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United States - Mexico Chamber of Commerce Binational Business Magazine

USMCA: Status & 2020 Outlook Features/

Year / Año 19 // Nº 31 // USA $4.00 // MEX $ 45.00

USMCA: An Agreement That Strengthens and Protects North American Trade USMCA: to Keep North America the World’s Economic Powerhouse Opportunities for Mexico with the USMCA


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EDITORIAL COUNCIL UNITED STATES MEXICO CHAMBER OF COMMERCE Albert C. Zapanta,

President & CEO, Binational Headquarters;

Francisco Lopez Espinoza,

CEO, Grupo Grafico Multicolor; Eric Rojo, Vice-President/ Mexico Liaison; Joseph R. Chapa, Vice-President, International Trade Development Centers; Gabriela Kenny, Director of Communications; Cecilia Lopez, Publishing Manager; and Jill Martinez, Editor.

PUBLISHING COORDINATORS Executive Director PROMEXE Rafael Lopez Rivera rafa.lopez@multicolorig.com Director of Communications Gabriela Kenny gabriela.kenny@usmcoc.org Publishing Manager Cecilia Lopez ceci.lopez@usmcoc.org

CONCEPT & MAGAZINE DESIGN Editorial Coordinator Cecilia López ceci.lopez@usmcoc.org Editor Jill Martinez jmartinez@irvingonline.com Graphic Design AMIC Parlante Christopher Jareno cj@amicparlante.com

EDITORIAL CONTRIBUTORS Joe Chapa Francisco Fabila Osvaldo Gonzalez Gabriela Kenny Cecilia Lopez Joe Lopez Sergio Garcia

PRINTED BY

For advertising inquiries, contact: Rafael Lopez rafa.lopez@multicolorig.com Executive Director PROMEXE Gabriela Kenny gabriela.kenny@usmcoc.org Director of Communications Cecilia Lopez ceci.lopez@usmcoc.org Publishing Manager

Cover Photo by: Travel mania/Shutterstock.com ALLIANCE, revista cuatrimestral.- Publicacion de la Camara de Comercio Mexico Estados Unidos y Promotora Mexicana de Ediciones, S.A. DE C.V. (PROMEXE). Editor Responsable: Francisco Javier Lopez Espinoza. Número de Certificado de Reserva otorgado por el Instituto Nacional del Derecho de Autor: 04-2013-071518324800-102. Numero de Certificado de Licitud de Titulo y Contenido: 16157. Domicilio de la Publicacion: Jose Maria Chavez #3408-A. Cd. Industrial. C.P. 20290. Aguascalientes., Ags. Imprenta: Multicolor Gran Formato S.A. de C.V. Jose Maria Chavez #3408. Cd. Industrial. C.P. 20290. Aguascalientes., Ags. Distribuidor, PROMEXE Jose Maria Chavez # 3408-A. Cd. Industrial. C.P. 20290. Aguascalientes., Ags. Camara de Comercio Mexico Estados Unidos, 5510 Cherokee Ave. Ste. 120, Alexandria, VA 22313-2320. Mailing address: P.O. Box 14414, Washington, D.C. 20044. Printed by Multicolor Gran Formato, S.A. de C.V. Av. Jose Maria Chavez No. 3408, Ciudad Industrial; Aguascalientes, Ags., Mex. Specifications: Total production, 3,000 units; covers: couche paper 135 grs; Varnish UV. Interiors: couche paper 135 grs. Impression: offset full color. The views expressed in this magazine are the responsibility of the authors and do not necessarily reflect official positions of the U.S.-Mexico Chamber of Commerce, its members or supporters. Our goal is to present a broad range of perspectives on shared bilateral issues.

EDITORIAL Dear Members and Friends, The U.S.-Mexico-Canada Agreement (USMCA) is a great accomplishment of the three countries. There were several moments of tension between the partners during the negotiating process, however, the spirit of collaboration was always present, along with the recognition of the positive impact that free trade brings to each country. It should be noted that, during the original North American Free Trade Agreement (NAFTA) negotiations, there were also numerous disagreements and domestic strains, but this intense process and the eventual implementation, led to the creation of the largest free trade area with 450 million people producing $17 trillion in goods and services annually. The U.S.-Mexico Chamber of Commerce has been a strong supporter of NAFTA and from the very beginning, a strong supporter of the USMCA. The Chamber responded to the notice from the United States Trade Representative Office in seeking comments to negotiating objectives, and I personally testified during the public hearing held on June 27, 2017 in Washington, D.C. The Chamber presented the recommendations from our North American Working Group, in which we concluded that “… we must address the North American context in today’s challenges and securing the safety and efficient movement of goods, services and people, with considerations for a workforce that is justly treated and compensated among the NAFTA partners”. During the months that followed, we also submitted comments to the Secretaría de Economía (Mexico’s Ministry of Economy) and the NAFTA/ USMCA has been a topic always present during our binational events, consistent with our mission to foster trade and business relations between the U.S. and Mexico. At the May 2019 Binational Board of Directors meeting, members voted unanimously to support passage of the new trade deal. Additionally, the Chamber led delegations comprised of Board Members to Mexico City and Washington, D.C. in order to meet with members of Congress and trade economic development officials to highlight the positive value and impact the revised free trade agreement would have on their businesses and respective economies.

Mexico’s Senate has since ratified the USMCA with overwhelming support. At present, the U.S. House of Representatives continues to pursue discussions through working groups on the impact and enforceability of the revised agreement. As the U.S. Congress is in the final process of what we hope is approval of the USMCA, I would also like to bring attention to the importance of securing our collective supply chains, especially in the turbulent times of transnational criminality, narcoterrorism and corruption. There is much more to say on this topic, however, we should not lose sight of security as a pillar to the economic and social development of the North American region, and the need for deeper and decisive collaboration to deter illicit activities. For this edition, we are presenting a special compilation of articles from key government officials and private sector leaders who have been at the forefront of the negotiations. You will find that all of them agree that the passage of the USMCA is key to our future wellbeing. We are pleased to share with you articles written by Ambassador C.J. Mahoney, Deputy U.S. Trade Representative for Investment, Services, Labor, Environment, Africa, China and the Western Hemisphere; Ambassador of Mexico to the U.S., Martha Bárcena; Undersecretary for North America and Chief USMCA Negotiator Jesús Seade; Patrick Ottensmeyer, CEO of Kansas City Southern; Scotty Greenwood, CEO of the Canadian-American Business Council; and Francisco Cervantes, President of the Confederation of Industrial Chambers of Mexico (Confederación Nacional de Cámaras Industriales-CONCAMIN). To each one of them we would like to express our gratitude for their partnership with the Chamber, and for their commitment to improve a trilateral agreement for the benefit of our countries. Sincerely,

President and CEO


CONTENTS 08

Overview/ Historical Context

North America: The economic integration initiated 25 years ago must continue

12

Opinion/Diplomacy

USMCA A Path to North America’s Prosperity

28

40

The (sooner than you think) incoming USMCA: motor vehicles and autoparts

Insight/Mexico

An interview with Francisco Cervantes, President of CONCAMIN

32

Insight/Canada

Road to USMCA Ratification next steps post Mexican Ratification

16

40

USMCA: An Agreement That Strengthens and Protects North American Trade

Mexican Manufacturers’ Challenges and Opportunities to Grow and Stay Competitive in the Global Economy

Analysis/Automation

Features/

USMCA: to Keep North America the World’s Economic Powerhouse Opportunities for Mexico with the USMCA

42

USMCOC XVIII Border Issues and NAFTA/USMCA Conference

44 Annual Conference

and Good Neighbor Awards Gala


CHAPTER OFFICES

THE AMBASSADOR OF GOOD BUSINESS www.usmcoc.org

Albert Zapanta

Joseph R. Chapa

Alejandro Ramos

Gabriela Kenny

6800 Versar Center Dr. Suite 450 Springfield VA 2215 zapantaz@usmcoc.org (469) 567-0921 F: (703) 642-1088

jrchapa@usmcoc.org (469) 567-0922 F: (703) 642-1088

alejandro@usmcocne.org (212) 471-4703 F: (212) 471-4701

207 Mandalay Canal Irving, TX 75039 gabriela.kenny@usmcoc.org (469) 567-0923 F: (703) 642-1088

President & CEO Binational Office

Vice President Western Region, Executive Director, Trade Development and Assistant Center

California Regional Chapter Los Angeles, CA MARK LEVINSON President MARLEN MARROQUIN

Executive Director marlen@usmcocca.org 2029 Century Park East, 12th Floor Los Angeles, CA 90067 (310) 922-0206 Inter-American Chapter Miami, FL ANTONIO PEÑA

President

CLEMENTINA GAY

Executive Director clementina.gay@usmcocne.org 2601 S. Bayshore Dr. Suite 1110 Miami, FL 33133 (626) 890-9049 Inter-Mountain Chapter, Salt Lake City, Utah KEITH ATKINSON

President intermountain@usmcoc.org DENNIS TENNEY

Executive Director dtenney@usmcoc.org 111 South Main Street, Suite 2200, Salt Lake City, UTAH 84111 (801) 916-3575 International Trade Development and Assistance Center JOSEPH R. CHAPA

Executive Director jrchapa@usmcoc.org 207 Mandalay Canal Irving, TX 75039 (469) 567-0922

Washington, D.C. Office Mid-Atlantic Chapter CLARK H. CROOK CASTAN

President chcrookcas@hotmail.com 6800 Vesar Center Dr., Suite 450 Springfield, VA 22151 (301) 233-4485 (703) 752-4751 Great Lakes Chapter Detroit, MI Contact via email: greatlakes@usmcoc.org

Vice President Eastern Region Executive Director of Northeast Chapter

Mid-America Chapter Chicago, IL RALPH BIEDERMANN

Executive Director Themrbgrp@aol.com Blue Cross Blue Shield Building 300 E. Randolph Dr. 47th floor Chicago, Il 60601 (312) 729-1355 Northeast Chapter New York, NY ROSA ERTZE

President

ALEJANDRO RAMOS

Executive Director alejandro@usmcocne.org 1540 Broadway, Suite 1400 New York, NY 10036-4086 (212) 471-4703 (212) 471-4701 Pacific Northwest Chapter Seattle, WA STEPHEN P. WALROTH-SADURNI

President Two Union Square 601 Union Street, Suite 4200 Seattle, WA 98101 (206) 259-5003 Southwest Chapter Dallas, TX VINCENT CHAPA

President

JOSIE OROSCO

Executive Director josie.orosco18@gmail.com 901 Main Street, 60th. Floor Dallas, TX 75202 (214) 651-4300 / (817) 881-0264 Houston-The Woodlands-Gulf Coast Chapter, Houston, TX JULIE CHARROS-BETANCOR President PETE GARCIA Executive Director petegarcia@usmcocgc.org 4582 Kingwood Dr Suite E-334 Kingwood, TX 77345 (713) 854-1577

