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Mexcentrix – Shelter Services Mexico Outsourcing
18Oct

How Trump is about to make the ‘worst deal ever’ even worse

octubre 18, 2017 Jesus Aguirre NEWS

President Trump has called the North American Free Trade Agreement “the worst deal ever,” but one thing might actually be worse: no deal at all.

The fourth round of negotiations to revise the agreement wraps up Oct. 17, but many people close to the talks have expressed doubts that they will succeed.

If NAFTA crumbles, trade among Mexico, Canada and the United States would fall under World Trade Organization rules with modest average tariff rates and an established, if unwieldy, process for resolving disputes.

But the tariff rates, although relatively low, would be higher on U.S. exports than on U.S. imports. Many trade experts say that would hurt U.S. exporters of everything from corn to auto parts and that the United States could end up with fewer jobs while paying higher prices for goods than it does.

Meanwhile, Canada and Mexico would be able to fall back on free-trade agreements they have forged with Europe recently, providing zero tariffs.

Mexican Foreign Minister Luis Videgaray told a Mexican Senate committee this week that the end of the North American Free Trade Agreement “won’t be the end of the world.”

And in some ways Videgaray is right. The world of global trade has far fewer walls and stumbling blocks than it did 23 years ago, when NAFTA went into ­effect.

Nonetheless, even small tariff differences can have substantial effects, many trade experts say, and could upend established supply chains.

“If NAFTA ends, the tariffs the United States imposes on imports from Mexico would revert (from currently zero) to their WTO levels. For the United States, these tariffs average 3.5 percent” across all goods, Chad Bown, a senior fellow at the Peterson Institute for International Economics, said in an email.

“Mexico’s WTO tariffs are a bit higher — on average 7.1 percent,” he wrote. “So U.S. exporters would go from facing zero tariffs currently for their sales to the Mexican market under NAFTA to 7.1 percent on average without NAFTA.”

For automobiles, the gap could add hundreds of dollars to the price of a car. Or carmakers in Mexico might drop U.S. suppliers subject to WTO rates and look for European auto parts manufacturers, who would not have to pay any tariff under their free-trade pact.

NAFTA’s rules of origin for automobiles would also disappear. Those rules were designed to prevent countries outside North America from using the treaty as a back door into the U.S. market. Under NAFTA, 62.5 percent of the value of an imported vehicle must originate in Canada, Mexico or the United States for that vehicle to get duty-free access to the region.

Without NAFTA, supply chains could reorient themselves. Cars sold in the United States might contain more foreign parts, and Mexican cars sold to Europe or Latin America might use fewer U.S. components.

“U.S. producers would face less market access in Mexico without NAFTA than Mexico would face in the United States,” said Caroline Freund, a senior fellow at the Peterson Institute for International Economics and former economist at the World Bank.

Getting rid of NAFTA could also hurt the agriculture industry, which is strong in the states Trump carried in his presidential campaign. Since NAFTA was enacted, U.S. food and agricultural exports to Canada and Mexico have more than quadrupled, to $38 billion in 2016, according to the Fresh Produce Association of the Americas. And Mexican agricultural exports have given consumers year-round access to fruits and vegetables that had been available only during certain seasons.

A collapse of NAFTA could also boomerang on some of the accord’s harshest critics, especially labor and environmental groups that want to toughen up what they see as ineffective side agreements to the original treaty. Without NAFTA, however, those agreements would simply vanish.

Leo Gerard, president of the United Steelworkers union, says NAFTA was sold to the American public with “a bag full of lies.” He says it has done little to bring good wages to Mexico and has therefore siphoned jobs to Mexico away from the United States and Canada. He singles out auto factory jobs; half his members make auto parts.

But Gerard isn’t ready to simply shred the NAFTA agreement. He wants to fix it with enforceable labor standards and wages.

“If you just rip it up, it’s worse,” he said. “If you bail out of this, you’re going to have to have new rules.

”Mexico, however, would not escape damage from a collapse of NAFTA. NAFTA has helped generate confidence in all three nations, which has been especially helpful in attracting investment to Mexico. A collapse of the accord could choke off some of that investment.

Moreover, the WTO tariff numbers are averages and in some areas — especially in agriculture, sneakers and textiles — the United States could impose much higher duties. It would impose a 25 percent tariff on pickup trucks, 48 percent on sports sneakers, and between 5 and 20 percent for textiles, Freund said.

