Mexico wary as transition memo reveals 200-day plan for Nafta review

Mexico's wait will soon be over to see what US president-elect Donald Trump has in store for the North American Free Trade Agreement (Nafta) once in office, with the agreement at the top of the new leader's agenda, according to a memo that outlines plans for the first 200 days of his administration.

Touching on a wide range of areas, the 21-page document, first obtained by CNN, establishes key steps in reviewing Nafta and working with co-signers Canada and Mexico to either renegotiate the treaty or scrap it, starting 'Day 1' January 20 and calling for Trump to make a final decision by August 7 next year.

Mexico has experienced strong volatility following Trump's upset win in the November 8 election, likely leading to the central bank's fifth benchmark rate hike of the year Thursday and slamming the peso, local stocks and the Mexican bond market, as the financial industry struggles with uncertainty around the real-estate mogul's plans to reshape trade with its southern neighbor.

With Mexico highly exposed to changes in the agreement, Nafta is at the heart of that uncertainty, as on the campaign trail Trump regularly railed against what he deemed unfair policies that spurred the deterioration of US manufacturing, calling for a massive overhaul of the treaty or its possible repeal.

If Nafta is scrapped, the memorandum posits creating new bilateral treaties with the economic giant's northern and southern neighbors to replace the trilateral trade agreement.

The memorandum says Trump will order the US Department of Commerce and the International Trade Commission on Day 1 to begin a study on the impact of withdrawing from the free trade agreement, as well as the legislative requirements to do so.

The US would notify Mexico and Canada that it is reviewing the treaty, specifically mentioning currency manipulation, lumber, country of origin labeling, and environmental and safety standards.

Former steel industry CEO Dan DiMicco, recently named to Trump's transition team to lead trade policy, appears likely to be at the helm of the discussions between the three nations, as well as potential revisions of any or all of the United States' current trade agreements.

Beyond Nafta, the memorandum also sets a 100-day limit for either stopping the passage of the Trans Pacific Partnership (TPP) or, in the highly unlikely event of its passage before January 20, prevention of its enactment.

In the past Mexico has raised objections to the treaty as well, having absorbed much of the negative impact from Nafta, including the loss of livelihood for millions of Mexican farmers and grave environmental impacts. Mexican President Enrique Peña Nieto has signaled that he is open to working with Trump to renegotiate the treaty.

"The next president [of the United States] will have a partner in finding the path towards modernizing Nafta in order for it to be more effective in generating more and higher quality, better paid jobs in both countries," said Peña Nieto in an August 31 address during Trump's visit to Mexico, which generated a massive political backlash.

Trump at the meeting, seemed to set aside the hard-line stance he had taken on previous occasions to mirror the sentiment, adding "workers in both countries need a pay raise, very desperately."

It is with some irony that the visit may have laid the groundwork for a better deal with the United States in the coming trade talks.

Nafta has quadrupled trade between the United States, Mexico and Canada and created millions of jobs since its enactment in 1994; however, the initial impact cost an estimated 500-750,000 US jobs in autos, textiles, computers and electrical appliances, as well as lowering wages to compete with Mexican maquiladoras - a stinging impact that helped rally supporters around Trump during the election.

Under the US laws enacting Nafta, the incoming president will have the power to unilaterally withdraw from the treaty, giving only six months' notice to member nations. This would, however, leave the current duties under the FTA in place.

The president can then increase duties under section 201 of the statute that implemented Nafta, requiring him to merely consult with congress on the matter, though these consultations offer no authority to the legislature.