Director of Communications North American Headquarters

Aguascalientes Chapter Aguascalientes, Ags. Rosaura Orozco

Trade Representative aguascalientes@usmcoc.org.mx (449) 286 6682 Golfo Chapter Veracruz, Ver. JORGE VEGA

Trade Representative jorge@usmcoc.org.mx (229) 937-0598 Guanajuato Chapter Leon, Gto. PATRICIA VILLASANA

President

SERGIO PONCE LOPEZ

Executive Director sergio.ponce@usmcoc.org Blvd. Campestre No. 1215, Int. 12 Col. Panorama Leon, Gto. 37160 (477) 779-5670 Michoacan Chapter Morelia, Mich. NICK ORTIZ

President / Executive Director usmcocmco@gmail.com Melo 166-B Morelia, Mich. C.P. 58000 (443) 353-7743 Noreste Chapter Monterrey, N.L. JOSEPH CHAPA

VP Western Region and International Development Centers jrchapa@usmcoc.org (469) 893-1796

Pacifico Chapter Guadalajara, Jal. JOSE MARIA SALGUERO President and Executive Director pacifico@usmcoc.org Av. Circunvalación Agustín Yañez 2895 Piso A, Guadalajara, Jalisco (33) 3376 8444 Puebla Chapter Puebla, Pue. FERNANDO A. TREVINO President VIDAUR MORA Executive Director puebla@usmcocpue.org 31 Poniente No. 4128 Piso 2B Col. Ampliacion Reforma Puebla, Pue. 72160 (222) 249-8828 (222) 249-2361 Queretaro Chapter Queretaro, Qro. SERGIO NAVA

President

MONICA LOPEZ

Executive Director queretaro@usmcoc.org monica.lopez@usmcoc.org Av. Zaragoza Pte. 330-301 Col. Ninos Heroes Queretaro, Qro. 76010 (442) 125-7359 Valle de Mexico Chapter Mexico City JOSE GARCIA TORRES

President

CLAUDIA VIDAL

Executive Director c_vidal@usmcoc.org Av. Insurgentes Sur 1605 Torre Mural, Piso 25, Mod. 3 Col. San Jose Insurgentes Benito Juarez, 03900. Mexico, D.F. (55) 5662-6103 (55) 5683-2700


¡Por el compromiso continuo con la comunidad Empresarial Mexico-Estadounidense!

Here’s to an ongoing commitment to the Mexican-American business community!

Como miembro binacional de la USMCOC, hemos visto cómo el poder de las buenas relaciones y las grandes conversaciones pueden llevarte a un gran futuro. Al igual que la USMCOC, Baker Tilly toma todas las oportunidades que presenta el mañana.

As a longstanding binational member of the USMCOC, we have seen how the power of great relationships and great conversations can lead to great futures. Like the USMCOC, Baker Tilly embraces the opportunities that tomorrow presents.

Honramos el legado de USMCOC y esperamos enfrentar el futuro juntos.

We honor USMCOC’s legacy and look forward to facing the future together.

Jeff Jorge Principal & Firm Leader International Services USMCOC Binational Board of Directors Member

Angel Ramirez Mexico Market Leader USMCOC Great Lakes Advisory Board Member

Mayra Pena Senior Manager International Tax Services USMCOC Mid-America Advisory Board Member

Connect with us: bakertilly.com

Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2019 Baker Tilly Virchow Krause, LLP.


North America: The economic integration

initiated 25 years ago must continue By Sergio GarcĂ­a GĂłmez

S

ince our independence from colonial rule, our nations have always had complex and asymmetric relations. We have gone through wars and conspiracies, geographic reconfigurations, alliances in favor of our republics, and a common front in World War II. During the Cold War, our countries experienced a period of growth in an environment of relatively closed and distant economies; however, the globalization of the past three decades created the need to explore new and more competitive forms of production in order to compete in international markets. Over the last four years, international relations have come to a profound transformation particularly on trade and investment. Clearly Mexico and the United States started a new chapter in their relation. New rules of the game have been agreed to and decisive steps need to be taken now to move forward.

The challenge we faced has not been the first since the North American Free Trade Agreement (NAFTA) was inaugurated in 1994, but certainly the most significant. When NAFTA was ratified, it was the most sophisticated trade and investment structure of its time. The agreement created the foundation for regional integration and sophisticated supply chains. A strategic relation emerged between the U.S. and Mexico and grew strong and stable, effectively identifying and advancing common interests as never before. The two countries have been key partners since then, establishing a global strategic alliance that allows them to develop production capacities collaboratively. The establishment of a common economic space over the past 25 years has allowed our economies to become more interrelated and compete successfully in global markets with trade growing from $81 billion in 1993 to $612 billion in 2018.


Overview / HISTORICAL CONTEXT

The Binational Business Magazine

p.09

NAFTA matured to become the United States’ most important international market. Intra-NAFTA trade in 2018 was valued at over $1.2 trillion; an estimated 14 million jobs

in the U.S. alone depended on trade and investment with Mexico and Canada.

Furthermore, foreign direct investment (FDI) in the region has expanded to support an integrated supply chain where Mexican exports now have 40 percent U.S. content and Canadian exports have 25 percent U.S. content.

The risk of losing so many opportunities created a firm alliance of North American supporters. For months, representatives from government, the private sector, and advocacy organizations engaged in a campaign to raise awareness and support of the need for change through public education about the merits and benefits achieved through NAFTA—and the potential ahead. Concern was voiced about the high risks of losing competitiveness to overseas markets and, more distressing, weakening cooperation and shared values in our region.

Trade and Investment Modernization The platform upon which these economic relations flourished clearly needed change after 25 years, and a modernized world economy required updates in telecom, energy, good governance, labor, customs, environment, anti-corruption, e-commerce, inclusion, SMEs (small- and medium-size enterprises), IP, rules of origin and so on. Immersed in a sea of protectionism, reshoring and fair trade, NAFTA teetered between modernization and collapse.

As a Mexican diplomat heading the section for economic affairs in Washington, D.C. at the time, I had the privilege of participating in the broad effort undertaken by our governments to find common ground and to overcome a very challenging environment.


Overview / HISTORICAL CONTEXT

p.10

A powerful yet simple tool we constantly used in Washington, D.C.—one that still today is frequently overlooked—is to explain the relevance of trade with Mexico for the U.S. economy, state by state. Again and again, people were often surprised to learn that, for more than half of the states in the U.S., Mexico is either the first or second export market, and that five million jobs in the U.S. rely on trade with Mexico.

USMCA:

The New Tri-National Trade Deal Our leaders then and now realized that the world is facing many challenges beyond trade. Poverty, security and cybersecurity, migration, rule of law, environment, energy and food security. Beyond a protectionist rhetoric, it has been clear for a long time that the significance of the consolidation and integration of the North American economy goes well beyond free and fair trade. It is strategic and critical to meeting the great challenges of our time. One of the actions that needed to occur was a new trade deal for the three nations. After months of hard negotiations, the governments of the U.S., Mexico and Canada, drafted a trade deal that would meet current and future needs. The result of their efforts is the United States-Mexico-Canada Agreement (USMCA) that will replace NAFTA. USMCA was officially approved at a signing ceremony at the G20 Leadership Summit in Buenos Aires on November 30, 2018. It is no exaggeration to declare that this agreement represents an important geopolitical opportunity for our region and for generations to come. The region emerged stronger and more able to compete in global markets. Disagreement and stress gave way to renewed trust and cooperation. The agreement reached is the best possible outcome. USMCA includes new disciplines and technologies, advanced environment and labor legislation, and revised

dispute settlement arrangements. Some extremely restrictive clauses were avoided and, in their places, stronger North American rules of origin (ROO), protections against non-competitive trade, and currency manipulation prevention were introduced. Since then Mexico has done its part. When Mexico’s President-Elect Andrés Manuel López Obrador and his National Regeneration Movement party (Movimiento Regeneración Nacional or MORENA) won the July 2018 elections with an historic majority, one of his first actions was to appoint a negotiating team to introduce and advocate for his priorities, and to work in tandem with the outgoing administration. This was a wise decision that secured a smooth transition in Mexico. The Mexican Senate approved the agreement in June 2019. On the other hand, the Canadian Parliament is still waiting for the U.S. House of Representatives to make a move. Canadian elections on October 21, 2019, and the U.S. electoral cycle for 2020, still represent open questions for the future of USMCA. Free trade has always been controversial and election cycles have a significant influence. The USMCA has been waiting 10 months for the vote of the U.S. Congress. More and more people agree on the merits of USMCA and the necessity to approve it and move forward. The negative effects of further delays or deviation from the agreement may combine with an already complicated global economy and trade distress. Like 25 years ago, 2019 is a time for North America to set the course on trade policy and set it right. It is time that all the people, organizations and other stakeholders that support USMCA raise their voices in favor of its ratification once and for all. The U.S.-Mexico Chamber of Commerce will continue to actively advocate for USMCA passage. We need to get to the task of deepening the integration of the economies of North America. The challenges of the 21st century are here. We must open a new chapter of cooperation, integration and economic development for generations to come. The time is now!

Sergio García Gómez is an independent consultant and a senior advisor for the U.S.-Mexico Chamber of Commerce in Washington, D.C. Previously, he was head of the Economic Affairs Section, Mexican Embassy in the United States.


USMCA: A Path to North

America’s Prosperity By Martha Bárcena, Ambassador of Mexico to the USA


Opinion / DIPLOMACY

The Binational Business Magazine

p.13

T

he U.S.-Mexico relationship is at a crossroads and the decisions we take from now on will impact the direction of both our countries and the lives of millions of people. In these testing times, the approval of NAFTA’s successor, the United States-Mexico-Canada Agreement (USMCA) holds the key to our economic growth in North America and the ongoing creation of opportunities in both of our countries. Our joint commitment toward free trade, materialized through the North American Free Trade Agreement (NAFTA), reshaped the North American economies with far-reaching implications for our companies, our consumers and our societies. Since the treaty came into effect in 1994, United States trade with Mexico (and Canada) has more than tripled, growing more rapidly than American trade with the rest of the world. Presently, the North American trade is worth almost $1.3 trillion.

Mexico is now the United States’ second largest export market and its largest trading partner. Our bilateral trade exceeded $611 billion in 2018 which means that we trade more than 1 million dollars per minute. Moreover, according to the U.S. Chamber of Commerce, the jobs of five million American workers depend on U.S.-Mexico trade. To put the magnitude of our commercial partnership in perspective, U.S. sales to Mexico are larger than all U.S. exports to Russia, India and China combined. They are also larger than all combined sales to the United Kingdom, France, Belgium and the Netherlands. Mexico is also the first or second most important export market for 26 U.S. states, including the four border states whose economies are strongly linked to trade with Mexico.


Opinion / DIPLOMACY

p.14

The fact that the U.S. pays literally nothing on most goods that cross the border back and forth every single day allowed us to create a North American Supply Chain that is highly integrated. For the rest of the world, the U.S. is a market —that’s true when you look at China, or South Korea, for example. In the case of Mexico, Canada and the United States, we trade in order to manufacture things together. Just look at the automotive sector in North America: one piece of a car can cross the border up to eight times based on a “just in time” (JIT) model before the car is finally assembled. The result has been that North America is the second largest auto parts production region in the world. We should acknowledge this as a testament to the way our economies have become inexorably integrated. Production and supply chains in North America are now deeply connected. Consequently, we have to recognize what this represents in terms of our future economic and political cooperation.

bargaining and comply with USMCA obligations. The Mexican Congress approved a comprehensive labor reform aimed at ensuring workers can freely vote for their union representation and contracts. In fact, a democratic and effective labor rights agenda was always one of the top priorities of Mexican President Andres Manuel Lopez Obrador, so for the incoming, government this was a win-win scenario. Democrats in Congress could not find a better ally on this issue. This is an historical reform and a definite “game-changer” that will effectively transform the labor system in Mexico. Among other things, independent courts will replace the current labor board to resolve disputes and register contracts. We are confident that these institutions will be strong enough to ensure enforcement. The Mexican Congress ratified the treaty with the sole intention of providing certainty and stability to our trade which is the motor of our shared prosperity. Mexico has done and will continue to do everything in its power to ensure that USMCA becomes a reality.

It is true that NAFTA had its failings and, as it got older, it became obvious that it needed to be modernized to meet the necessities of 21st century economy.

The USMCA is not perfect but we’re confident it will have a long-term positive impact on our economies and it will allow us to remain globally competitive.

This is why the new USMCA raises rules of origin across manufacture to attract more investment and create more employment in the U.S. and the region.

The alternative of a region without USMCA and, possibly, without NAFTA, would have dire consequences for the three countries involved. The fate of the USMCA will directly impact the fate of millions of ordinary Americans whose prosperity is directly linked to free trade with Mexico.

The USMCA sets out to fight corruption and creates space to support small producers —a key component missing in NAFTA. USMCA expands our digital commerce, facilitates trade in financial services and protects the environment. The treaty also includes a key chapter on labor that requires parties to adopt and maintain fundamental labor rights. On this particular aspect, Mexico has been fully committed to carry on specific legislative actions to provide the effective recognition of the right to collective

We should not let politics stand in the way of a free trade that has yielded enormous benefits for both our countries. NAFTA transformed our economies but it also changed the way our two countries interact. The adoption of USMCA will allow us to remain one of the most competitive regions in the world, and continue building trust and stability between our countries.

Ambassador Martha Bárcena Ambassador Bárcena was appointed as Ambassador of Mexico to the United States of America by President Andrés Manuel López Obrador and ratified by the Mexican Senate on December 2018, Ambassador Bárcena joined the Mexican Foreign Service in 1979. Prior to arriving in Washington, D.C., she was posted as permanent representative to the United Nations Rome-based agencies. She has also served as ambassador to the Republic of Turkey, non-resident to Georgia and the Republics of Azerbaijan, Kazakhstan and Turkmenistan; ambassador to the Kingdom of Denmark, non-resident to the Kingdom of Norway and the Republic of Iceland, and as consul in Barcelona. On the multilateral level, Ambassador Bárcena has represented Mexico as delegate at the United Nations, UNESCO and the Organization of American States as well as head of delegation at the Forum on Migration and Development. She has also participated in multiple international conferences organized by the G-20 and the World Humanitarian Summit. Ambassador Bárcena holds a degree in communication sciences from Universidad Iberoamericana, Mexico City, and a degree in philosophy, summa cum laude, from the Pontifical Gregorian University in Rome. She also earned a, master’s degree in International Studies (Diplomatic School, Spain) and a master’s degree in political philosophy (Universidad Iberoamericana).


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USMCA: An Agreement That Strengthens and Protects North American Trade By Pat Ottensmeyer, President & CEO of Kansas City Southern


Features

The Binational Business Magazine

p.17

A

s I write this article, the new United States, Mexico and Canada Agreement (USMCA) still sits in the “on-deck circle” waiting on the moment when its implementing legislation is introduced to Congress for formal approval. It is believed that the agreement is stalled due to some final changes being sought by certain members of the U.S. House of Representatives around pharmaceutical, environmental and labor enforcement concerns. These issues simply should not impede the approval of such a landmark trade agreement, which has been negotiated with a bipartisan approach, and is far too economically important to American business and agricultural interests not to pass. The economic benefits of the USMCA, and its predecessor NAFTA, are well understood. More than 12 million American jobs depend on trade with Mexico and Canada, which are now also the top two export destinations of small- and medium-sized American businesses. It is estimated that more than 120,000 American small businesses sell their goods and services to Mexico and Canada. There are many more statistics that I could cite but the point of them all is that trade with our two largest partners in commerce—and closest neighbors—is far too important to the American economy and prosperity of our communities to delay approval of USMCA any further. We have passed so many key milestones to get to this point. In April, the International Trade Commission (ITC) released its economic impact analysis which estimates that USMCA would raise real U.S GDP by $68.2 billion and add 176,000 jobs to American payrolls. In May, Mexico passed landmark labor reforms to bring the country into compliance with USMCA’s upgraded labor provisions. Also in May, the U.S. lifted tariffs on steel and aluminum imports from Mexico and Canada, which, up to that point, had stalled progress in all three legislatures. On June 19, the Mexican Senate ratified the agreement making Mexico the first of the agreement countries to do so. Over the summer, Nancy Pelosi, speaker of the U.S. House of Representatives, assigned Democratic leaders in the House to four working groups to engage with Ambassador

Robert Lighthizer, U.S. Trade Representative, and other administration officials to resolve differences and bridge gaps on certain issues, including those that I mentioned previously. Finally, in July, Ways and Means Subcommittee on Trade chairman Earl Blumenauer led a bipartisan congressional delegation to Mexico. In addition to all of the bipartisan groundwork that has been done on the U.S. side, think about this: Prime Minister Justin Trudeau’s Liberal Party of Canada, Republican U.S. President Donald Trump’s administration, and a unique collaboration between Mexico’s outgoing PRI (Institutional Revolutionary Party) leadership and incoming Mexico President Andrés Manuel López-Obrador’s MORENA (National Regeneration Movement) administration reached an agreement that all sides can hold out as a model for cooperation and collaboration that benefits their citizens. If that doesn’t indicate this agreement’s bipartisan appeal, I don’t know what does! At Kansas City Southern, agriculture is one of our most important industry segments. And grain primarily yellow corn grown in the upper Midwest is our single largest export commodity to Mexico. Prior to the passage of NAFTA, very little grain moved to Mexico on our railroad. Today, we move about 45-50 “unit trains” (dedicated trains, each consisting of 100 or more rail cars) per month, from states including Missouri, Kansas, Iowa, Nebraska, and Illinois, deep into Mexico. Looking ahead, we see significant new opportunities for growth in trade between the U.S. and Mexico, that, in certain cases, includes increasing exports from the U.S. to Mexico in commodities that are much needed and desired in Mexico. The first of these areas would be refined petroleum products moving from the U.S Gulf Coast refineries into Mexico, made possible by constitutional reforms passed in Mexico in 2013, which, over time, open Mexico’s energy markets to private and foreign investment. The second of these opportunities is also energy-related and involves the shipment of plastics and resins from U.S.


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refineries into Mexico for use in products ranging from water bottles to electronics and auto parts. Substantial investment is being made in both of these areas including investment that Kansas City Southern is making to build terminals and add track capacity to facilitate the movement of these products from the U.S. into Mexico. The investment and growth in these segments will benefit both countries, creating jobs and economic growth on both sides of the border. Approval of the new USMCA is essential to provide clarity and structure to support investment and growth in these commodities. All of these considerations should point to a trade agreement that literally sells itself and, clearly should be approved, but we cannot let our guard down until the USMCA is approved. There are several venues and initiatives underway which have elevated the collective voice of business and agricultural interests on this important topic:

• The USMCA Coalition, composed of more than

450 companies and associations of every size, sector and region across the U.S., including KCS, is working to secure congressional approval of the agreement. This Coalition has had over a thousand meetings on Capitol Hill to discuss and promote USMCA, and coordinates grassroots events around the country;

• In July, the U.S. Chamber of Commerce and

more than 600 business and agricultural associations and local chambers sent a letter to Congress urging members to support USMCA—a staggering level of support for a trade agreement;

• At Kansas City Southern, we are trying to do

our part as well. We have written to and communicated with members of Congress about the agreement’s importance to our economy. In early September, KCS partnered with Congressman Emanuel Cleaver (D-MO) and Missouri Governor Mike Parson to lead a grain elevator inspection tour on our historic Southern Belle passenger train. The purpose of this inspection tour was to reinforce the importance of USMCA passage to Missouri farmers, ag-business interests and communities; and

• During September, we continued to press

members to bring the USMCA implementing law to Congress for a vote. As I mentioned at the very beginning, the USMCA is still awaiting formal introduction in Congress; therefore, we still need all interested parties to speak up and make sure your voices are heard to provide that final nudge to Congressional leaders to move forward with approval of USMCA without delay.

Patrick J. Ottensmeyer is president & CEO of Kansas City Southern. Patrick J. Ottensmeyer has served as president & CEO of Kansas City Southern since July 1, 2016. Kansas City Southern, a transportation holding company with railroad investments in the U.S., Mexico and Panama. Previously, he was vice president of finance and treasurer for Santa Fe Pacific Corp and Burlington Northern Santa Fe Corp. He is chairman of the U.S. Chamber of Commerce’s U.S.-Mexico Economic Council and recently served as chairman of the strategic trade initiatives working group of the U.S.-Mexico CEO Dialogue. He also serves on the boards of the Association of American Railroads, Truman Library Institute and Kansas City Metropolitan Crime Commission, and is a member of The Civic Council of Greater Kansas City.


USMCA: to Keep North America the World’s Economic Powerhouse By Ambassador C.J. Mahoney, Deputy U.S. Trade Representative of United States of America.


