual, bicultural. There are myriad of english words that are just creeped into spanishlanguage in mexico. There are spanish words that creeps into the u. S. Language, you name it. D the relationship has never been better. This was what was on my mind. You are talking about a level of anxiety in mexico that sweet cannot see from here. We hear about this, we read in the papers. Isnt anyone in mexico who is not thinking about what is going on. We have worked very hard to get here. Is atelationship today risk. I think what we need to trust that our i government here in the u. S. Will understand this, we cannot humiliate a country to the bargaining table. We cannot get a country to negotiate with us by humiliating them. Maybe in business you can because it is all about the bottom line but you cant quantify cannot quantify National Pride. You cannot quantify national dignity. That is what is at stake here. It will be extremely difficult for mexico to do anything but take a combative response or position. In many ways, it is our position and our tactics that have forced mexico into a corner, and they have no option. We have given them no option. It is not going to be in easy task. I would not push mexico on that. I would not call their bluff. You know as well as i do that if this means going into a recession for a couple of years, but we are going to keep our National Sovereignty and dignity that will happen. I would hate to even test it. So, we are creating the conditions for a president ial election in 2018 in mexico where the winner could well be an antiamerican populist, antiimperialist, what have you in mexico. Something we have not seen in decades. That would be a strategic issue. We need to have the wisdom to not go for a tactical victory that down the road will cause us to realize it was a strategic defeat. The motivation for a quick, tactical victory is always there. I hope we have the wisdom to look down the road a little bit. I started my career in mexico. For me, it is a country that i know very well. I was general manager of kellogg mexico from 1983 to 1988 before nafta. I remember that mexico extremely well. We are talking about very nationalist policies, protectionist in many ways, products that are imported today that we could not import back then, and a sense that things had to be nationalistic. Not open but very nationalistic. Being on the corporate side of things, you could see the impact it had on our ability to create jobs. When hundred percent inflation. A lot of people have 100 inflation. A lot of people forgot about that. Low growth rates. We all remember this oom and boost cycle where once every six years there would be in major devaluation which would have devastating impacts on border towns, state, jobs in the u. S. , jobs in mexico, corporate balance sheets, corporate earnings which led to more downsizing it was just a terrible, vicious cycle. We have not seen that for about 20 years. That coincides with the nafta period. Today, what the hree countries have built is really quite breathtaking. Nafta is worth over 1 trillion. Supply chains have been integrated throughout the three countries. Manufacturing supply chains and Agricultural Supply chains going on both sides of the border. Being able to give produce get produce to the countries on time so it does not rot. We have been able to do that because of this infrastructure we have built over 20 years. But just six Computer Systems on both sides. Nafta is infrastructure and Computer Systems on both sides. Nafta is digital. All the hings you need to do to work the supply chain and forecast sales. To invoice a customer. It is not like switching off a light. All of a sudden nafta goes away. This is billions of dollars that has been invested in this infrastructure we call nafta. 14 million u. S. Jobs are tagged tied to nafta. As we approach this, we need to keep that in mind. Geographic proximity always makes the difference. You would expect that mexico is the main export market for the majority of u. S. Companies. Let me explain that for a second 57,000 u. S. Companies export to mexico. Of those 57,000 companies, 94 are small and mediumsize. You are talking about this is the essence of geographic proximity. If you start exporting, you might want to export your neighbor. So, a lot of jobs are at stake. If you just take one example of the domino effect of Something Like this we received exports of avocados and tomatoes from mexico. A lot of families are working in that industry. The u. S. Is a great market. Those are highvalue agricultural items. They also happen to be in the states where we have seen the drug crime and impact of organized crime in mexico. What are those families going o do if they are out of a job . If you cannot find a job in the avocado business or tomato business, where else do you go . We have to keep thinking about and connecting dots. This is a lot bigger than how much we are paying for mexican goods or how much they are paying for u. S. Goods. How much are they buying and how much are we fighting buying. Canada and mexico are the top customers for u. S. Products. So, we are dealing with the biggest thing we have going. The world is regionalized. We keep talking about globalization and how it has heard hurt everyone. It is still very much a regional world. The eu, in spite of brexit, the brexit problem shows the issue with the u. K. Now and eu with trade. China is now leading the way towards the 10 Southeast Asian countries in ne big trading block. All that without the u. S. Dollar. That is the vision. It may not happen for 10 years or so, but it is being talked about. They are getting ready. So, let us look at the americas. We are fragmented and splintered. Aside from nafta, there are the pacific lines in a lot of different things, but there is not one americas. The crown jewel we have is nafta. I hope we also think about the role that our region plays as we compete with other regions in the world. We would much rather have jobs stay here in the hemisphere than go to asia. And that is a reality. It becomes an economic reality in a National Security reality. Again, i hope we keep that in mind. Energy supply chains we have the opportunity to see a massive shift of wealth from the east to the west if we can get our act together regionally and build Energy Supply chains. We have the oil, and we have the gas. This is a time where we could be doing that. This is a time where we could be negotiating that. Soon, mexico will be the seventh largest economy in the world. Canada will always