Nafta collapse risk pushes Mexico to diversify exports destinations

Mexican exports to the UAE have jumped 81 per cent in past decade as the country looks to expand markets for its goods

Mexico seeking to diversify destinations of its exports. Alejandro Cegarra/Bloomberg

Mexico is boosting its efforts to diversify the destination of its exports to lessen its reliance on the North America Free Trade Agreement (Nafta) amid concerns the US may pull out of the agreement, officials from the Mexican economy ministry said.

"The focus now in Mexico in terms of industrial policy is two fold," Rogelio Garza Garza, undersecretary of Industry and Commerce at the Mexican Ministry of Economy, told The National on the sidelines of a Latin American forum in Dubai.

"The first is in diversifying the destination of our exports. It's the reason we have a lot of agreements, with 46 countries through agreements like Nafta, the European Union," Mr Garza Garza said. "Our first big focus is to expand our market, the second one is how can we transform our high potential manufacturing sector to high value added products."

As well as boosting exports to countries like the UAE, where sales of Mexican goods have increased 81 per cent in the past decade, Mexico is also looking to attract more foreign investment from broader sources, including the Arabian Gulf.

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While its government's export diversification efforts started in 2012, the need to do so is becoming more urgent in light of US President Donald Trump's threats to pull out of Nafta, said Mr Garza and Paulo Carreño King, head of Promexico, the economy ministry's promotion arm. Over the past week Mr Trump, who's campaign promises included bringing jobs back to the US, has announced plans to slap a 25 per cent import tariff on steel and 10 per cent on aluminium. Over the weekend he also threatened to put tariffs on European car imports, stoking fears of a global trade war.

Mr Trump has called the free trade agreement with Canada and Mexico the worst deal the US has ever made. He has also attacked other free trade agreements the US has struck. Relations between the US and Mexico have also cooled because of Mr Trump's proposal to build a wall between the two countries. He angered Mexicans with his speeches where he branded immigrants as rapists, drug dealers and criminals.

The Nafta agreement went into effect in 1994. Trade between the three countries exceeds $1 trillion each year. In August, the Trump administration began talks to amend the agreement to make it more favourable to the US and those negotiations are expected to last until March.

"We are working to maintain the agreement but the possibility of not obtaining it is there," Mr Garza said.

Since 2012, Mexico has reduced the percentage of its annual total exports to the US to 74 per cent from 81 per cent, Mr King noted. During the same period, exports to Western Europe have increased by 63 per cent, those to Oceania countries by 116 per cent while sales to Asia, particularly China and Japan, jumped 197 per cent. Mexico exports about $360b worth of goods to the world annually.

Mexican exports to the UAE  include steel tubes, flat-panel televisions, refrigerators, berries and chickpeas, the officials said. Other products that hold potential are agave syrup, an alternative sweetener to sugar, and more sophisticated products such as medical devices.

The push to bolster trade ties between the UAE and Mexico follows the visit of Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, to Mexico in 2014 and a reciprocal visit by Mexico's President Enrique Pena Neito in 2016. Earlier this year, the two nations signed an agreement to protect investors and prevent dual taxation, the officials said.

Promexico opened an office in the UAE in 2015, its second in the region.