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fter 25 years, it is time for the North American Free Trade Agreement (NAFTA) to be replaced with a new, modern, and balanced agreement. Thanks to the leadership of President Donald J. Trump, the U.S.-Mexico-Canada Agreement (USMCA) is a complete re-write of NAFTA, with significant upgrades to almost every aspect of the United States’ trade and investment relationships with Canada and Mexico. This state-of-the-art agreement will be the standard by which all future U.S. trade agreements are measured. The USMCA will ensure that North America as a whole remains the world’s economic powerhouse. Here are the key highlights of the new agreement: Stronger Support for Manufacturing. The USMCA features innovative rules of origin (ROO) for automobiles and other key products. Rules of origin are critical to trade agreements because they determine which products get the benefit of tariff elimination. The rules of origin in NAFTA set a regional content threshold of only 62.5 percent for passenger vehicles and trucks, but they contained a major loophole: certain key components, including many electronics and high-tech parts, were “deemed” to be North American content, regardless of their true origin. Over time, these components came to represent a larger and larger share of the total content of an automobile, and manufacturers were able to meet the NAFTA rules of origin with less and less North American content. As a result, vehicles qualify for duty-free treatment under the NAFTA rules even if they contain far less than the 62.5 percent regional content requirement. Under USMCA, all three countries have agreed to significantly improved rules of origin for automobiles that will increase North American content to 75 percent and ensure that the benefits of the USMCA flow to North American producers and workers—not to other countries. The independent International Trade Commission and the Office of the U.S. Trade Representative estimate that the USMCA will stimulate billions of dollars in new auto manufacturing investments and support thousands of additional good-pay-

ing manufacturing jobs. In addition, the USMCA eliminates NAFTA’s burdensome “tracing” requirement for cars and trucks—cutting bureaucratic red tape and freeing manufacturers from these onerous and outdated documentation requirements. Stronger Support for Workers. The USMCA includes a new labor value content requirement that—coupled with stronger labor standards—helps level the playing field for North American workers. One major disappointment of NAFTA is that there has been no convergence in wages between Mexico and the United States, particularly in the automotive sector. Over the years, this wage disparity created incentives for outsourcing. The USMCA fixes these problems by requiring that at least 40 percent of a car and 45 percent of a light truck consist of content manufactured by North American workers making at least $16 per hour. As part of the USMCA, Mexico agreed to make unprecedented reforms to its system of labor justice—reforms that labor leaders in Mexico and the United States have sought for decades. In May 2019, Mexico finalized historic labor reforms codifying the USMCA’s labor commitments into Mexican law. Implementation and enforcement of these labor reforms will improve wages and labor conditions for workers on both sides of the U.S.-Mexico border. Stronger Support for Farmers and Ranchers. The USMCA is a big win for America’s farmers and ranchers, since Canada and Mexico are the first and second largest markets for U.S. food and agricultural products. All products that have zero tariffs under the NAFTA, including food and agricultural products, will remain at zero under the USMCA. This means American farmers and ranchers will have the certainty that their products will remain competitive in North America. In addition, we have secured new access to the Canadian dairy market, and Canada has agreed to stop dumping millions of dollars in subsidized dairy products that squeeze American producers out of third-country markets. The USMCA also creates new market access for U.S. poultry and egg exports to Canada.


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The USMCA includes new disciplines in biotechnology, sanitary and phytosanitary standards, geographical indications, and wheat grading—all of which are designed to prevent non-tariff barriers to agricultural products in the region. Stronger Support for Small Businesses. The USMCA recognizes the fundamental role that small businesses play in keeping the North American economy competitive and dynamic. New customs and trade facilitation rules will lower costs and cut red tape for exporters across all sectors. These new rules will make it easier for small businesses to tap into foreign markets and participate in cross-border trade. Combined with a new chapter on small and medium-sized enterprises, these provisions will help ensure that small businesses enjoy the USMCA’s benefits and maintain their critical role in growing the North American economy. Stronger Support for Innovation. Among the USMCA highlights are ambitious, modernizing provisions that will bring our trading relationships into the 21st Century. These include path-breaking rules that will protect our country’s, and the region’s, competitive edge in technology and innovation well into the future. America’s creative industries will be strengthened by receiving full national treatment for recording artists and requiring enhanced penalties for bootlegging movies. The USMCA’s first-of-its-kind chapter on digital trade eliminates data localization requirements and ensures that data can be transferred across borders to benefit companies operating online, thereby strengthening our efforts to combat the growing tide of digital protectionism worldwide.

Support for a Stronger Future. The USMCA includes a provision that will ensure we never again find ourselves with such an outdated and unbalanced agreement as the current NAFTA. By requiring regular reviews of the agreement, all parties have an incentive to comply with its provisions and achieve balanced trade outcomes that benefit all three countries. In addition, the USMCA sets a common goal with some of our largest trading partners to confront challenges, not within North America, but from around the world. The first-ever chapter on currency manipulation in a U.S. trade agreement and the strongest commitments ever on stateowned enterprise subsidies mean that the United States, Mexico, and Canada believe that economic success should reflect hard work and innovation—not unfair government support and other market-distorting practices. The USMCA is a great deal for the United States, Mexico, and Canada. It lays a solid foundation for the future of North American trade that will prove durable over the long-term. In June 2019, Mexico ratified the USMCA by a huge margin, and Canada began its approval process. We have been working constructively with the U.S. Congress to secure approval of the USMCA as soon as possible. With passage of the USMCA, all three countries can have confidence that the North American economy is on the move and will remain the envy of the world.

C.J. Mahoney serves as Deputy United States Trade Representative for Investment, Services, Labor, Environment, Africa, China, and the Western Hemisphere. Ambassador Mahoney was confirmed by the Senate on March 1, 2018.


Opportunities For Mexico with the USMCA An interview with Jesús Seade. Undersecretary for North America at the Mexican Ministry of Foreign Affairs, and Chief Trade Negotiator for USMCA, for the administration of Mexico President Andrés Manuel López Obrador.


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new era for business arrives with the United States-Mexico-Canada Agreement (USMCA) signed on November 30, 2018, by the leaders of the three countries. Jesús Seade, Undersecretary for North America at the Ministry of Foreign Affairs of Mexico, and Chief Trade Negotiator for USMCA, participated during negotiations the last two months of the talks when many of the most important issues were resolved. As a representative of the new Mexican government, he accounts for the more social content of the agreement, clarity for business, new conditions for improvement in labor matters, and greater attractiveness for investment in the automotive sector. Despite the advantages provided by the North American Free Trade Agreement (NAFTA), which is expected to be replaced by the USMCA, NAFTA needed an update after 25 years of existence. According to Seade, modernization for Mexico was guided by four key principles: promote regional competitiveness; ensure USMCA is more inclusive and sustainable; maximize the opportunities offered by new technologies; and maintain a predictable environment for trade and investment.

Q. What do you think are the main changes between USMCA and NAFTA?

USMCA is a very modern agreement; it adapts to the demands of the current times in social and technology matters. I could divide the changes into two parts: first, I would say that it is an agreement that establishes very specific conditions to do business, to give certainty when it comes to investing—it is a pro-investment agreement. Secondly, I would highlight that the new agreement has greater content in social matters; it is an agreement symbolic of the times. There is a whole series of new social chapters: labor, environment, small-and medium-sized enterprises (SMEs) and e-commerce. Those are very relevant provisions for the current times, and in which we previously had no rules nor margin to give those safeguards.

Q. What new provisions are important in commercial

and industrial matters? Do they represent opportunities for investment and business in Mexico? Without hesitation I would highlight the changes in the rules of origin (ROO) for the automotive sector, the most important for the three countries, because it is one of the largest volumes of trade in the region.

Currently, in order for a car to leave Mexico to the United States without paying tariffs, 62.5 percent of its content must be from the region, so manufacturers can import the remaining 37.5 percent in auto parts and other expenses, such as engineering, from other regions, including Europe and Asia. Now this rule is restricted further, since it rises from 62.5 percent to 75 percent. That is to say, the percentage of imported content decreases from 37.5 percent to 25 percent, which means that if the manufacturers installed in Mexico want to continue enjoying zero tariffs to supply the world’s largest market, they will have to import fewer parts and invest more in the countries of the region. This is already contemplated by the automakers and, in Mexico, five major firms have announced increases in their investment in Mexico. I see incentives for investment in the three countries due to these changes. This implies that Mexico can endorse more actions for competitiveness and labor. With good and non-protectionist policies to support the industry, we can all enjoy greater benefits from the USMCA.

Q. Just in relation to the labor matter, what major

changes are there in USMCA? And how is Mexico working to improve in this aspect? It is one of the main areas of the trade deal where the objectives of the Mexican government’s long-term agenda converge with the provisions of the agreement. Unlike NAFTA, the USMCA includes a labor chapter that satisfies the main provisions that our government wanted to implement and were included in our legislation as part of the labor reform. Many of these provisions and changes the Mexican government had already implemented are related to trade unions and are detailed in the annex of Chapter 23: freedom of representation; signing of collective bargaining agreements, and eliminating the figure of protection contracts which hinder the creation of unions and the right to strike; and very importantly, the creation of an independent labor justice system which is under the nation’s judicial system rather than under the executive branch.


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Labor provisions were present in NAFTA but they were negotiated as a side agreement. Therefore, there was not an enforcement mechanism and they generated complaints from production sectors in the United States and Canada concerning unequal working conditions to compete for investment. The USMCA addresses these concerns by including an enforcement mechanism. Independent of the agreement, the Mexican government, after approving the reform last April, is concentrating its efforts for its implementation through an action plan with goals, budgets and dates for its compliance.

Q. What do you think were the most important con-

ditions negotiated by the new government team that were integrated into USMCA negotiations in the last two months? We believe that one of the biggest contributions was the acceptance of a single-page chapter about the respect for the sovereignty of Mexico over its energy resources. This is already in our constitution, but the fact that it is in the agreement means that we have the United States and Canada recognizing Mexico’s energy sovereignty. Another of the contributions resulting from our participation in the negotiations was the fundamental change “sunset clause” proposed by the United States, which stipulated that the agreement should end every five years unless the three countries agree to continue. With President López Obrador’s authorization, I proposed that, instead of ending the agreement every five years by not signing its renewal, the base duration would be 16 years with revisions every six years. If all three countries decide to continue, the agreement will last another 16 years. These are important reviews that were not included in NAFTA.

If one of the countries decides to leave the USMCA after six years, it must notify the other parties and will then enter into a special status, and the following year it will have to reiterate this intention. In order to leave the deal, a party will have to reiterate its decision to leave for 11 consecutive years. For example, in the case of the United States, it would be at least three presidential terms within which it would have to reiterate its departure, and not be a decision during the time of any single president. I think that gives durability to the agreement that was never expected.

Q. At the beginning of the interview, you pointed out that the new agreement has great social content. Which changes would you highlight?

Society is not the same as it was 25 years ago when NAFTA came into effect. Cultural changes can no longer be excluded. We see those societal effects with Brexit in the United Kingdom and with the current social unrest in Hong Kong. These are just a couple of examples of general complaints about the economy, economic disparity and the political atmosphere expressed by people around the world. In this sense, USMCA leads the way by advancing provisions of unprecedented social concern, expanded in scope and depth in a direction that begins to be outlined in TPP11. Finally, in addition to the labor and environmental chapters of the USMCA, there is an anti-corruption chapter, conditions to support the cultural industry, and also a chapter to develop and support SMEs. There is no doubt that with these new stipulations, trade and industry at the regional level will continue to grow with reinforced social conditions and will mean improvements for the competitiveness, economy and investment in Mexico.

