United States: What Might Be Next For U.S.-Mexico Bilateral Trade After The Election?

Last Updated: November 16 2016
Article by Carlos Vejar

Carlos Véjar is a Senior Counsel in Holland & Knight's Mexico City office.


  • If implemented, positions held by new U.S. President-Elect Donald Trump during the presidential campaign could have consequences on trade and investment regulations applicable to Mexican and U.S. traders and investors.
  • From a legal point of view, denouncing the North American Free Trade Agreement (NAFTA) is feasible, making the World Trade Organization (WTO) agreements the fallback legal instrument for Mexican-U.S. trade relations.
  • However, adopting protectionist measures for specific sectors of the U.S. economy would be possible without the need to withdraw from NAFTA or the WTO agreements.

This week's electoral results in the United States require a serious analysis of the consequences due to some of the statements made by new President-Elect Donald Trump during the campaign, which could impact trade and investment regulations applicable to Mexican and U.S. traders and investors if those positions are implemented.

From a legal point of view, denouncing the North American Free Trade Agreement (NAFTA) is feasible. Article 2205 of NAFTA states the following:

A party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties.1

The fallback legal instrument for Mexican-U.S. trade relations would be the World Trade Organization (WTO) agreements. As for U.S.-Canada trade relations, those countries would still have a chance to reinstate their previous bilateral Free Trade Agreement (FTA), which has been suspended since NAFTA took effect.2

Withdrawal Effects

Some immediate effects of NAFTA withdrawal would be the possibility to exclude U.S. goods and suppliers from Mexico's FTA government procurement processes. NAFTA Chapter X obligations would not affect Mexican companies as much since they rarely participate in U.S. proceedings due to, among other things, Buy American Act restrictions that were permitted under NAFTA. U.S. suppliers would have to carefully identify Mexican procurement processes to assure that they can participate in international processes not restricted to nationals and other FTA partners.

Another immediate consequence would be the elimination of the investor state dispute settlement provisions contained in NAFTA Chapter XI, excluding any chance for investors to bring expropriation claims (among others) before a neutral arbitration tribunal against the Mexican or U.S. authorities. This is a scenario that investors should consider right away before losing the right (the consent of governments to arbitration contained in NAFTA) for raising a dispute.

Elimination of the Chapter XIX antidumping dispute settlement mechanism would be another big loss for both sides, bringing back local administrative proceedings as the sole opportunity to challenge such measures aside from the WTO mechanisms, which hold a different standard of review than that of NAFTA.

Since Mexico is not a party to the WTO Government Procurement Agreement and there are no dispute settlement mechanisms such as NAFTA Chapters XI and XIX under the WTO, there would be no alternatives other than those mentioned above.

A bilateral trade and investment relation ruled solely by the WTO would imply, among other things, the elimination of free trade and the reinstatement of tariffs. The simple average applied Most Favored Nation (MFN) tariff rate of the U.S. under WTO is 3.51 versus 7.52 from Mexico, and the simple average bound tariff is 3.47 for the U.S. and 36.12 for Mexico. In other words, NAFTA withdrawal would increase tariffs to U.S. imports immediately by a 7.52 rate, allowing Mexico to raise those tariffs up to 36.12, which would also have to be applied to every other WTO member. Meanwhile, Mexican exports to the U.S. would be subject to an increase from a free trade zero tariff to a 3.47 tariff automatically and up to a 3.51 MFN tariff (average) without violating WTO commitments. This scenario would require an immediate analysis on trade preferences from third-party countries to assure the best prices on supplies that comply with other existing regulations and maintain their businesses.

Withdrawing from WTO is another scenario that has been suggested by Trump, one that is also legally possible.3. This would have far more complex consequences and seems much more unlikely than a NAFTA withdrawal. A WTO withdrawal would require a look back in time to the world economy before 1947, when the General Agreement on Tariffs and Trade (GATT) took effect.

Other Options

NAFTA withdrawal might not be the only alternative to keep U.S. companies from moving production offshore – assuming that is one of the main goals for such a withdrawal. Adopting protectionist measures for specific sectors of the U.S. economy would be possible without the need to withdraw from NAFTA or WTO. Such measures would require a more detailed and specific analysis, as has previously occurred when NAFTA has been breached with disputes involving cross-border trucking, tuna, broom corn broom and poultry, as well as other bilateral disputes involving tomato or softwood lumber.

The only legal obstacle for this type of unilateral measures for breaches of international obligations are dispute settlement mechanisms that could be triggered to seek an authorization to retaliate and "compensate" against them. Unfortunately, unlike WTO's dispute settlement mechanism, NAFTA's Chapter XX mechanism is broken since there is no agreement on the roster of individuals who could participate in a dispute settlement panel. Therefore, closely examining such measures would be necessary to identify WTO violations and refer all disputes to that forum.

This might not be the case for Chapter XI investor-state or Chapter XIX antidumping mechanisms that would continue to operate but could increase in use, particularly Chapter XI since some trade protective measures might be challenged by investors if they encompass an economic harm to their investments in the other country. That happened to Mexico when a tax on sodas using high fructose corn syrup (fructose) was adopted to protect the Mexican sugar industry, whose sugar production was being displaced by fructose. In that instance, three U.S. investors brought claims against Mexico resulting in three arbitration awards that said Mexico should pay millions of dollars to compensate U.S. investors.

Attorneys in Holland & Knight's International Trade Group have the experience to help your business prepare for and navigate any upcoming changes in NAFTA or the WTO. We follow international trade developments closely, including in regards to the Trans-Pacific Partnership, which in spite of the election results might still be placed before the U.S. Congress for approval.    


1.   U.S. statutory provision 19 U.S.C. §2135(e) seems to confirm the president's ability to achieve this goal.

2. See Sec. 107 of the North American Free Trade Agreement Implementation Act.

3.   See Article XV of the Marrakesh Agreement establishing the World Trade Organization.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Gardere Wynne Sewell LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Gardere Wynne Sewell LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions