Mexico not a NAFTA 'back door' for Chinese goods: economy minister

WASHINGTON (Reuters) - Mexican Economy Secretary Ildefonso Guajardo said on Tuesday that the North American Free Trade Agreement’s rules of origin can be improved but denied that Mexico was a “back door” for Chinese goods to enter the United States.

Mexico's Economy Minister Ildefonso Guajardo delivers speech during the inauguration of ABA antitrust in the Americas conference in Mexico City, Mexico June 1, 2017. REUTERS/Edgard Garrido

Speaking in a live interview on CNBC, Guajardo also said he believed there were grounds to believe that NAFTA can be renegotiated to benefit the United States, Canada and Mexico.

He said, however, that “Plan B” for Mexico would be to revert to World Trade Organization tariff rates for exports to the United States such as the 2.5 percent tariff for passenger cars.

“Obviously, (it is) a little bit more expensive, but it’s not the end of the world,” he added.

He said that the Chinese content of cars traded between North American countries was very low, about 3 percent, largely using parts that are no longer produced in the region, such as flat panel display screens and other electronic items.

“This idea that Mexico is being used as a back door for Chinese imports into the U.S. is not the right one,” he said.

Under the current NAFTA agreement, motor vehicles must have 62.5 percent North American content, a figure that U.S. Commerce Secretary Wilbur Ross has said is too low and allows for too much content from other regions to benefit from NAFTA tariff-free status.

Guajardo warned that raising the bar too high on North American content could make the region less competitive.

“We can make an effort to strengthen that, no question about it. But if you go too far, you may be shooting yourself in the foot, because you’re losing competitiveness,” he said.

Negotiations to modernize the 23-year-old NAFTA trade deal are expected to start after Aug. 16, at the conclusion of a U.S. government consultation period with lawmakers, industries and the public.

Guajardo also said that he and Ross were close to announcing an agreement on sugar trade between the two countries.

Reporting by David Lawder Editing by W Simon