Jesús Seade earned a B.S. in chemical engineering from Universidad Nacional Autónoma de México (UNAM) and a Ph.D. in economics from Oxford University in England. He developed a distinguished academic career at the Universities of Warwick in Great Britain, CEPREMAP in Paris and the College of Mexico; and served as chief economist at the World Bank (1986-89). He served as an ambassador from Mexico to the General Agreement on Tariffs and Customs (GATT) and concurrently chief negotiator in the creation of the World Trade Organization (WTO) and in the addition of Mexico to the Organization for Economic Co-operation and Development (OECD). After ten years as Mexican Ambassador and international diplomat in the GATT and the WTO, was invited to the International Monetary Fund (IMF). In 2007, Dr. Seade returned to the academic world, first as vice president of the Lingnan University of Hong Kong. In January 2017, he joined the Chinese University of Hong Kong-Shenzhen, the technological capital of China, as vice president of Global Affairs. Dr. Seade returned to his duties as an international negotiator on July 1, 2018, representing the elected president in the renegotiation of NAFTA and the creation of the United States-Mexico-Canada Agreement (USMCA). He currently serves as Undersecretary for North America at the Mexican Ministry of Foreign Affairs. He is Chief Trade Negotiator of USMCA, appointed by the President Andrés Manuel López Obrador.


An Interview with

Francisco Cervantes DĂ­az President of CONCAMIN

Francisco Cervantes DĂ­az1 is chairman of The Confederation of Industrial Chambers of the United Mexican States (CONCAMIN)2. In this interview for Alliance Magazine, he discusses the challenges, benefits, opportunities and future of the T-MEC trade agreement.


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Q.

Regarding the changes reflected in T-MEC, what is your assessment of the positive effects for the North American region? T-MEC (Tratado entre México, Estados Unidos y Canadá)3 can make North America the most competitive region in the world, thanks to the deep integration of its production value chains that will become stronger and with higher regional value added because the new agreement has stricter rules of origin (ROO) for the United States, Mexico and Canada in very important industries including automotive, auto parts, steel, aluminum, and chemicals.

The agreement will take advantage of the opportunities of the new century by modernizing businesses such as: digital commerce, financial services and telecommunications, among others. It also facilitates the inclusion of small and medium-sized enterprises into international trade and establishes provisions that protect the environment and help fight corruption in “both sides of the table”.

Q. T-MEC presents new opportunities and challenges

for Mexican businesses. How are companies preparing for their implementation, for example, in information technology?

New regulations for trade and an increase in the duty-free franchise will increase and facilitate trade due to streamlined and easier transit of goods and services between our borders. These new trade facilitation and simplification of paperwork will benefit small- and medium-size companies, making the new Agreement a mean to better distribute the benefits of trade and investment within the three countries.

The first steps have been engaging with authorities and within the industry associations to understand the implications of the changes, regulations and framework to ensure compliance with the new T-MEC.

Q. What is the perspective of the Mexican private sec-

Businesspeople know that the major challenge will be implementation. One example is the creation of an oversight function led by the Ministry of Communications and Transportation (Secretaría de Comunicaciones y Transportes) that will propose best practices according to international standards and the T-MEC requirements.

tor towards the implementation of the agreement?

T-MEC will generate confidence in the investor community so they reinvest profits and by attracting new projects. The T-MEC will encourage new investors from other parts of the world in addition to the ones of our three partnering countries. The trade agreement introduces new rules of origin in several areas; revised frameworks for state-owned enterprises that engage in trade; updated rules for intellectual property rights; and regulations which will make North America more attractive to those companies that are now leaving China and looking to relocate in other nations. We know that economic growth will generate new employment opportunities for Mexicans. Moreover, newly created jobs will generate higher wages for workers due to the new and improved standards related to union democracy and transparency in wage bargaining as well as better working conditions to be enforced in the three countries. T-MEC was already ratified by a large majority in the Mexican Senate, and with majority support in both the United States and Canada, will mean certainty for investment, greater opportunities for workers and better and more competitive products and services for consumers of three countries. The Mexican private sector will continue to work with its counterparts to promote approval in the United States and Canada.

Also, we need to start the necessary overhaul of internal processes that are required to be compliant with timeframes established in the agreement.

Q. An important change implied in the T-MEC is the

wage increase. Do you think this could discourage foreign companies from investing in Mexico? I don’t think so. Mexico has had very competitive salaries compared to many other countries. Experience and history have proven that many other conditions besides wages are considered when deciding where to install a plant; good logistics are very important and Mexico surpasses most countries in this regard. Better pay gives the worker confidence in the company and this generates a stronger commitment to the organization on the part of the employee to give its best while increasing productivity, that certainly will lead and allow better salary levels.

Q. What has been the participation of CONCAMIN during the T-MEC negotiation process?

Members of CONCAMIN were fully committed and attended the Private Sector Advisory Board, known as the “Cuarto de Junto” during all the negotiation rounds. Our members


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know that, through long trips and hours of work, we defended their interests and positions which are undoubtedly those of Mexico. CONCAMIN devoted substantial amounts of resources, both economic and human during the almost two years of negotiations so the end result be a modernized, enhanced and efficient framework to do business between our three countries. It has been a privilege to participate in the whole negotiation process.

Q. With T-MEC, it is expected that there will be an

increase in foreign investment in the country. Which do you think will be the most favored sectors of this increase? • Auto industry. The agreement includes changes in the rules of origin of the auto industry. With NAFTA, 62.5 percent of the production of a light car was required to be made in any of the three countries to have access to preferential tariffs. But with the T-MEC, it rose to 75 percent. • Pharmaceuticals. In practice, Mexican pharmaceutical companies are more protected in relation to the competition by generic medicines in the marketplace. • The Canadian dairy market. The agreement now includes provision to open to trade this sector, currently excluded from preferential treatment.

• Textiles and Garment. The new rules of origin and the flexibility to use materials and inputs not produced in the Region will increase the competitivity of this sector.

Q. With the ratification of T-MEC, which other coun-

tries do you think would be interested in investing in Mexico? European countries and members of the Asia Pacific Basin mainly, but also through the Pacific Alliance, an Alliance that involves more than just trade in goods, but that also includes banking and finance integration, we can expect more investment from Chile, Colombia and Perú.

Q. What investment opportunities does the approval of T-MEC represent for Mexican businessmen?

To comply with the proposed new rules of origin, auto parts, plastics, textiles, garments, aluminum and steel industries have the greatest opportunities. E-commerce companies can benefit considerably under the new rules, regulations and the increased value of duty-free franchise for goods and services, will mean more and higher value transactions within the three economies.

1 Francisco Cervantes Díaz, Francisco Cervantes Díaz, chairman of CONCAMIN, is a Mexican businessman with 20 years of experience in the development of high-impact strategic business, technology, investment, education and national and international public relations of first level. As a public official, he served as undersecretary for Economic Development of the State of Mexico. He is chairman and CEO of Cerplastik industries and of Grupo CerPal México a real state developer. He has participated in several private and public company boards, such as: NAFINSA, BANCOMEXT, IMSS, INFONAVIT and FONACOT.

2 The Confederation of Industrial Chambers of the United Mexican States (CONCAMIN), was established in 1918, is an umbrella and nationwide trade organization, encompassing and representing most industrial sectors. It is recognized for its leadership and capacity to develop projects and initiatives and proposing public policy that contribute to the sustained growth and development of Mexican industry. For more detailed information, visit https://www.concamin.org.mx/nosotros/quienes-somos. 3 The new trade agreement between the United States, Mexico and Canada has different names for each of the North American partners. In Mexico, it is called T-MEC (Tratado entre México, Estados Unidos y Canadá); in Canada, it is CUSMA (Canada, United States and Mexico Agreement); and the U.S. refers to it as USMCA (United States, Mexico and Canada Agreement).


AGUASCALIENTES The State of Aguascalientes is Mexico’s driving force. Strategically located in North-Central Mexico, the most important economic area for industry and services, Aguascalientes stands out as the most competitive state with the highest standards of living, innovation, growth, employment and investment attraction. Aguascalientes is always at the forefront of higher education, technology, IT infrastructure and innovation. Our people are educated and skilled, highly competitive and talented. We are connected by land, rail and air, with full road connectivity to the three major cities in Mexico, two of the main train lines and one international airport. We are one of the best places to invest according to the World Bank’s “Doing Business” ranking, Aguascalientes has sound public finances, provides security to foreign investors and has social peace. Aguascalientes has been growing fast and steadily, surpassing the national average economic growth . In 2019, we are estimated to be the State with the 2nd fastest economic growth rate in Mexico. Auto, aerospace, healthcare, electronics, agribusiness and agroindustry, IT and logistics are all key sectors for Aguascalientes. We are open for business and eager to have you visit and invest in Aguascalientes.

Be Part of It!

Economic Indicators: • 1st place: “Doing Business in México” by the World Bank. • 2nd place in economic activity growth rate. • Investment grade by Fitch Ratings and Standard & Poor’s. • 4th most competitive state by IMCO1(Instituto Mexicano para la Competitividad A.C.) in 2018. • 4th place on innovation in economic sectors by IMCO in 2018. • 6th place on productivity in Mexico by Mexico, ¿Cómo Vamos?.2

1 IMCO is a research center in public policy and citizen action that proposes effective solutions to the most important challenges in Mexico. https://imco.org.mx/home. 2 https://mexicocomovamos.mx/ Mexico, ¿Cómo Vamos? is a group of researchers composed of a diverse group of academics and experts in Mexican economy and public policy.

For more information, please visit: www.innovacioneconomica.com Ph: + (52) 449 9102 611 Ext. 5914


Road to USMCA Ratification:

next steps post Mexican Ratification Interview with Maryscott “Scotty” Greenwood


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aryscott “Scotty” Greenwood is a partner at Crestview Strategy and the managing director of the U.S. region. As a former chief of staff to the United States ambassador to Canada, a business and public policy advocate, communications expert and political strategist to Fortune 500 companies, trade associations and nonprofit organizations, she brings a wealth of knowledge, experience and expertise to the roles. As the chief executive officer of the Canadian-American Business Council (CABC)1, she has repeatedly been recognized by Canadian newsweekly, and The Hill Times, which named her one of the country’s Top 100 Lobbyists (2017), Top 100 People Influencing Canadian Foreign Policy (2014) and Top 100 Most Influential People in Government and Politics (2010). For the past two decades, Scotty has been a frequently requested public speaker, a skilled panel moderator, and an insightful media commentator on a range of issues from U.S. politics to Canada/U.S. relations and the future of free trade agreements in the world.