be one of the most developed per capita income economies anywhere. So, nafta is not only important today, but it will get more and more important. Nafta should be updated. Let us agree to that. The market has changed. The world has changed in 23 years. So, yes, the labor chapter in the environmental chapter we should look at rules of origin. Nafta was signed before the internet took over the world. Think about the digital economy. Online marketplaces, the cloud, the app economy this is an area where the u. S. Could have a significant advantage if we get to the point where we can negotiate a better agreement where it is not a zerosum game. Where one party wins and the other loses. That is not what trade is about. It is about growing the market. I think the question i would hope we are asking as we go into these talks whenever they start to happen how do we make nafta stronger for all three countries . How does north america better compete with the rest of the world . Those are the two strategic questions. Everything else i think is tactics and politics. Sort of appealing to the political circumstances in individual countries. I think we should be working on Bilateral Agreements with mexico on immigration. We should be working on bilateral and trilateral agreements on border security. I had the opportunity to work on a major study to come up with a Bilateral Agreement for low skilled workers from mexico. Right now, low skilled workers ave to go to a black market. So, we are essentially outsourcing the labor that our Companies Need to a black market. Why not negotiate some kind of agreement . Those are the things i think are possible should those are the things i think we should be focusing on if we have the right attitude and not this idea that we are going to win and theyre going to lose. Or that we are going to put our foot down. We know from history that that is not going to work. I want to thank all of you for your interest in his. I want to thank you for your leadership and commitment. Above all, i hope we can be a voice of wisdom as this process starts, because there is an awful lot at stake not just for next year but 10 or 20 years down the road. Thank you all for being here. It is a pleasure. Utstanding. A great summary of the entire situation. Very well done. Thank you, secretary gutierrez. For taking the time o be here today and your leadership on this topic. Thank you very much for your comments and insights. Thank you to all of you for joining us today for this incredibly timely and important discussion. Id. I am jason, and i will be captaining the rest of our discussion today alongside these panelists. The topic of discussion today could not be more appropriate. Tonight, secretary Rex Tillerson and secretary john kelly will arrive in mexico with the objective of trying to calm the waters. Im sure we can all guess what will be part of the topics in tomorrows meetings. Of course, this will be against a backdrop where a once constructive relationship is now under threat. Politics on both sides of the border now will be as important as policy or potentially more important in finding common ground. It comes just within a week after Prime Minister Justin Trudeau came to washington. A visit that again raised questions about broader north america integration. There could be a huge loss for u. S. Jobs. We have an allstar panel to do so today. Beginning on your right is peter mckay. Peter is someone i have had the pleasure of working alongside of four years now. Everything you have heard about him is correct. He as held an impressive number of posts in the canadian government. That includes minister of defense and foreign affairs. He was also minister of justice until 2015. He is currently a partner in the oronto office in a firm that we have had the good fortune of collaborating with for a number of different conferences. Peter, thank you for joining us. Next to peter is paula stern. She is a wealth of knowledge and a privilege to call paula a dear colleague. As far as trade goes, i think it is hard to find someone with both the experience and expertise of paula. She served as chairwoman of the u. S. International trade commission has commissioner for nine years could she analyzed and voted on over 1000 trade cases involving a broad range of industries and issues. Next to me is rafael who is a professor at mexico city. Rafael, you are really the ultimate expression of a strong u. S. Mexico relationship. Ive had the pleasure to note rafael and work with him for a number of years. He is also a prolific writer who has written over 30 books on u. S. Lactic relationships and mexico or policy. He is someone who knows foreign policy. He is someone who knows what hes talking about. Thank you all for joining us. Here is what we are going to do we will spend the next half hour or so of taking a deep dive on a number of issues. We will talk about the future of nafta, short the longterm repercussions of todays environment, and we will leave plenty of time for questions from everyone joining us today. There is a lot to cover, and so i would ask analyst to keep panelests to keep comments short. Lets start with the visit of the secretaries to mexico tonight. Border policy and security will they will be meeting with the president as well secretaries of interior, finance, and national defense. Perhaps, peter, starting off with the, giving off the new relationship and President Trumps personal interest in driving this agenda, what do you think can be realistically accomplished at this point . Peter firstly, i want to thank peter and yourself for the invitation. Firstly, it is clear to us from a canadian perspective that the president s quite serious criticisms of nafta have been very much and undoubtedly in the direction of mexico. The visit of President Trump with Prime Minister trudeau here last week i think demonstrated that. The word that he used was tweak, not tweet. With respect to your question and this upcoming meeting, i think its an opportunity to maybe step back. And u. S. Officials, tillerson and kelly, who are going have an opportunity to hone in on legitimate concerns around security. I think if they go back to the basics of the security as being perhaps the primary concern that has been expressed by this administration, that may allow them to, i daresay, rethink some of the rhetoric, particularly around the wall. I fully expect we will have a discussion on the wall. And at the same time, i think it will allow mexican counterparts to make a very strong case for the continuation of this unprecedented relationship here in north america. How integral it is to the success of all of our countries from an economic perspective, but from an overall quality of life perspective. Lets go back to basics here. To make America Great again, you have to make nafta great again. I agree with many of the comments, all the comments frankly of the secretary who spoke of the need to modernize this agreement. I think this opening salvo and this visit tomorrow is a tremendous opportunity to recast what has perhaps been a wrongfooted approach and go back to the basics of security, improving some of the concerns that do exist in an agreement that is 23 years old when it comes to nafta, and not reach french or double down reach trench or double down on the rhetoric of how horrible nafta is. I know that the was the approach that Preminger Trudeau took last week in washington. Jason obviously secretary guajardo is not part of these discussions tomorrow. In addition to the wall and border issues and Law Enforcement cooperation front and center, what do you see being realistically accomplished tomorrow on that level, whether it is behindthescenes . What do you see as far as potentially public statements that could come out, obviously taking into account that the folks traveling on the u. S. Side are the Homeland Security secretary and our secretary of state . Paula im glad you asked about trade. We heard about one elephant in the room, which was a immigration and opening statement. Which was immigration and the opening statement, but i think the elephant in the room is trade. , so maybe two elephants here. The president of the United States of america ran successfully on a trade agenda. He said two things that he wanted to get done. 1 he wanted to reduce the trade deficit. The second he wanted to throw out those dumb agreements made by stupid officials. And nafta was numeral ino uno on the list. He set on day one said on day one that he would move against both the nafta and the tpp, the Transpacific Partnership agreement, which had not yet been ratified by congress but had been negotiated. He did that with the tpp. With nafta, it is very clear. He has had discussions already with the mexican president , both phone calls and personal conversations went badly. I think that the mission of the two secretaries from the United States who are going, tillerson and kelly, is to try o smooth and deal with the backlash, the naturalistic backlash, which is making president opinion mezzo pina nieto position even more difficult to negotiate a new nafta. One is to a kind of smooth down the feathers. The other thing i would like our secretaries to do in the visit is to put the trade issue in the context. I think we should do that here as well. Trade agreements are a subset of trade policy. Trade policy is microeconomics. What drives the trade deficits, what drives the disruption from competition come a globalization , technological change, which has affected our voters and disaffected are voters and made them anxious is all these other matters that are both macroeconomic as well as technological. We need to put this nafta agreement, which is old and needs fixing, into a proper context. Otherwise as a nation and with our neighbors, canada and mexico, we will find ourselves in an impoverished, reduced state lower growth, lower productivity, and we will not be gaining on the competition with the rest of the world that we had enjoyed. Jason you make an excellent point of what can be accomplished by tillerson and kelly specifically with regards to trade. One of those is smoothing over the naturalist nationalist backlash. You cannot humiliate a country and you cannot underestimate National Pride in mexico. Its also important to emphasize that these are two men who know mexico very well, who have deep relationships with the Mexican Government from secretary tillersons time as head of exxon mobil and secretary kellys time as head of u. S. Southern command. These trade agreements are also strategic agreements. Our First Agreement with israel was not necessarily because of the importance of the israeli economy to the United States at the true tea to but the strategic imperative to the event states. Paula mentioned the political environment that exist in mexico, the political environment that secretaries tillerson and kelly will see when they arrive in mexico city tonight. If you could compare the article temperament between the two countries right now to a past moment in this relationship, what would that be . Is there historical precedent for the point in which the relationship is right now . Rafael let me start by saying something about my recollection of the newly appointed secretaries. I remember vividly i was working with president calderon. The Homeland Security secretary came to mexico and a few weeks later, Hillary Clinton was a podium to secretary of state appointed to secretary of state and came to mexico. The meetings went very well and were key to khamenei kitchen between Hillary Clinton and our foreign minister and president calderon. She came very well prepared. For example, in the meeting, we saw the very important issue. We were getting black hawk helicopters for the mexican military. They were coming in 2014. President calderon was leaving office in 2012. Thanks to hillary, those helicopters came that your. It helps to understand the complexities of this. The narrative that mexico needs is that we are the friend. We are the southern ally. We are not the enemy. I am pretty sure that both secretaries will understand. They are already getting prepared. The complexities of the relationship of mexico. I never saw what ive seen in my lifetime with what i am seeing. Trump is amazing and has created a perfect sense of mexico. From the far right to the far left, we all hate mr. Trump. He made the migrants and called them things. If you want to draw a comparison , i would compare him to ambassador wilson in 2011. In 1911, he was an ambassador who fought against the mexican revolution and fought for the assassination. We would compare him with president polk who sent u. S. Troops invade mexico in 1846. Ive never seen this consumptions consensus in mexico. Mexicans are rallying a around the flag. These politicians have increased seven or eight points. It is hard to trust the pollster , but i will say that president pena nieto has received a push. Why . Trump is the public enemy. Not only that, but i would say pena nieto has once again found a sense of purpose. He has given the u. S. Mexico relationship a sense of urgency. He made a very important change in his cabinet and i would say he is focused. He is doing fairly well. This is the end. We are in the fifth year of his administration. The political times are coming to mexico, but i will say pena nieto has benefited a lot from the way mexicans hate mr. Trump. Jason perhaps unknowingly unleashed a variety of forces. For those who do not know, the candidates for the mexican president election will occur in 2018. Peter i just wanted to underscore that throughout the history of north america, there have been other polarizing figures. Lets be honest. This may be a new standard, but personal relationships in politics matter in the extreme. Following on your example, i recall the early days and my tenure as foreign minister meetings with Patrice Espinoza and secretary rice. There have always been outstanding issues water issues between canada and United States, trade issues, software, lumber, and similarly with mexico. But the ability to sit down and have an open, on honest discourse, develop trust among ministers, not only from the very top but from line departments, u. S. Governors, mexican governors, premieres in nova scotia, chambers of commerce. Those relationships matter as well. I dont think at this early stage we should sound too much alarmed. Yes, there has to be pushed back. Yes, the early signals and list of priorities mr. Trump has put out there, particularly around trade, are cause for alarm. But i think you will see in the coming days, and tomorrow will be a good example of how these ministers make a connection with her opposite number and allow people a little breathing room to step back from some of these positions, because in my estimation, we have to move away from the personal and back to the practical about what is going to pull the economy forward collectively in north america because of the cement his competition that we will face from the asiapacific and other parts of the world. We have seen events like brexit that have also caused tremendous discord and future elections obviously in European Union post that threat as well. Eresa mays visit with President Trump is an example of a relationship that could be rekindled in terms of the u. S. Great britain relationship. I think it is worth mentioning that the united kingdom, now as the extra the extra they extricate themselves from the European Union, theres a lot of unknowns, but theres a possibility to renew and establish trade relations with Great Britain with mexico, canada, and United States. With every situation comes opportunity. Rafael there was a good message by the mexican team by the trade minister. They went to canada and is great news. The Canadian Foreign minister said we will go ahead bilaterally. They will receive in mexico. Jason pollack, i want to go to you on the importance of the north american integrated market. A quick follow up on Prime Minister trudeaus visit last week. There was a lot of concern after that visit about where relations and a lack of reinforcement of the importance of north america as a whole and then the freelance statements about nafta negotiations canada and mexico will not want to egotiate separately with nafta. I think we are seeing different signals from the canadian side. Peter thats right. There was tremendous excited in the early days anxiety in the early days of this presidency. This visit was watched very closely. Our Prime Minister moved with his arms and legs intact. A lot of rhetoric of this being a and b meets godzilla and it didnt happen. It all worked out ok. There were collective sighs of relief, but there were still signals about nafta there and it there were expressions of concern around the border. We will deal with them over time. Thats the reality. We have to get down to the hard facts, the tremendous advantages that can be laid out in very specific terms of this agreement , and modernization around things like dispute resolution mechanisms, rules of origin those things can and should be dealt with because of the many changes that have happened since this agreement was put in place. Jason the value Chain Integration that has occurred in north america as a result of nafta has not been discussed as much but has allowed our Global Exports to be more economically competitive. What are the risks to the United States if we break this up . What does this mean for china and for chinas position in the world with a less competitive unified north america . Paula the integration which has occurred and accelerated, facilitated by nafta, really started with u. S. Canada on the auto agreement, which then became a u. S. Canada agreement more generally, but auto dominated the nafta considerations once the u. S. Canada and then mexico got into the final nafta. What we have seen is a dramatic shift in which the Automobile Industry in this country, which was being battered if you will buy japanese competition, it was able to study itself steady itself. It engaged not only using the nafta rules but during the same period saw an increase in technology, which allowed the supply chains to span the borders very, very quickly. There is no question that technology has had an enormous disruptive effect on anufacturing jobs in the United States and, i presume, anada has felt a similar ituation. We in the United States are manufacturing production is higher than it has ever been, but the number of manufacturing jobs is the lowest since the end of world war ii. What you have seen is a shift and the shift was also occurring in mexico. So you saw mexicans who had been eking out a living agriculturally on small plots being attracted to a new desk new factories that were being invested in mexico. The combination of the technology, the combination of lower wages in mexico for these actory jobs saw the capability of both the Auto Industry and other manufacturers to compete with the tigers of asia japan, south korea, taiwan, etc. That has been, i think, a remendous north american success. Meanwhile, agriculturally, agricultural and United States agriculture in the United States enjoyed a great surplus. We export around the world, but in particular visavis mexico. That is being, if you will, jeopardized by the future of whether we will have a nafta agreement that all three nations can agree to. So we have seen shifts that are both technological as well as lubricated, if you will, by these nafta agreements. Jason it has lifted millions of people out of poverty. Peter the integration of both economies and policy is