Mexico and Canada 'in this together' on NAFTA, amid Trump confusion

Misery loves company, so Mexicans could be forgiven for feeling relieved to learn this week that they are not alone in Donald Trump's sights.

Canada's there now too, as disputes over dairy products and softwood lumbermadeus thebad neighbour."Mexico had managed to stay under the radar for quite a few weeks," said Monica de Bolle, a senior fellow at Washington's Peterson Institute for International Economics. "They were pretty happy that they were nolonger at front stage in all of this."

It is very clear that Canada and Mexico are in this together.- Agustin Barrios Gomez, former Mexican congressman

Mexicans felt "very much relieved" when they saw the draft letter sent to Congresslisting American priorities for the North American Free Trade Agreement renegotiationsthough the draft was vague, they were comfortable with its tone,de Bolle said.

Then came Wednesday'smedia reports of a draft executive order to withdrawbefore talks evenhad a chance to succeed.

"This is kind of a slap in the face for them," de Bolle said.

MexicanPresident Enrique Pena Nieto who, like Canada's Justin Trudeau,agreed to renegotiations months ago heard about it from the media, according to his foreign minister, Luis VidegarayCaso. The twoleaders goton the phone to Washington.

Trump said Thursdaythat he liked both leaders very much, and when they asked him to renegotiate rather than terminate, he agreed.

Trilateral deal, co-ordinated strategy

Foreign Affairs MinisterChrystia Freelandsaid previously Canada wasn't about to "throw Mexico under the bus."

She was travelling home from Germany during the White House calls, but spoke to her Mexican counterpart later Wednesday evening.

Trudeau and Pena Nieto spoke late Thursday afternoon to "continue their dialogue."

"It is very clear that Canada and Mexico are in this together," former Mexican congressman Agustin Barrios Gomez told host Rosemary Barton on Power & Politics Thursday, comparing recent behaviour of the Trump administration to a "banana republic."

"At the outset it's all very alarming and everybody is all on their toes,and then, by the end, you start realizing that you're dealing with an unstable person, somebody that reallydoesn't know what they're talking about," Gomez said.

"Among the threecountries,the U.S. is the one with the most to lose," hesaid.

Nevertheless, a bruising round of talks is coming, likely by late summer.

Mexican government sources tell CBC News one condition is non-negotiable for Pena NietowhenMexico sits down with the United States, Canada must be at the table.

Likewise, the Mexicans opposebilateral talks between the U.S. and Canada, except onissues that don't involvethem, such as the dairy dispute.

Officials believe the two countries can hold out for a far better deal if they hang together. They've done it before:when the Americans and Japanese movedto disadvantage them withrules of origin changes for the automotive sectorduring Trans-Pacific Partnership trade talks in 2015.

Mexico, like Canada, can count on itsskilled and experienced negotiators. Mexico has free trade dealswith no fewer than 45 nations (although only one, the U.S., buys 80 per centof its exports.)

Replacing American corn

Mexico'sstrategy is similar to Canada's avoid responding to verbal provocationsandremain optimistic.

It is also, like Canada, vigorously seeking new trading partners,an insurance policy in case NAFTA really does end. Negotiating with others remindsthe Americansthere are other fish in the sea.

Mexico's looking toBrazil and Argentina, South America's two biggest economies.

Mexico's Agriculture Secretary JoseCalzada recently led a trade mission of yellow corn importers to both countries as part of a plan to diversify. Last year 98 per cent of Mexico'simported corncame from the U.S. $3.25 billion Cdn of annual businessfor Americanfarmers.

"This is not some visit to build commercial relationships or generate goodwill," Calzada emphasized. "We are going there to sign purchase agreements."

Beyond corn, Mexico is the Americans' third-largest agricultural market overall. That makes Mexico risky to offend reports saidTrump's new agriculture secretary did point thisout to the presidentWednesday.

American farms were already hit hard by immigration changes that threatened their workforce, deBollesaid.

"Rhetoric does have economic impact," she said.

Mexico was already looking to Latin America for leverage. Afterthis week, "Ithink they're going to play thathand a lot more forcibly than they have been."

Energy and the AMLO factor

When Trump lumped "energy" among the issueswhere countries like Canada were taking advantage, it was unclearwhat he meant. There are, however, energy issues driving Mexico'spolitics.

Pena Nietocalled hisprivatization of state oil company Pemex "the most important economic change in the country of the last 50 years." But it hasn't been popular.Ifreforms aren't finished by next year, they may be undone by his successor. (Heisn't running for re-election. His PRI party isn't looking goodeither.)

• Why Trump is racing against the clock on NAFTA: The Mexican election
• Tax on Mexican imports among a 'buffet of options' to fund border wall: White House

While the U.S. hasn't started its required 90-dayNAFTAconsultation period, Mexico has. Its timelines are tighter: Trump may have his eye on U.S. midterms in the fall of 2018, but a revised NAFTA mustbe ready by next April to have its best shot at passing Mexico's Congress beforeMexicans go the polls on July 1, 2018.

Washington backedthe opening of Mexico's energy sector, which was exemptfrom the original NAFTA agreement. Pena Nieto's government believes privatization puts Mexico on a stronger footing for the renegotiation.

But the "gasolinazo," a 20 per cent jump in the price at the pumps, outraged ordinary Mexicans used to cheap gas. That, combined with the near-universal dislike of Trump, plays well for veteran Mexican politician Andres Manuel Lopez Obrador, known to Mexicans by his acronym "AMLO," who plans to run for president.

• Trump's first trade punch and what it could mean for NAFTA renegotiations
• Trump to give NAFTA talks a 'good, strong shot' after Trudeau warns of withdrawal risks

"The nationalist sentiment is building up in Mexico," de Bolle said. "He's not anti-NAFTAbut he is using the Trump rhetoric on NAFTA as a sign that the United States doesn't like Mexico."

Mexico's corporate elite fears the unpredictable Trump. They may fear AMLO even more. In renegotiating NAFTA, Trump will demand concessions and each concession builds support for a man they do not want to run their country.