Q: From your knowledge and experience in North

American trade, would you say the new NAFTA is a step forward for the relationships among the countries, especially considering the tense political climate it was produced from? The negotiation of a new North American trade agreement has seen its fair share of challenging rhetoric. That said, if the agreement is ultimately approved in all three countries, it will be a major step forward for our economies, joint prosperity in our communities, and has the potential to be an example of economic leadership for the world. The original NAFTA, as successful as it is in many ways, is in need of an update. The new agreement makes significant strides in areas that are important to all three countries.

Q: NAFTA (North American Free Trade Agreement)

was created in a very different economic and political climate than the one we live in today. Could you speak to how the agreement accounts for our current climate? Certainly, we are living in very different times both in a political and economic sense than when NAFTA was ratified. Where citizens used to tune into the 6:00 p.m. television news each evening, we now see them scrolling through Twitter feeds to inform them of what’s important. Much like the modernization of how we consume information,

the way we purchase goods and services has changed drastically from the days when NAFTA was created. We are living in a more connected, global world and our economy reflects that. NAFTA removed numerous barriers to trade and business development; however, the barriers we see today didn’t exist back then. With the emergence of e-commerce, consumers are becoming accustomed to an economic landscape that is receptive to their needs, on their timeline, straight to their front door.

Q: What are some of the benefits that the United

States-Mexico-Canada Agreement (USMCA/T-MEC2) brings to Mexico-U.S. trade? In 2017, the United States exported $24 billion and $19 billion worth of agricultural products to Canada and Mexico, respectively. The two countries represent America’s largest and third-largest agricultural markets in the world. These exports support 325,000 American jobs. Consider the agreement’s section on agriculture. USMCA/T-MEC is a big relief to Mexico’s avocado farmers who supply more avocados to Americans each year than to any other nation. The deal maintains zero tariffs on agricultural products for all three nations which helps farmers ship goods across borders very inexpensively, thus protecting farming jobs in Mexico and lowering Americans’ grocery and restaurant bills. USMCA/T-MEC would boost job creation and wage gains for auto manufacturing workers as well. The deal requires 75 percent of a vehicle’s parts be manufactured in North America in order to qualify for tariff-free treatment, up from the current requirement of 62.5 percent. This provision will foster job growth in Mexico, the United States and Canada.

Q: Apart from manufacturing and agriculture, what

other industries will see significant impacts from the updates made in the USMCA/T-MEC? A number of industries will certainly see big changes. The USMCA/T-MEC devotes an entire chapter to small- and medium-sized businesses. America’s 30 million small businesses employ almost 60 million workers. Meanwhile, 99 percent of Mexico’s economy is comprised of small-and medium-sized enterprises.


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The chapter includes provisions that cut down on paperwork for express shipments valued below $250 and eliminates duties and tariffs on all shipments up to $50 for Mexico. Lower costs and fewer administrative hassles will increase revenues, allowing firms to raise wages and hire new workers. We can also see significant changes for producers of digital products such as film, software, music and e-books which are exempt from custom duties. As a result, businesses in IT-intensive industries, which support about 30 percent of jobs in the United States alone, will face fewer barriers when selling their products across North American borders.

Q: The negotiations for the USMCA/T-MEC were tense. Do you see that strain will continue as the process begins for lawmakers in Canada and the U.S. to ratify the deal?

Trade is of paramount national self-interest and trade negotiations are never easy but the parties bargained in good faith. When the deal was signed last October, all three governments declared it a win-win-win. Put simply, USMCA/T-MEC makes commerce between Mexico, the United States, and Canada more streamlined than ever. Mexico has already ratified the agreement, and it would be in the best interests of both Canada and the United States to ratify as well, and as soon as possible.

Q: What are some of the political issues affecting rati-

fication of the new USMCA/T-MEC in the United States? The Democrats are seeing tougher enforcement provisions on labor and environmental protections, in particular, but they also are looking at the new agreement as part of a larger negotiation with President Donald Trump’s administration on the broad legislative agenda. They have talked about trading a new NAFTA deal for an infrastructure funding program or for renewed action on the Paris climate accord. Speaker Nancy Pelosi, Speaker of the U.S. House of Representatives, is not interested in giving up “something for nothing” and will exact a price from the administration in return for consideration of the trade agreement.

We also know that there is political support for the new agreement among both Democrats and Republicans. For example, thousands of individuals in Democratically-held districts in Michigan, Ohio, Wisconsin and Pennsylvania have urged ratification by faxing their representatives using the Canadian American Business Council online tool, our pointed way of reminding people that when the first Canada-U.S. free trade agreement was signed, cutting-edge technology meant fax machines. Our outreach tells us daily that thousands of American small business owners want the new agreement signed, as do the farmers and ranchers who have taken a pounding from the tariffs that are the administration’s alternative should the USMCA/T-MEC fail to be ratified.

Q: What should we expect for the future of the USMCA/T-MEC?

North American trade policy has shown a remarkable ability to cross party lines over the years. The initial Canada-U.S. agreement was negotiated between U.S. President Ronald Reagan, a Republican, and Canadian conservatives. The deal to bring Mexico on board was struck between these same two parties and ratified with upgrades by Democratic President Bill Clinton and Canadian liberals. Calling the USMCA/T-MEC “a better deal for workers on both sides of the border,” Canadian Prime Minister Justin Trudeau pointed to integral parts of the deal that “we look to the U.S. Democrats to understand are significant improvements and are issues that, like Canadian Liberals, they care deeply about.” Overcoming the instinct to oppose trade deals has, over the past 30 years, created a powerful continental trading bloc that is well-equipped to confront challenges from China and others. On some issues, elected officials simply must find common ground and choose to govern. The USMCA/T-MEC is a rare piece of good news at an ominous moment for global free trade.

Maryscott “Scotty” Greenwood is CEO of the Canadian-American Business Council. 1 The Canadian American Business Council (CABC), established in 1987, is a nonprofit, nonpartisan, issues-oriented organization dedicated to promoting private sector initiatives that affect Canada and the United States. CABC members employ about two million people and have annual revenues of close to $1.5 trillion. The Council’s activities include high-level briefings on issues of current concern, assistance with practical trade and policy challenges. For more information, visit http://cabc.co. 2 In the United States, the agreement is called USMCA (United States, Mexico and Canada Agreement); in Mexico, it is T-MEC (Tratado entre México, Estados Unidos y Canadá); and, in Canada, it is called CUSMA (Canada, United States and Mexico Agreement).


Hard Rock Hotel Guadalajara Joins Company Portfolio Hard Rock Hotel Guadalajara is the first urban setting hotel in Mexico to join the Hard Rock Hotel portfolio. This new venue offers a mix of pop culture, entertainment options, gastronomy, and first-class experiences. The concept for the interior design comes with urban, contemporary décor and modern design in an environment based on the idea that unites everything that Hard Rock does: music.

those empty faces reminding us that music can unify all humanity in one community without discrimination. Other works of art gracing the lobby area include a byzantine-inspired glass mural with hidden binary codes created by Rodrigo Menchaca, and a huge white canvas that subtly emerges from the hotel as a feather that is anchored at the front gardens in an elegant design that reminds guests of the calm and order awaiting them inside.

The single-piece spiral sculpture rising from the lobby’s center, serves as a 22-yard long stairway that floats over the lobby with no apparent support, defying the laws of physics.

The property offers 348 rooms with the most advanced technology in five different categories, including the Rock Royalty Level and the legendary Amplify Suite.

Ascending from the main floor and emerging through the center of the stairs, is an iron column that rises four stories to connect the floor with the dome that features carefully crafted stars made from precious wood. The stars represent rock stars of all genres and ages that have elevated our spirits, transporting us from this world to music’s heaven.

Guests can indulge in multisensory Mexican culinary creations at Sessions Restaurant then chill out at the iconic B.I.T.S. sky lounge and soak in an infinity pool with an impressive 360º view of the city.

The UTC-6 Lobby Bar has a spectacular mural painted by renowned artist Alexandra Poiré. The mural, titled “The Music Brotherhood,” depicts faceless musicians of different genres allowing viewers to imagine musicians of all cultures, races, religions and nationalities in

Other amenities available for guests include the Body Rock® Fitness Center; Rock Shop® with world-famous brand merchandise; and Rock Spa® that offers a place to escape the stress of daily life. Hard Rock Hotel Guadalajara provides a luxury backstage pass to everything visitors want to discover, offering the Guadalajara experience with a twist. http://www.hrhguadalajara.com/


Mexican Manufacturers’ Challenges and Opportunities to Grow and Stay Competitive in the Global Economy

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espite a slight drop from the third quarter of 2018, Mexico’s manufacturing sector still reflected a strong growth trajectory in the first quarter of 2019, posting $14.7 billion GDP (gross domestic product) according to Trading Economics’ econometrics models.1 Their data indicates that this number will increase to $15.4 billion by 2020. This is not surprising for a country that manufactures and exports as many goods as the rest of Latin America combined and holds a record number 12 free trade agreements with 46 countries. Among the main growth industries in Mexican manufacturing are automotive, aerospace and medical devices, followed closely by food and beverage. In 2018, Mexico exported vehicles worth $115.5 billion; electrical machinery and equipment worth $81.9 billion; machinery (including computers, phone system devices, optical readers,TV receivers and monitors, etc.) worth $74.5 billion; and optical, technical and medical equipment worth $19 billion according to the website

World’s Top Exports.2 (“Mexico’s Top 10 Exports List”) Additionally, in the first half of 2018 alone, the country attracted foreign direct investments (FDI) of $17.8 billion according to the Mexican Ministry of Economy, an increase of 14 percent over the same time period in 2017. Forty-three percent of these investments were made in the manufacturing sector. These are all indications that Mexico is poised to become a tier 1 manufacturer in various industry segments that produce high-value goods that will enable it to compete on a global scale. Mexico’s manufacturers, however, are not without their challenges, specifically those relating to the deployment of automation, workforce development, and the optimization of their factories’ quality controls and processes. Gaining a better understanding of these challenges and how they are being addressed provides a clear view of what it will take for the country’s manufacturers to compete effectively.