absolutely right. There are Canadian Auto manufacturers operating in mexico very successfully. It has also and i think others may speak to this much more authoritatively than i, but it has improved labor standards across the board. It has had a big impact in terms of bringing people into a more modern, more lucrative quality of life in terms of how they can employ themselves, feed their families, and contribute to their communities. Paula meanwhile we did not deal adequately in the United States with the disruption that comes about with the technological dynamism. Jason go ahead. Rafael nafta had a lot of spillover into mexico and that relationship. One of those was environmental norms. Because of nafta, mexico started to implement environment someones. Al norms. It helped mexico a lot. It not only helped trade in jobs, ut it helped diplomacy. Mexico decided to play the game because of nafta. We decided to move our embassy where we now have a really nice Cultural Institute to signify that we are close to the white house, that we are here to affect decisions, and all that is at stake now with mr. Trump. Jason one of the big challenges with nafta is nearly 14 million americans whose jobs depend on nafta dont even realize it or the 5 million who depend on the mexicou. S. Trade. The integrated nature of supply chains that any kind of disruption to this would have severe consequences across the economy. People dont actually realize it. Paula its not just making the stuff. Its also delivering and servicing. It is the services as well as manufacturing, which also go into this whole component of a healthy north american economy. Jason i want to get beyond economics. An interest of time, i want to go alone but more on nafta and the current environment. Secretary gutierrez mentioned about not being able to humiliate a country to the negotiating table. The National Pride that has now been unleashed in mexico as a result of discussions. What could be some of the points forward for modernizing nafta . Especially this current political context . Paula i think the political context is about jobs. As long as we can see that even though there is increased productivity that comes about, and as long as we have a system in place for helping those who are inevitably disrupted by change, i think it can be a win. The problem, as i said, is we really neglected that. We have not talked about human capital, so what trump really managed to tap into was this neglect. I havent seen, by the way, however, the president talk about this. And i think that no matter what he negotiates, whatever the terms of a new nafta might be, he has got to wrap it into adjustment plans for retraining, community colleges, digital literacy, all the kinds of preparation which is voters his voters and the nation as a whole needs. Thats the case in any country, but we, if you will, have been the leader and are setting the pace now. This is what trump has put as his number one issue to negotiate these trade agreements. I happen to believe that you can take this 23yearold agreement and really pull out the things which were way too controversial from the tpp negotiations and really see that tpp in those seven years, where 12 nations negotiated, dominated, if you will, economically by canada and the u. S. Together, with mexico making up, if you will, at least a third of the tpp countries. They were able to agree on new rules on environment, new rules on labor. They were able to agree on new rules that had not even existed with regards to services, intellectual property, digital trade, all kinds of matters that had not even been in our minds or adequately politically gelled in our systems a quarter century ago. I think the president frankly could make lemonade out of lemons and quickly borrow what you would see an agreement between the three nations canada, u. S. , and mexico already and really come out and say, i thought of the future. Im not just thinking about voters disrupted because they had some jobs in manufacturing and they didnt come back and productivity put them out of business. Jason you can say that any of this came from the tpp negotiations themselves. Peter, let me ask you a question about canada. Peter just before that, the tpp negotiations that were protracted, similarly canada embarked on a conference of trade agreements with the European Union. A long process, nine years in its final form a. At. What that tells you is a very important, often unspoken truth is that in all of our countries, mexico included emma we have some very capable, professional Public Servants who have their a game right now when it comes to trade discussions ready to engage. That helps in a detailed, rich mature, not fake news discussions about trade. I think that is very important. You cannot negotiate these hings and 147 characters. Or 140. Maybe its the Exchange Rate in canada. What im saying is we have some really rate in canada. What capable people other than the political figures involved in the discussions. I have a lot of confidence spending time in government and those in visuals engaged in serious and doing a lot of the heavy with lifting lifting frankly out of the glare of the public. I think when we get back to all these important elements and considerations, we are going to be able to make those improvements. Rafael you are right, peter. The mexican team has a lot of experience and have worked hard with the secretary for 25 years. He was an after negotiator and has a nafta negotiator and has a lot of experience. He went into politics and now is a politician as well as negotiator. They were negotiating tpp. Mexico and canada teamed a lot during tpp. It seems to me that is why to remain bilateral would be important. Paula i want to reinforce the trilateral. I really think its so important and therefore canada plays an incredibly Important Role here. Rafael pivotal. Paula pivotal because this will set the stage for the next 25 years or 50 years of what is our trade architecture . Trade architecture which has been a winning architecture since the end of world war ii make wins and increase the economic time by reducing the barriers at the border very briefly. But can doubt is so important and play such an Important Role, i think of sylvia, who had led the charge for so many years intellectually in canada, to ensure canada was part of the quad. The quad was the u. S. , japan, europe, and canada. Pushed, if you will, many of the rules of the road, commercial rules of the road, at the wto and its predecessor. Those rules of the