May 11, 2017 / 2:58 AM / 4 months ago

Mexico presses Trump to uphold NAFTA for good of both nations

U.S. President Donald Trump arrives aboard Air Force One at JFK International Airport in New York, U.S. May 4, 2017. REUTERS/Jonathan Ernst

MEXICO CITY (Reuters) - Mexico made a pitch to U.S. President Donald Trump on Wednesday to uphold the NAFTA trade deal, arguing that unwinding economic integration would hurt both nations, damaging U.S. exports, risking American jobs and hitting consumers north of the border.

Responding to a March 31 executive order by Trump for a review of the U.S. trade deficit, Mexico said its trade surplus with the United States was misunderstood and that the real hit to U.S. manufacturing jobs came with China’s accession to the World Trade Organization (WTO) in 2001.

Last year’s U.S. deficit with Mexico of $63.2 billion also reflected a weak peso after it was battered by uncertainty over the future of bilateral trade relations, according to a document published by the Mexican Embassy in Washington.

“The increasing integration of our economies makes Mexico critically important to the U.S. economy, not only as an export market, but also as a partner in production,” the director of the embassy’s trade and NAFTA office, Kenneth Smith, wrote.

Mexico was responding to the U.S. Commerce Department’s request for public input as it prepares a report for Trump on the United States’ $500 billion annual trade deficit. The report and public comments will be sent to Trump in June.

Mexico said that, without NAFTA, the average tariff on Mexican exports to the United States would be 3.5 percent, or about half the average tariff on U.S. exports to Mexico, because of the “most favored nation” clause that would apply under WTO rules.

U.S.-Mexican trade relations have been strained by Trump’s repeated vow to scrap the North American Free Trade Agreement if he cannot secure better terms for U.S. workers and industry.

Trump has cited the U.S. trade deficit with Mexico as proof that the United States was the loser in the relationship, saying the Americans would be better off if the two nations did not trade at all.

However, Mexico said 75 percent of its exports to the United States are inputs in U.S. production processes and that the United States has an $8 billion surplus in services.

“Workers on both sides of the border work together in the production of goods to successfully compete in global markets,” Smith said.

The U.S. energy industry also relies on exports to Mexico, which is now the biggest export market for U.S. refined oil products and natural gas, Smith said.

Reporting By Frank Jack Daniel, Writing by Dave Graham and Mitra Taj

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