Mexico-US New Trade Deal: A Step Forward in the Right Direction

In late August, Mexico and the US reached a new trade deal. New provisions regarding local content requirements, the wage level for local workers, digital data, and the access to farm products etc. are expected to be included in the new trade deal. The progress made in advancing the Mexico-US trade deal has been generally perceived as a good sign against the increasing trade tensions also within NAFTA (North American Free Trade Agreement). In his interview by Frankfurter Allgemeiner Zeitung (FAZ), Prof. Holger Görg, Ph.D., KCG Managing Director, also indicated that such a development is a step forward in the right direction. It also shows that it is not completely impossible to achieve compromises with the US government, particularly, with its President, Donald Trump, over issues of cross-border trade and investment.

The deal is welcome also by the market, as was the progress achieved in bilateral negotiations between the EU and the US in late July, when Donald Trump and Jean-Claude Juncker, the President of the EU Commission, agreed on starting new rounds of negotiations to help remove trade barriers between the two economies.

Against the background of a growing wave of protectionism and trade tensions, such positive developments in favour of cross-border trade and investment are clearly welcome. It is, however, unclear, whether such bilateral progress made will be at the end an opportunity or a risk for the further development in the world economy and for the world economic growth in the long run. Take the Mexico-US new trade deal as an example. Many questions are still open. To name but a few, what does this new deal mean for Canada? Would the bilateral negotiations between Canada, Mexica, and the US end up with three bilateral agreements with different trade and investment provisions that make cross-border trade within NAFTA and between NAFTA and other countries more complicated and costly than before? What does that mean for both firms operating in NAFTA and those firms outside NAFTA but engaging in economic transactions with firms and individuals in NAFTA? How will this deal determine the future prospect of NAFTA and of the economic development in the NAFTA members and beyond?

Yes, bilateral positive developments in favour of cross-border trade and investment are welcome, particularly taking into account the increasing trade tensions worldwide. Still, more needs to be done to learn more about potential impacts of such developments on the multilateral trade system and on the long-term prospect of the world economy and global prosperity.

The abovementioned interview can be found here: