Archive for category Trade
09/21/12 (written by lquezada) – On September 18, 2012, the Trans-Border Institute and the Center for Peace and Commerce hosted a border breakfast roundtable titled, “The United States-Mexico Border Economy in 2012,” featuring Dr. Alejandro Diaz-Bautista, PhD., and panelists Dr. Stephen J. Conroy, PhD., Director of the Center for Peace and Commerce, and Dr. David Shirk, PhD., Director of the Trans-Border Institute. The presentation focused on the issues that affect the economic relationship between the United States and Mexico.
Diaz-Bautista’s presentation highlighted the fact that Mexico’s top trading partner is the United States, while Mexico is the United States’ third major trading partner, emphasizing how closely linked the two countries are in economic terms. He noted that, given the border between the two countries is the largest in the world, it fosters a unique economic zone. Diaz-Bautista pointed out that frequent border crossings for shopping, tourism, and work result in 350 million crossings and $450 billion in trade each year; with shopping accounting for 42% of the such crossings. Diaz-Bautista also highlighted that both countries share similar economic trends due to their intensely close relationship, and provided the examples of mirrored unemployment rates and GDP growth rate patterns, the latter, which the World Bank has documented, have been similar for the past 13 years.
Stephen Conroy, director of the Center for Peace and Commerce, explained that the perception that U.S. citizens have of the danger and insecurities in Mexico is exaggerated and it is affecting the tourist segment of the economy in Tijuana. After being questioned on how the misperception of Mexico’s insecurity is fostered, where it comes from, and its effect, Conroy pointed out that indeed violence does occur in Mexico, but that it should not prevent people from crossing given how targeted the violence is, how unlikely U.S. citizens are to be victims of such violence, and how much violence in Tijuana specifically has decreased the past few years. David Shirk, Director of Trans-Border Institute, shared the same sentiments as Conroy in expressing that people should be encouraged to visit Baja California to change the negative perception many have of Mexico.
To view Diaz-Bautista’s power point presentation, please click here.
With the help of the U.S. Department of Commerce and expos such as the one in Nogales, Sonora, connecting U.S. suppliers with Mexican manufacturers is becoming increasingly easy. On November 16, the 2011 Nogales Supplier Expo was held in the Mexican state of Sonora in an attempt to connect assembly plant representatives with suppliers in the region. U.S. officials from the Commerce Department saw a chance for American suppliers to compete with their Mexican counterparts by bringing them down to meet potential business partners at this expo. So, the U.S. Commercial Service decided to transport one hundred suppliers to the Nogales expo, in hopes that American businessmen and women can reap some of the benefits of the growing maquiladora industry in Mexico, which now includes approximately 110 assembly plants.
Matt Baker works for the U.S. Commercial Service and thinks of himself as a kind of matchmaker. Chris Schlesinger, owner of a business that supplies products to the metal-finishing industry, was looking to expand the market of her small operation and had her eye on Nogales. She contacted Baker and he got her on the bus to the 2011 Nogales Supplier Expo. Schlesinger was delighted. “To have a matchmaking, networking event that brings the supplier and the end user together, that is something I view as a gift to any business on a growth curve,” she said.
Similar government arranged trips have taken busloads of businessmen across the border both in 2008 and 2010. The idea of this type of supply chain tour sponsored by the U.S. Commercial Service arose out of a meeting with Nogales officials who informed the U.S. that they were having supply issues. The Commercial Service officials jumped at the chance to fill this need with American suppliers and started getting serious about connecting small business owners with Mexican assembly plants.
Schlesinger reported that she made three promising contacts from the expo and is hopeful that one will turn into a lucrative business partner. With many similar success stories coming out of the latest trip, the U.S. Commercial Service is looking to expand and improve upon these types of trips in the future.
On November 22 in San Salvador, El Salvador, Mexico signed a Free Trade Agreement with five Central American countries, including Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. The pact is expected to cover the regional trade that amounts to $48 billion every year and it will take the place of the individual Free Trade Agreements Mexico holds with all five countries.
Mexico’s Department of the Economy confirmed that this agreement was three years in the making and is expected to promote competitiveness and development in the region. Economy ministers, Hector Dada of El Salvador, and Bruno Ferrari of Mexico, expressed hope that the accord will promote trade, mutual investment, and business opportunities among the signatory countries.
Foreign Secretary Patricia Espinoza, present at the signing, stated that the agreement is also a priority under the Tuxtla Dialogue and Agreement Mechanism and the Mesoamerican Initiative, which promotes integration among the region.
This new pact reflects the growing pressure in Mexico to look outside of NAFTA for trading partners. For more than a decade after the signing of the historic agreement Mexican trade with the U.S. increased exponentially, which significantly benefitted both economies. However, after the 2008 financial crisis in the United States caused massive economic shocks in Mexican firms, the drawbacks to an economy heavily dependent on the U.S. became apparent. Before the crisis, 88 percent of Mexican exports were dependent on U.S. demand. Now that Mexico is back on its feet, the country is witnessing a drive to diversify its trading partners and export demand, looking to strengthen existing partnerships and create new ones.
In this environment of diversifying trade agreements, the Free Trade Agreement with Central America comes as no surprise. As Ferrari explained, “For Mexico, the signing of this treaty has great importance, because one of our strategic priorities is to get closer to Latin America.”
At an APEC meeting in Honolulu, HI over the weekend, the Trans-Pacific Partnership began to live up to its name. After persistent encouragement from President Obama, both Mexico and Canada have agreed to join talks for a free trade area in the Asia-Pacific in a U.S. led initiative to tear down trade barriers in the region. The proposed pact currently includes nine countries that have committed to fostering economic growth in the region, including the United States, Australia, New Zealand, Singapore, Malaysia, Brunei, Chile and Peru. With the valuable additions of Mexico, Canada and Japan, who have all expressed intent to join, the TTP will cover most of the Pacific Rim.
Mexican economy minister, Bruno Ferrari, told the press that “Mexico is interested in beginning consultations to join the Transpacific Partnership,” and that the agreement potentially offered his country an opportunity to boost growth. The Obama administration is thrilled that its two North American neighbors will be joining the partnership. U.S. Trade Representative Ron Kirk said in a statement on Sunday, “The United States welcomes the interest of Canada and Mexico… Along with Japan’s similar announcement this week, the desire of these North American nations to consult with TPP partners demonstrates the broadening momentum and dynamism of this ambitious effort toward economic integration across the Pacific.” Although Mexico, the U.S., and Canada have been free trade partners since the 1994 North American Free Trade Agreement, the Trans-Pacific Partnership talks will address many issues that have arisen since the agreement was signed.
Younglai, Rachelle and Doug Palmer. “Canada, Mexico ask to join pan-Pacific trade talks”. Reuters. 13 November 2011.
Adam, Shamin. “U.S. Says Mexico Interested in Trans-Pacific Partnership Talks”. Businessweek. 13 November 2011.
For the first time since the signing of the North American Free Trade Agreement in 1994 authorized cross-border trucking, Mexican cargo trucks are being allowed on interior U.S. highways. Prior to October 21, trucks were stopped at the border and the cargo was transported into an American vehicle to continue the rest of the delivery. Nearly 1,500 cargo trucks per day pass through the Port of Entry in Nogales, AZ, which, before the full implementation of the NAFTA, had to be stopped and reloaded, causing a great deal of congestion at the border. Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, stated that this delay at the border added cost to the final product, sometimes as high as a 5 percent increase. He also claimed that allowing Mexican trucks on U.S. roads is long overdue and could be the key to full integration of the U.S. – Mexican market.
Although the first long-haul Mexican cargo truck carrying construction equipment crossed the border on October 21 ending the last of the $2.4 billion in tariffs on the U.S., the issue is far from being settled. Labor unions and political interests have been fighting the idea of Mexican trucks in the U.S. for seventeen years, and don’t seem to giving in any time soon. They claim that Mexican drivers and the cross-border trucking program will put thousands of trained U.S. drivers out of work, since Mexican companies can pay significantly less. Politicians from both sides are also voicing safety concerns. Adding more challenges, Mexican trucking companies are not jumping at the chance to be involved with the program. Many do not trust that the program will last very long, making investments in new technology to meet U.S. standards risky. Only two truck companies from Mexico have applied to be involved in the cross-border program so far. At this point only time will tell if the new cross-border trucking pilot program will be a success.
At a time when the United States is trying to reduce its dependence on foreign oil, Americans are beginning to look outside their borders for a much more precious resource: water. For years, the Western states both of the United States and Mexico have relied on the drought-prone Colorado River as the main source of water for millions of people. However, both countries are now looking for strategies to wean themselves off of the unpredictable river. The most salient solution so far is two large desalination plants proposed for Playas de Rosarito, 15 miles south of the San Diego border. Combined, the two plants are expected to provide 150 million gallons a day, supplying more than 300,000 homes on both sides of the border with water. This means a possible new export industry in Mexico and another foreign dependency in the United States. The huge water plants will be a cooperative effort between the two countries, though, with four U.S. water districts directly involved in the planning of one of the two plants.
Critics claim that the proposals for Playas de Rosarito are an American strategy to fulfill their water interests without the complications of U.S. environmental policies, reviews, and legal challenges. Desalination plants can devastate the coastal ecosystems, sucking in and killing fish and larvae and dumping large amounts of brine back into the ocean, disrupting the balance. Environmental groups are currently fighting similar plans for plants in Monterey and Carlsbad in court. However, officials from both Mexico and California have said that the Rosarito plants will adhere to the same standards as Californian plants, just with fewer legal challenges and quicker response times.
Other issues surrounding the desalination plants in Rosarito involve water rights. It is unclear, and a source of potential disagreements between the United States and Mexico, how the water will be used. U.S. agencies are proposing giving Mexico all rights to the water from the partly American financed plant if the Mexicans will give up some of their claims to the Colorado River. However, Jose Gutierrez assistant director for binational affairs at Mexico’s National Water Commission, claims that would never happen. The other alternative, building pipelines from the plant in Rosarito to California, is not cost effective and inefficient. Yet, the San Diego Water Agency hopes to get 10 percent of the region’s water from desalination plants by 2020 to reduce dependency on the Colorado River 200 miles away. Tijuana also has an interest in reducing its dependency on the river after an earthquake knocked out its main aqueduct for three weeks. So the best way for both countries to decrease their dependency and save money in the process is by joining forces and creating economies of scale, according to Halla Razak, the San Diego agency’s Colorado River program manager.
The 18th annual U.S. – Mexico Border Energy Forum, scheduled to take place on October 27th and 28th, provides top policy makers and industry leaders the chance to discuss energy issues that affect the entire bi-national region. The forum will be held at the El Paso Convention Center and will coincide with the Re-Energize the Americas conference. The idea is to facilitate information sharing between the two countries so that leaders on both sides can make informed energy and environmental decisions. The forum helps officials and business leaders track progress and innovations in the natural gas industry, fosters cooperation and interconnectivity in the electricity sector and creates international partnerships for renewable resources. Since the forum is intended to promote the sensible use of energy, this year’s agenda will focus heavily on wind and solar power, most likely discussing the plentiful opportunities for wind power in Mexico.
Over the past few years, Mexico’s renewable energy industry, both wind and solar, has experienced dramatic growth. Big name companies in the industry are investing large amounts of money into the country to build and expand renewable energy power plants. In July, the Cannon Power Group announced its decision to invest $2.5 million to generate wind energy from plants in Quintana Roo, Zacatecas y Baja California. With these three new projects, Mexico will gain more than 1,000 megawatts of wind energy capacity, decreasing the country’s dependency on foreign oil. Calderón claimed that this investment demonstrated confidence in Mexico’s economy and that without a doubt it will have a “very positive impact on the economy, society, and the environment”.
Swiss company, Nestle, also recently announced its decision to invest 60 million Swiss francs in sustainability projects in Mexico. It plans to build wind farms to meet 85 percent of its electricity requirements and hopes to cut energy use by 39 percent over the next five years. The Latin American Wind Association (LAWEA) emphasized the steady progress Mexico is making in the wind power industry, using Baja California as an example. In the state, there is at least one wind farm already up and running and 4 more projects in the development stages, in addition to the upcoming Nestle project. Some of the energy that will be produced at these plants is expected to be exported to the United State, decreasing the dependency on foreign oil for the whole bi-national region. The U.S. – Mexico Border Energy forum will facilitate cooperation in this type of trade in energy resources to benefit both sides of the border.
Although the Mexican automobile industry is seeing a decrease in sales of cars to the United States, the automotive parts industry is more than making up for the decline. From January to July, car sales have fallen 6.4% compared to the same period in 2001. This normally would be a tough blow for the Mexican economy; however, in the same seven months automotive part sales have increased an astounding 86.3% compared to 2001. This growth in sales over a seven-month period is the highest on record and it is expected to draw the attention of foreign investors, especially U.S. and Japanese firms. Koju Ishimatsu, the president of the Japanese Department of Commerce and Industry in Mexico, predicts more growth is soon to follow from these investors. Nissan Motor Company has already increased their investments in Mexico to expand plants in Aguascalientes and Morelos.
While Japanese and German firms have the majority of the imported automobile market in the United States, Americans are also dependent on imports from their southerly neighbor. From January to July of this year, 12.7% of all imported cars in the United States were assembled in Mexico and 31.3% of imported car parts arrived from Mexico. This puts Mexico as the fourth foreign provider of cars and car parts in the U.S. market, behind only Japan, Germany, and Canada. The growing automotive industry in Mexico offers an opportunity for the entire supply chain in the region, which provides a whole range of goods from plastics and chemicals to steel and tires. The challenge for these firms will be to produce more locally in order to add to the total value of the product. Shuichero, the Japanese ambassador to Mexico, is hopeful that the arrival of more Japanese auto part companies to the region will create an opportunity for growth in the local firms.
The automotive sector, which brought in $26,575 million in August alone, is the principle component of the Mexican economy when excluding the oil industry. Therefore, this incredible growth in the automotive parts industry is an optimistic sign for the overall Mexican economy. Officials are also hopeful it will lead to more trade ties and cooperation across the U.S.-Mexico border through greater foreign investment.
The Georgia Institute of Technology is working in conjunction with Tecnológico de Monterrey to launch the Trade & Logistics Center in Mexico City. The center will be focused on increasing Mexico’s trade competitiveness and advancing logistics performance. The new institute will be Georgia Tech’s fourth international center, adding to its network of innovational and logistical hubs. The inauguration ceremony will be held this Friday at the Tecnológico de Monterrey, Santa Fe campus.
Not only will the center help improve Mexico’s trade strategies, it will also allow Georgia Tech to gain invaluable information and foresight into the supply chain of one of the United States’ largest trading partners. Georgia Tech prides itself on being the leader in international trade. “In order for us to continue our global positioning, we have to understand the supply chain from an international perspective,” stated Jaymie Forrest, managing director of the Georgia Tech Supply Chain & Logistics Institute. The institute is also opening centers in Costa Rica, Singapore, and Panama with the same purpose: improving the countries’ competitiveness and gaining knowledge of the international supply chains. The Mexico center, like the other three, will focus on three main areas: education, research, and industry growth. The end goal is to teach locals through the same comprehensive curriculum used at Georgia Tech to give Mexico the capacity to do this research on their own. “The goal is to better prepare our infrastructure and our industries to be competitive at the local level and for export,” the director of the Mexico center Martinez stated. Both sides have high hopes for the new center.
The World Trade Organization ruled on Tuesday that Mexico’s tuna fishing practices are in fact “dolphin-safe”. The decision ends a 25-year long dispute over Mexico’s tuna fishing practices which were deemed unsafe by the US in 1991. Since 1991, yellow-fin tuna exports from Mexico to the US have been barred. The US can appeal the decision in late July, but it is unlikely that the US will be able to overturn the decision. The ruling has been publicized by Mexican officials and the Mexican National Aquaculture and Fishing Commission, but has yet to be commented on by the United States.
The dispute began after the US Department of Commerce refused to label Mexico’s tuna exports as dolphin-safe, standard US labeling practice. Mexico took the case to the World Trade Organization by contending that although Mexico’s practices are not as strict at the US standards, Mexican fishing practices meet international standards and laws. Both countries are members of the Inter-American Tropical Tuna Commission, meaning that an inspector from the commission is always on-board fishing vessels. However, Mexico’s use of a fishing technique which requires encircling dolphins in order to catch yellow-fin tuna can be dangerous and even fatal to dolphins. The largest US tuna companies such as Starkist and Bumble refuse to buy any tuna that was caught in a way that is harmful to dolphins and it is unlikely that even if Mexico begins to export yellow-fin tuna to the US, it’s market share will not be very large. Greenpeace Mexico has stated that the overfishing of tuna is actually more of an environmental concern than endangering the dolphin population and calls the issue political rather than environmental. Mexican tuna will begin to enter US markets in late 2012.