Mexico says labor, environment rules could be in NAFTA update

LIMA (Reuters) - Mexico could include labor and environmental rules in talks over modernizing a trade deal between the United States and Mexico, President Enrique Pena Nieto said on Saturday as he seeks to avoid a stand-off with U.S. President-elect Donald Trump. Trump has threatened to ditch the 1994 North American Free Trade Agreement (NAFTA) that binds the United States, Canada and Mexico if he cannot renegotiate it in favor of the United States, arguing it has led to a loss in U.S. manufacturing jobs. The New York real estate magnate has also threatened to slap hefty tariffs on Mexican-made goods, sparking anxiety south of the U.S. border because Mexico currently sends four-fifths of its goods exports to the United States. Mexico's government has made clear it is willing to talk to Trump about NAFTA, and Pena Nieto said during the Asia-Pacific Economic Cooperation summit in Lima that he was in favor of modernizing the trade treaty, not renegotiating it. That meant looking at issues that were not contemplated when the treaty was signed more than two decades ago, he noted. "There are elements that could be included, issues to do with the environment ... the labor issue is one I think that wasn't incorporated in NAFTA, just to mention some chapters that could be included in this modernization," Pena Nieto said. Before Trump's surprise win, Mexico had been hoping to use the Trans-Pacific Partnership (TPP), a wider accord between the NAFTA members and nine other countries, to address issues such as labor standards and the environment with the United States. However, Trump was highly critical of TPP during his election campaign and policymakers are doubtful whether it will be ratified by the U.S. Congress under him. Without U.S. ratification, TPP cannot take effect as the deal currently stands, although Mexico's government has said it and five other signatories aim to press on with it regardless. Mexican Economy Minister Ildefonso Guajardo has said he does not believe Trump will scrap NAFTA, but also put forward the idea of adding additional chapters to the accord. Mexico's government and its business leaders are eager to make the case to Trump that the United States' economic integration with Mexico and the latter's lower cost base has made all of North America more competitive on the global stage. To break up NAFTA, they argue, would be to damage both the U.S. and Mexican economies. (Writing by Dave Graham; Editing by Shri Navaratnam)