road have brought us to the kind of economic level that we have had today. But again, i want to emphasize, it is not enough. Each of our nations has to worry about those who were disruptive by this turbocharged Economic System that we are in. New business models, new digital worlds. But on the trade side, and that is why i say it is just microeconomics, and it is smart negotiators, but it is essential but not enough. David trade architecture is there, the bones are there. Some of the same individuals. We have seen our former Prime Minister a merge prominently in this discussion around nato. Peter he attended the meeting yesterday. Spoke very positively. Said they would be difficult negotiations, as they were in the beginning. I do come back to an often referred to expression about security trumping trade, and that has taken on a whole new meaning, but canada has this existing or red relationship, our nato relationship, g7 relationship with the United States of america, but we also have tremendous ties with mexico that goes back decades as well. You mentioned the auto pact. This is a relationship that has been cultivated, ebbed and flowed. I put a lot of faith in a leadership as well as those professional Public Servants, not only nafta but the acid rain treaty is one that would not have happened were not for the personal relationship between Ronald Reagan and brian mulroney. David i want to get back to net, the specifics from the canadian perspective, that there is folks are familiar with but the Trump Administration wants out of nafta, potential nonpatients modifications. When nafta is open to be modernized, there are a number of things in the agreement that are not serving canadas interest, and canada will be coming to the negotiating table to fight for changes. What are some of those . Peter one of them, i suspect, will be access to some of the Infrastructure Projects that will be presented. This is yet to be really unpacked, in terms of how this will impact the american economy. There seems to be a lot of indications that there will be restrictions placed on mexican and canadian dissipation and infrastructure building. They are going to need labor, canadian softwood lumber, other products that will be part of building the infrastructure that President Trump has spoken to. Lets not forget he is a businessman, a contractor. I think he owns a golf course. One or two at least. He will quickly come to the realization that you cannot go it alone and the enormity of the type of infrastructure he is speaking about. The dispute resolution mechanism has also been contentious. We have seen it breakdown over the 30 years and the canadau. S. Relationship. I guess putting on my justice had for a moment, it strikes me that pulling back from the independent dispute resolution mechanism entrenched in nafta, going to the american courts, may not be the best idea. You have to be careful what you ask for, as we have seen in recent decisions coming from your courts. So the independent mechanism has worked well overall. Changing the rules of the game significantly at this point is where we will get bogged down. If it is tweaking, updating, modernizing, including things like ip, currency manipulation, those things can be worked out. David the u. S. Mexico relationship extends far beyond nafta, an incredible amount of intelligence sharing, cooperation at the u. S. Mexico border as well as at the mexicoguatemala border. El chapo was extradited to the United States only before President Trump took office. A huge amount of cooperation at the agency level. Between governors, mayors. What are some of the cards that mexico could potentially play to hold its position visavis the United States, with regard to the nafta discussions . Rafael very important the strategic one, i would say the northern triangle of south america, honduras, el salvador, guatemala, has become the syria of america. The levels of violence is like syria. The lack of Economic Opportunity is like syria. I believe mexico is the essential partner of the u. S. To try to control that problem, and to improve Central America, especially the northern triangle. Lets put it this way. Central americans are leaving america. The last few years, the otms, other than mexicans, coming to the u. S. Through the mexican border, more than mexicans. The flow of Central Americans are now larger than mexicans. We can discuss why. Out of 10 Central Americans coming to the u. S. , mexico is deporting five, the u. S. Is deporting three, and two are making it into the u. S. Some mexico is a key ally. I do not see a way for the u. S. To come and try to improve conditions in Central America without mexico. Economically speaking, i would say, especially the four border states, california, new mexico, arizona, texas, the top destination is mexico. Those four states have made 25 of the u. S. Economy. California is huge. It seems to me, the border states will come to mexico. I believe time is going to help mexico because the natural allies of mexico will come out. So far, the narrative is that we will negotiate nafta. It will take time. In terms of candidates, we will see ambivalence. We have the promise of canada. Canada come in the 1980s, was a champion of globalization. Because of canada, we are close. Canada was the champion. Im sorry but we also have he imposes visas on mexican nationals. In the midst of the 1n1 crisis. By the way, that was a north american crisis. He number of people having 1n1 was very alarming, not only in mexico but entire north america. If you look at a map and you look at the cities with more than 500 people affected, north america was red. Why was that . Because of the connectivity between canada, the u. S. , and mexico. So the connectivity is there. There are some conservative people in canada, some that prefer the bilateral way. We have a lot to win. When we negotiated nafta, there were only about 40 regional agreements. Now about 300. Now the world is basically trading regionally. North america could be very strong if the three remain there, but we dont know. I doubt there is a lot at stake with canada. I believe we have a lot to gain, canada and mexico, especially in trying to balance mr. Trump. If we do not remain together, we dont have the power to balance. David you mentioned the four border states. Thewe have a number of Different Social Media tiles and other things that you saw coming into todays event, not only those four border states, but over 30 states that have mexico as a number one or number two trade partner. I want to open up the questions for the audience. Please start thinking about the questions. I want to make sure we had time to address the questions. Pollock, my question to you, what are some of the industries in the u. S. That would suffer greatest from any type of breaking a part of nafta are moving toward a bilateral with mexico . What would be the most severe things how the American Workers would be most severely affected . Paula i really want to emphasize, when it comes to manufacturing, the numbers of jobs in a successfully global sector will be reduced. We will see robots here there might have been people before. You will increase and see increasing production and shipments and exports, but you may not see the concomitant increase in obs, in those particular situations. Electronics. We see it every day with televisions, flatpanel displays , the assembly of electronic factories that are assembling and doing value added as well in mexico. Often with the semiconductors and the very high value added input that may be reflective of u. S. Values, i should say, value added, coming across the border not just once but two or three different times before you finally see the assembled product. So if you disrupt that, i think we basically, as a continent, as a continental economy, will lose to competition in asia. I think that is across the board. As far as the agricultural goods , we heard already from the texas cattlemen. If you wait long enough, you said, you will see others pushed back. You are hearing texas cattlemen who basically have some of their cattle on the other side of the border, moving back and forth and coming back. Likewise, of course, corn. We are already seeing a threat to our agricultural sectors here in the United States and the representatives speaking out and speaking up now, concern that mexico is, indeed, shopping in argentina, brazil for the corn that had really been responsible for much of our exports, export numbers. And they are not many jobs, again, particularly in agricultural area. But i dont think we can afford to shoot ourselves in the foot, if you will, by unwinding all of the progress we have made. Yes, there needs to be something done to deal with the anxiety, yes, we can upgrade the trade agreement, but we should not be seeing this as an opportunity to expand and not come back with a fallback position. David peter, i want to give you a quick word and then open up to the audience. Peter that is why talk of a border tax right now is unhelpful. That is not to say that the u. S. Congress and senate will not have a lot to say about these negotiations as they progress. Paula constitutionally they are entitled. Peter checks and balances in your country are very strong. One of the areas that we have not touched on that will figure prominently is energy. This sex all three countries in north america. Being Energy Independent in america is one thing. Being north american Energy Independent, in my view, should be the goal. The way to achieve that is closer cooperation. That also includes closer cooperation around Climate Change, around the environment, emissions standards. We are yet to see what the president will do with the paris Climate Change record. It is a pretty clear signal coming already that there is a backing away from that, as we saw with kyoto. That is problematic. If we are not holding to account china, pakistan, india, ourselves, we are whistling past the graveyard on these important environmental issues. Going it alone in that area is disaster. David u. S. Energy exports to mexico could themselves errors the trade deficit. Im going to stop the panel so we can have questions from the audience. There will be microphones irculating. Introduce your name, your question. I will take three questions together. First question here in a second row. Diana negroponte from he Woodrow Wilson center. If the key political problem is jobs, is there, within nafta, the capacity to raise dditional revenues to invest n the skills retraining, which we need to meet the new economy . David i will take a couple of questions. Middle of the third row. Then to you, sir. Brett with inside u. S. Trade. How will the idea of renegotiating nafta bilaterally, with separate negotiations, happened between canada and mexico . How will that impact how that renegotiation will happen . Is that a realistic way to do so . How do you deal with issues such as rules for jeanette fashion . There has also been talk about other issues like a border adjustability tax, immigration. Is it possible that those other areas poison the well, in terms of this renegotiation, that they overshadow any possible update with nafta . David thanks. Question in the right side, middle. Kirk. I want to ask the flip side of the question that diana asked. From the mexican point of view, there is a lot of concern that wage growth over the past 20 years has not been adequate. The flip side of the jobs equation there is lack of wage growth. How would a renegotiation address that . David thanks. Let me start out with paula, the capacity in nafta for funding for greater worker capacity building. The question on the impact of bilateral multilateral, other things that macleod the discussion . The lack of wage growth in mexico and how that is part of the discussions. Paula you are right to put this together. The need to deal with the adjustment that comes from trade , there has never been, if you will, a tax that has been kind of put aside. Talk about the wall that President Trump wants to build. He has suggested that a 35 tariff on mexicos goods, he could pay for the wall, if you will. But that means you are taking money out of the American Consumers pocket when you take it out that way in a ta riff. One your challenge is, to the congress and president , when it comes to allocating funds for this, there are many excellent bozos that academics have made that deal with both wage insurance, various ways of assisting those who are impacted not only by changes in trade but changes from technology. But congress has never shown a willingness to advocate those kinds of funds. As you know, we as a nation, compared to other industrialized nations, basically think the individual should deal with these disruptions. I happen to believe that that has brought about the toxic situation that we saw in this last election. I think the bigger competitiveness agenda, the bigger bargain, is something that you have to turn back to President Trump and ask, now what are you going to do, in addition to just going back to trade negotiations . But you have to remember the role of the consumer here, when it comes to allocating a new tax or tariff. Peter very briefly to the question about skills training, job training. I dont believe, in the reading of the original agreement in 1993, that it did really envision the impact of technology and that sector. Not only in automation, but the number of jobs. As the secretary said, this is an area of modernization that should happen and will happen. Thank you, to the Woodrow Wilson institute, for remarking these issues. On the negotiation, the signal that came clearly from the foreign minister yesterday was that we are not going to throw mexico under the bus. This is not going to be a go it alone bilateral. However, having made a declaration, a was that we are not going to lot will depend on the signals from the white house. It is easy to make that declaratory state and. Statement. The concern will be the propensity of the president , who has stated his preference for bilateral relations in trade negotiations. Go on back to square one, he wants to win. He wants america to come out with at least 51 better than whoever he is negotiating with. So if that means starting way over here and making quite extreme statements to get back to middle ground, that is a negotiating tactic. That is not new. But it is certainly part of the president s personality, if i can say that. And about and mexico will have to come to the table with clearly enunciated positions, well articulated, backed up with facts, and let the negotiations begin. Rafael there is an american consensus in mexico that if trump were to denounce nafta, it would not be end of the world. Why is that . Because we have the wto. Tariffs to the amerco would raise about 2 . Paula except on small trucks. Rafael it goes both ways because then the u. S. Auto industry will have to scramble. Ford, general motors. You are right, the gap between mexican sellers and u. S. Sellers has not been bridged. Nafta has not done much. But if you look at another index, the Human Development index, you will see that mexico is reaching the gap with the u. S. In the last 20 years. Education has increased a lot in mexico, and also health. About 95 million mexicans are covered by health insurance. This is a new mexico. And also because of that, there have been a lot of mexicans coming back, some of them willingly, deportation for ome of them. If you dont have health care, if you dont have Educational Services here, they better go back to mexico. That helps explain why in the past seven years there has been zero net migration of mexicans into the u. S. The good thing about renegotiating that stuff, now we have to have a Labor Agreement within nafta, then we can really talk about salaries. There is a new or emerging consensus in mexico. The mayor of mexico city has been talking about raising the minimum wage. He is getting somewhere. For now, listen about this from every single political side. You will finally listen, the transportation minister of mexico talking about this. We know we had to bridge that get between mexico and the u. S. Salaries between the u. S. And mexico, about 20 here, two dollars and mexico. We have to change that. We believe that we have to update nafta. We see this as an opportunity for updating that. Peter i would also say nafta has helped to lift the boats of he said we have to be careful with mexico. There are ways for mexico to proceed. The important thing is there is consensus that we can live without nafta. Hopefully that is not the case. But if this is a negotiating position of mr. Trump, it seems to me mexico has a good response. We know that we can leave and survive. David what is achievable in terms of nafta . Paula the fact is, President Trump taught us, again, that he or she who shapes the debate wins the debate. He made this election about trade. Now he is making this discussion here today about a trade agreement. I believe that with enough people in place, civil servants, skilled people, that we can see, as i said earlier, lemonade out of lemons. The president is going to increasingly have to hear from members of congress who, in turn, are hearing from their constituents how they are being impacted. For the first time in a long time, the ceos have become incredibly outspoken about immigration, on this h1b visa stuff, the tech companies, financial companies. We have to see the same ceos start talking, along with the agricultural multinationals, about what this can mean, if we do not get a successful agreement. David the Business Community has been very silent until now. Peter a World Without nafta is a much more difficult world for all three countries. I agree, all three countries will go into these negotiations with their own very specific issues. On some things, we may have to part company. But that does not undermine the fact that the overall agreement can be improved. Security is inseparable. Immigration will be inseparable. Labor mobility. This is why canada has a much more diversified trade relationship. Under Stephen Harper we negotiated some 30 trade relationships, including one which allows a country of 37 Million People to have access to a European Union economy. That is not to suggest we can go it alone, but it is to suggest that you need to diversify your trade relations. That is what mexico is doing as well. Tpp, while dead for the u. S. , is not for canada. There are other trade relationships that can factor into this as well, including moving the u. K. Into a north american trade relationship. David i want to thank my colleagues at the Latin American Center, those that put the event together, the deputy director, as well as the entire latin American Events team here at the Atlantic Council. I want to thank secretary gutierrez for his insightful remarks, your leadership on the issues. My colleague who opened the event, and of course, this allstar panel. Of course, all of you for joining us today. This is an issue that is incredibly important for the Atlantic Council and the Latin American Center and will be continuing to have events and publications and other types of social media awareness about the importance of the mexican relationship in north america overall. Thank you for being with us. [applause] [captions Copyright National cable satellite corp. 2016] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] th i90 mut. Amarscit im e direorfheolic ror prraandict o sdi foneamic wa tweomyo a th ooafrnn and lce toewmecai mk scit decr t
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