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Initiatives Underway by Government,

Academia and Industry Mexico’s governments (national, regional, local) are bolstering manufacturers with key initiatives. The federal government’s drive to liberalize the economy in the late 1980s and early 1990s laid the foundation for today’s export-driven economy which continues to expand into middle- and high-end manufacturing sectors. Economically, this trend is driven by Mexico’s participation in multiple free trade agreements. The most significant of these is the United States-Mexico-Canada Agreement (USMCA), formerly known as the North American Free Trade Agreement (NAFTA). One early incentive given to foreign manufacturers was the establishment of the Maquiladora program. This program continues to allow factories to operate under special tariffs and rules negotiated between Mexico and the United States. Under this program, manufacturers can import materials and equipment duty-free for the purpose of assembly and processing of goods to be exported to the United States. The USMCA now allows for these goods to also be sold in Mexico. The incentives have since expanded to include federal and state government initiatives including tax breaks for companies, real estate concessions and public co-investment options for privately-held companies. Additionally, programs offer foreign manufacturers the opportunity to establish a Maquiladora in a short period of time by taking over all legal, accounting, tax and labor-related functions while the manufacturer focuses on product quality and plant operations. The modernization of manufacturing facilities that accompanies production and process automation requires a highly-skilled workforce. This requirement is especially visible in Mexico’s automotive, aerospace, medical device, and electronics manufacturing sectors. As Mexico’s manufacturing further evolves, its design, research and development, and engineering capabilities become paramount, all of which are dependent on an educated workforce. The government, industry and academia already recognize the need for education and are addressing it on several levels. Mexico’s universities have established strong science, technology, engineering and mathematics (STEM) programs, and are graduating large numbers of engineers every year. Federal programs such as Proyecta 100,000, managed by the Secretaría de Edu-

cación Pública (SEP), aimed to have 100,000 Mexican students studying in the U.S. by 2018 on full government scholarships. The only requirement was that the students return to Mexico and apply their newly-gained knowledge. Some Mexican states have been equally active in educating tomorrow’s workforce. The state of Sonora, for example, looking to further grow its aerospace industry, is exploring educational partnerships with U.S. universities. Mexico recognizes that college is not the only way to receive a valuable technical education. It has, therefore, embraced dual educational and vocational training through the direct cooperation of industry leaders and educational institutions tasked with vocational training. Among these schools are Colegio Nacional de Educación Profesional Técnica (CONALP), Centro de Bachillerato Tecnológico Industrial y de Servicios (CBT) and Centro de Estudios Científicos y Tecnológicos (CECYTE). These programs typically have three semesters of basic training, followed by three semesters focused on a specialization, and one semester of a mandatory company internship. The Festo Didactic Business Unit focuses on technical training and is currently working with several state government institutions in charge of workforce development. For example, Festo is supporting El Instituto Estatal de Capacitación (IECA) in the State of Guanajuato, Instituto de Capacitación para el Trabajo (ICATEP) in the State of Puebla, Instituto de Capacitación y Educación para el Trabajo (ICET) in the State of Nuevo Leon, and Instituto de Capacitación para el Trabajo (ICAT) in the State of San Luis Potosí by supplying equipment, curricula, and instructors to educate trainers, who in turn, can provide high quality training in their respective industries. Universidad Politécnica de San Luis Potosi is another example of a designated Festo Authorized and Certified Training Center (FACT Center). Through this program, the university facilitates the transfer of important industry knowledge to the surrounding industry including German car manufacturers located in the region. To stay competitive in the long-run, Mexican manufacturers also will need to embrace Industry 4.0, the fourth industrial revolution, that focuses on interconnectivity, automation, machine learning, and analysis of real-time data.


These and other technologies such as the Internet of Things (IoT) and cyber physical systems, inform and operate smart factories. Solutions must be faster, more flexible and intelligent. There is also a heightened need for manufacturing systems to offer increased availability, be more energy efficient, and be capable of fulfilling just-in-time production requirements. There are several forthcoming regional initiatives intended to prepare the workforce for a fully-automated and networked factory environment. The State of Nuevo León government started a Program for International Teacher Assessment (PISA) and Qualification for Industry 4.0 (PITAQ4.0). As a participant in this program, Festo provides game-based competence development training for vocational teachers and instructors in the field. The goals of this program are to: • Increase the knowledge of 300 teachers/trainers in Industry 4.0 through a method based on online games; • Hold two training camps on Industry 4.0 to train Master Teachers in the Festo Industry 4.0 program; • Train 60 teachers in skills training camps to become Master Teachers in Industry 4.0; • Provide 20 technical/vocational schools with expert

teachers and equip them with Industry 4.0 laboratory equipment; and • Provide 3,000 students per year with training to develop skills for Industry 4.0 during their vocational training which can then be applied to industry.

The knowledge will subsequently be applied utilizing virtual and real skills competitions involving gaming elements, learning platforms, and training camps. The ultimate goal is to educate 1,500 vocational teachers about Industry 4.0 and train 300 teachers in intensive, hands-on skills training camps to become master trainers for Industry 4.0. Further, the objective is to assist as many as 100 technical/vocational schools in gaining skilled Industry 4.0 teachers and related lab equipment. Approximately 10,000 students annually are expected to be trained in Industry 4.0 related skills, which will provide relief for manufacturers and advance these students’ career opportunities. To assist manufacturers in developing systems that offer greater availability, energy efficiency, and are capable of fulfilling just-in-time production requirements, sophisticated pneumatic and electric automation solutions are being deployed in modern factories. Manufacturers are applying high-quality products such as actuators, servo motors,


sensors, valves or robots and other equipment to address manufacturers’ automation needs. Customized systems designed to address manufacturers’ specific production line needs are also being developed to help give Mexico’s manufacturers a competitive edge. They are relying on engineering solutions, supported by high-quality design and engineering services, to address production line challenges in order to increase production, facilitate more competitive pricing, enhance worker safety, and reduce their environmental impact. For example, automation has provided a wide range of solutions to the Mexican car industry. One of these solutions, Festo’s Robot Installation Plate (RIP), is being used by major auto body plants in Mexico. The RIP controls and monitors the compressed air and cooling water supply for individual welding tongs and has proven to increase efficiency while reducing water waste up to 90 percent. Other components of this automation are focused on supporting worker safety while protecting equipment. Another element of these components is Festo’s soft start

quick exhaust valve which can instantly cut off power to critical components when an emergency stop is triggered. Another product enjoying a high adoption rate in the Mexican automotive industry is an energy efficiency module incorporating smart technology (i.e., service units, sensors and fieldbus). This Industry 4.0 solution automatically monitors and regulates the compressed air supply enabling manufacturers to meet key sustainability goals and reduce operating costs. Mexico’s young labor force, geography and professional education system are positioning the country well to compete in the global manufacturing market. As Mexican manufacturers continue to ascend in the manufacturing value chain, it will be critical to embrace advanced automation and the continued professional education of the workforce. Bernd Noak is general manager of Festo Mexico. Festo is a leading global manufacturer of high-quality process control and industrial automation solutions. 1. https://tradingeconomics.com/mexico/gdp-from-manufacturing 2. http://www.worldstopexports.com/mexicos-top-exports


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By Alejandro N. Gomez-Strozzi

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uilding upon the centuries-old business relationship between Mexico and the United States, NAFTA allowed both countries to benefit from a seamless border that clearly made the pie larger. The 25-year-old agreement needed to be revised, though, with motor vehicles and auto parts taking the lion’s share of the modifications (for better or worse depending on how well individual companies coordinate upstream and downstream operations and recordkeeping). Mexico´s economic importance to the U.S. is frequently overlooked. As the 11th largest economy in the world, Mexico has a population of 126 million, roughly 40 percent of the United States’, and is close to three times the size of Texas. Mexico has more free trade agreements (FTAs) than any other country in the world (12 FTAs with 46 countries) and seven more will be added with the renewed Trans-Pacific Partnership (TPP).1

In 2019, Mexico became the largest U.S. trading partner, and in 2018 it was either the first or second largest export market for more than 50 percent of the states: it was first for six states2 and second for another 22 other states.3

Mexico’s middle class has grown accustomed to purchasing American goods and services. The country has proven to be a near-shore, reliable manufacturing partner and will benefit from the dwindling U.S. population and workforce. USMCA: Strengthening up- and down-stream business partners The United States-Mexico-Canada Agreement (USMCA),4 signed in November of 2018, has already been approved by the Mexican Senate and is making its way through the legislatures in the U.S. and Canada; though subject to political timing, it is expected to be ratified by the three countries during the calendar year 2019. Regardless of where companies are located in the automotive industry’s production chain, in the short term (read this as “right now”), all players need to evaluate how the USMCA’s provisions will impact their current activities—possibly as early as January 2020—and develop common strategies with their up- and down-stream business partners. In the interim, companies need to be aware of certain desired changes to

USMCA from the U.S. House of Representatives, although they would not necessarily mean reopening the negotiations as they could be addressed utilizing U.S. domestic implementing provisions. In the long term, we believe that Mexico’s export orientation and openness will be strengthened by USMCA. Regarding motor vehicles and auto parts manufacturing and sales in North America, the USMCA represents a transformation from a straightforward compliance-or-not of the relevant rules of origin (ROO)5 at the original equipment manufacturer (OEM) level, into a complex tracing process through the full chain of production. For motor vehicles, a more stringent rule of origin will have to be met, increasing from the current 62.5 percent to 75 percent during a fiveyear transition period; additionally, 70 percent of steel and aluminum should be sourced within the NAFTA region, and 40 percent of its manufacturing will have to be made with labor wages of $16 per hour or above; there are, however, specific rules in USMCA that allow for some flexibility to comply with these requisites.


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USMCA will require auto parts to be classified into highly detailed categories that describe different types of products such as “super-core,” “principal” or “complementary” parts. Rules of origin will then vary depending on how those products are used; for example, to produce passenger vehicles, light or heavy trucks, etc. Even though the previous rules may look overwhelming, 68 percent of current Mexican motor vehicle exports already comply with them.6 For the remaining 32 percent, the appropriate USMCA ROO will need to be adjusted—or dropped altogether—along the chain of production on a model-by-model basis to pay the 2.5 percent import duties for passenger vehicles, 25 percent for light trucks.

We believe that, due to the USMCA requirements, Mexico will ultimately receive greater investment as a result of production relocation out of Japan, China, Korea and other countries. U.S. President Donald Trump’s administration has threatened to start the six-month NAFTA withdrawal process to pressure Congress to vote on the USMCA as is, or risk having no treaty at all. If the withdrawal actually occurs, trade within North America would go back to “ordinary” status, that is, no preferential commercial treatment, under World Trade Organization (WTO) standards, creating a serious disruption of numerous production chains that extend beyond motor vehicles.

The López-Obrador Administration Former Mexico City Mayor Andrés Manuel López-Obrador began his six-year term as president of Mexico in December 2018. He ran on a simple message platform: fighting corruption which would liberate a large sum of financial resources to be redirected to less privileged groups and geographic regions within Mexico. López-Obrador offered to freeze taxes for at least the first half of his tenure and has already issued a Northern-Border program that, on one hand, reduces value added and income taxes to eight and 20 percent, respectively, and, on the other hand, doubles the minimum wage. Further, a labor reform bill was passed that would, among other things, ensure union votes by secret ballots, allow workers the freedom to join or not join a union, and create a new set of independent labor courts. In the end, López-Obrador’s administration would not risk losing export-oriented manufacturing positions that provide income for a significant number of middle-class families across Mexico; thus, even in the unlikely NAFTA-less scenario, we anticipate that the Mexican president would do as needed to support export promotion programs so that valuable chains of production do not flee Mexico.

Alejandro N. Gomez-Strozzi is a partner at Foley Gardere Arena, a Subsidiary of Foley & Gardner LLP. He can be reached at agomez@foley.com. 1. The Trans-Pacific Partnership is now known as CPTT, Comprehensive and Progressive Agreement for Trans-Pacific Partnership. 2. It was first for Arizona, California, Kansas, Nebraska, New Mexico and Texas, 3. It was second for Colorado, Georgia, Illinois, Indiana, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennessee, and Wisconsin. 4. USMCA, the United States, Mexico and Canada Agreement, is the replacement for NAFTA. 5. The World Trade Organization defines rules of origin as the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and restrictions in several cases depend upon the source and transformation of imports. https://www.wto.org/english/tratop_e/roi_e/roi_info_e.htm 6. As per former Mexican Minister of Economy Ildefonso Guajardo. https://www.pressreader.com/mexico/el-economista-mexico/20180828/281509342050937


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XVIII U.S.-Mexico Congressional Border Issues & NAFTA/ USMCOC Conference The U.S.-Mexico Chamber of Commerce (USMCOC) held its XVIII U.S.-Mexico Congressional Border Issues and NAFTA/ USMCA Conference in Washington, D.C., on February 26, 2019. The nearly 100 individuals who attended the 18th conference were able to engage in informative and productive discussions with guest speakers on border security, border development and the United States-Mexico-Canada Agreement (USMCA). The first panel was an open conversation on border security, with panelist Bradley F. Hayes from U.S. Customs & Border Protection; Natalia Campillo, from Servicio de Administración Tributaria (SAT), Mexico; and David Aguilar, principal at Global Security & Innovative Strategies. The panel was moderated by José Zozaya, president and executive representative with Kansas City Southern de México and chairman of the USMCOC binational board. The following panel included presentations by Davin Lopez, from Mesilla Valley Economic Development Alliance; Paola Avila, representing the San Diego Regional Chamber of Commerce; and Luis Ramirez, president of Ramirez Advisors Inter-National. Each shared their experiences with successful policies and projects that were implemented in collaboration between U.S. and Mexican agencies. Examples of the successes they cited were trans-boundary sewage pollution, ports of entry infrastructure improvements, workforce training, co-production of manufacturing, business development and expansion. The keynote presentation was delivered by U.S. Rep. Xochitl Torres Small (NM-2), a member of the House Committee on Homeland Security, who emphasized collaboration as the best strategy to foster economic development in the border region.

1 During the final panel, speakers provided a wide range of experiences and perspectives on the U.S.-Mexico-Canada Agreement, and the North American Free Trade Agreement. Featured were Marvin Hildebrand, economic minister with the Embassy of Canada in the U.S.; Gary H. Baise general counsel for the U.S. Grains Council; Steve Lande from Manchester Trade Limited, Inc.; and Ambassador Juan Sosa, Consul General of Panama in Houston, Texas. At the end of the conference, the Chamber hosted a reception in honor of Martha Bárcena Coqui, appointed Ambassador of Mexico to the U.S. by President Andrés Manuel López Obrador in January of this year. Also attending were David MacNaughton, Ambassador of Canada to the U.S., and Gen. Albert Zapanta, president of the USMCOC, who warmly welcomed Ambassador Bárcena to Washington. The conference and reception took place at the Verizon Technology and Policy Center in Washington, D.C., with support from Verizon Communications Inc., a binational member of the Chamber.

PHOTO 1 Congresswoman Xochitl Torres Small, member of the House Committee on Homeland Security. PHOTO 2 Amb. Juan Sosa discusses the prospective impact of the USMCA in the Americas. To his right, Marvin Hildebrand, Gary H. Baise and Steve Lande. PHOTO 3

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Luis Ramirez during his presentation on border development. To his right, Albert Zapanta and Davin Lopez. PHOTO 4 Members of the border security, José Zozaya, Bradley F. Hayes, Natalia Briseño Campillo and David Aguilar. PHOTO 5

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Ambassador of Canada to the U.S., David MacNaughton; Ambassador of Mexico to the U.S., Martha Bárcena Coqui, with Albert Zapanta, president of the USMCOC.


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2019 Annual Binational Conference & Good Neighbor Awards Gala The U.S.-Mexico Chamber of Commerce binational board of directors gathered in Washington, D.C., on May 29 for their Annual Meeting, Conference and Good Neighbor Awards Gala. The conference and board meeting were held at the Mayflower Hotel while the gala was held at the Organization of American States (OAS) building.


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Conference Panel Discussions The conference began with a panel discussion regarding border issues. Panelists agreed that much work is needed as trade is being impacted by current immigration challenges. “We can’t enforce our way out of this challenge. We need to support Mexico on their southern border,” said David Aguilar, principal of Global Security and Innovative Strategies and former commissioner of U.S. Customs and Border Protection. Dr. Jose Zozaya, chairman of the board, president, general manager and executive representative for Kansas City Southern de Mexico said, “We are facing delays in trade on freight because of immigration problems. We are not doing what

is needed. U.S. and Mexico need to work together on the southern border of Mexico.” The second panel focused on the United States-Mexico-Canada Agreement (USMCA) and North American Free Trade Agreement (NAFTA). Panelists were Sergio Garcia Gomez, former head of the Section for Economic Affairs at the Embassy of Mexico U.S.; Ricardo Martinez, Secretary of Economic Development for the State of Aquascalientes; Eduardo Infante, Undersecretary of Economy for the State of Aguascalientes, Gary H. Baise, principal attorney at OFW Law1 and general counsel for the U.S. Grains Council and Agricultural Retailers Association; and Angel H. Ramirez, Mexico Market Leader for Baker Tilly Virchow Krause, LLP.

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Binational Board of Directors Meeting Following the panel discussions, the binational board of directors of the U.S.-Mexico Chamber of Commerce convened for the annual meeting where they announced unanimous support for the passage of the United States-Mexico-Canada Agreement. PHOTO 1

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Albert Zapanta, president of the USMCOC; David Aguilar, principal of Global Security; Juan Acereto Cevera, Representative of the Government of Ciudad Juarez for International Affairs and Joseph Chapa, VP of Finance and Executive Director of the Trade Development and Assistance Center.

Sergio Garcia Gomez, economist and former Minister of Economic affairs at the embassy of Mexico in the U.S. and senior advisor on trade and investment to the USMCOC; Ricardo Martinez, Secretary of Economy for the State of Aguascalientes; Eduardo Infante, undersecretary of economy for the Sate of Aguascalientes, Gary H. Baise, principal attorney, OFQ Law and general counsel for the U.S. Grains Council and Agricultural Retailers Association and Angel H. Ramirez, Mexico Market Leader at Baker Tilly.


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White House Briefing Board members were invited to the White House for briefings from key administration officials who shared current trade policy and legislative objectives relating to the passage of the USMCA, overall border security and immigration issues. White House representatives discussed the administration’s policy objectives, legislative challenges and welcomed feedback and support from the attendees. Following the White House briefing, board members received an update from John M. Melle, chief negotiator and Assistant U.S. Trade Representative (USTR) for the Western Hemisphere on specifics of the USMCA and how it improves upon the current NAFTA framework.

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USTR is part of the executive branch. Through an interagency structure, USTR coordinates trade policy, resolves disagreements, and frames issues for presidential decision. The trade representative also serves on several financial and monetary boards including: Overseas Private Investment Corporation (OPIC), Millennium Challenge Corporation, is a non-voting member of the Export-Import Bank board of directors, and a member of the National Advisory Council on International Monetary and Financial Policies.2 Melle, who assisted in writing NAFTA over twenty-five years ago, stressed the importance of passing the USMCA. In addition to proposed revisions and inclusions of new topics not currently covered in any other trade agreement currently in force, USMCA may provide other nations a framework for future trade agreements. According to Melle, USMCA would become “the new gold standard” for future trade agreements. He also shared that, as a consequence of NAFTA’s passage, Mexico and Canada began to increase their international free trade agreements and have implemented language found in NAFTA in many of those agreements. USMCA may have the same effect with U.S. allies and their respective trade partners.

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The briefing concluded with the directors and leadership of the U.S.-Mexico Chamber of Commerce reiterating their unanimous support for passage of the USMCA.

PHOTO 1 Briefing at the USTR. PHOTO 2 and 3 USMCOC board members during the White House briefing at the Eisenhower Executive Office Building.

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1. Olsson Frank Weeda Terman Matz PC 2. https://ustr.gov/about-us/about-ustr


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Good Neighbor Awards Ceremony & Dinner Gala Later that evening, the Good Neighbor Awards were presented at the annual USMCOC gala. Rabbi Levi Shemtov provided an inspirational invocation. As honorary president of the U.S.-Mexico Chamber of Commerce, H.E. Martha Barcena, Mexico’s ambassador to the United States, provided the keynote address advocating for continued cooperation between our two countries.

Recipients of the 2019 Good Neighbor Awards were: • Private Sector Leadership Award: Jayson Adair, CEO of Copart Inc. and Francisco J. López Espinoza, owner and CEO of Multicolor Grupo Gráfico. • Public Sector Leadership Award: Hon. Martín Orozco Sandoval, governor of the State of Aguascalientes. • Border Leadership Award: Hon. Dee Margo, mayor of the City of El Paso, Texas, and Hon. Armando Cabada Alvidrez, mayor of Ciudad Juarez, Chihuahua. • Special Leadership Award: Javier Vélez Bautista for his many years of support for the Chamber.

1 PHOTO 1 Ambassador Martha Barcena, shares her remarks during the opening of the Good Neighbor Awards ceremony. PHOTO 2 José Zozaya and Albert Zapanta present the Good Neighbor Award to Jayson Adair.

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PHOTO 3 Francisco J. López Espinoza, owner and CEO of Multicolor Grupo Gráfico. PHOTO 4 Ricardo Martinez, Secretary of Economy of the State of Aguascalientes, receives the Good Neighbor Award on behalf of Hon. Martín Orozco Sandoval, Governor of the State of Aguascalientes. PHOTO 5

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Hon. Dee Margo, Mayor of the City of El Paso, Texas recipient of the Border Leadership Award. PHOTO 6 Lic. Rodolfo Martínez Ortega receives the Border Leadership Award on behalf of Hon. Armando Cabada Alvidrez, Mayor of Ciudad Juárez, Chihuahua. PHOTO 7

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Javier Vélez Bautista, former CEO of Mission Foods Corp. and Former President of USMCOC Pacific and Monterrey Chapter, recipient of the Special Leadership Award.


Profile for USMCOC

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Alliance 31