Even with the free-trade agreements Mexico has with Europe and others, it will be hard- pressed to divert goods from the United States, where Mexico sends 80 percent of its exports.

In a roundabout way, the collapse of NAFTA could help Mexico sell those goods. The end of the agreement probably would undermine confidence in Mexico’s currency, the peso, which has declined nearly 6.5 percent over the past month amid squabbling over trade. That could further lower costs of manufacturing in Mexico, making it even harder for the United States to compete with its southern neighbor.

The impact a NAFTA collapse would have on U.S.-Canada trade is less clear. Before NAFTA, the two nations had a bilateral free-trade agreement that might come back into force after ­NAFTA. If so, each country would have zero tariffs on the other. If that treaty were not brought back into effect, then Canada could impose an average tariff of 4.2 percent on U.S. goods under the WTO rules.

 

 

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13Oct

Trump’s Tough Talk on Nafta Raises Prospects of Pact’s Demise

octubre 13, 2017 Jesus Aguirre NEWS

WASHINGTON — The North American Free Trade Agreement, long disparaged by President Trump as bad for the United States, was edging closer toward collapse as negotiators gathered for a fourth round of contentious talks here this week.

In recent weeks, the Trump administration has sparred with American businesses that support Nafta and has pushed for significant changes that negotiators from Mexico and Canada say are nonstarters. All the while, the president has continued threatening to withdraw the United States from the trade agreement, which he has maligned as the worst in history.

As the trade talks began on Wednesday, Mr. Trump, seated in the Oval Office beside Prime Minister Justin Trudeau of Canada, said it was “possible” that the United States would drop out of Nafta.

“It’s possible we won’t be able to make a deal, and it’s possible that we will,” the president said. “We’ll see if we can do the kind of changes that we need. We have to protect our workers. And in all fairness, the prime minister wants to protect Canada and his people also. So we’ll see what happens with Nafta, but I’ve been opposed to Nafta for a long time, in terms of the fairness of Nafta.”

Mr. Trudeau, in comments later at the Canadian Embassy, said he remains optimistic about the potential for a Nafta deal but noted that Canadians must be “ready for anything.”

The collapse of the 1994 trade deal would reverberate throughout the global economy, inflicting damage far beyond Mexico, Canada and the United States and affecting industries as varied as manufacturing, agriculture and energy. It would also sow at least short-term chaos for businesses like the auto industry that have arranged their North American supply chains around the deal’s terms.

The ripple effects could also impede other aspects of the president’s agenda, for example, by solidifying political opposition among farm state Republicans who support the pact and jeopardizing legislative priorities like tax reform. And it could have far-reaching political effects, including the Mexican general election in July 2018 and Mr. Trump’s own re-election campaign.

Business leaders have become spooked by the increasing odds of the trade deal’s demise, and on Monday, more than 310 state and local chambers of commerce sent a letter to the administration urging the United States to remain in Nafta. Speaking in Mexico on Tuesday, the president of the U.S. Chamber of Commerce, Thomas J. Donohue, said the negotiations had “reached a critical moment. And the chamber has had no choice but ring the alarm bells.”

“Let me be forceful and direct,” he said. “There are several poison pill proposals still on the table that could doom the entire deal.”

The potential demise of the trade deal prompted supportive messages from labor unions, including the A.F.L.-C.I.O. and the United Steelworkers, as well as some Democrats.

“Any trade proposal that makes multinational corporations nervous is a good sign that it’s moving in the right direction for workers,” said Senator Sherrod Brown, Democrat of Ohio.

If the deal does fall apart, the United States, Canada and Mexico would revert to average tariffs that are relatively low — just a few percent in most cases. But several agricultural products would face much higher duties. American farmers would see a 25 percent tariff on shipments of beef, 45 percent on turkey and some dairy products, and 75 percent on chicken, potatoes and high fructose corn syrup sent to Mexico.

For months, some of the most powerful business leaders in the country, and the lobbies and political figures that represent them, had hoped that the president’s strong wording was more a negotiating tactic than a real threat and that he would ultimately go along with their agenda of modernization. Nafta is nearly a quarter-century old, and people across the political spectrum say it should be updated for the 21st century while preserving the open trading system that has linked the North American economy.

The pact has allowed industries to reorganize their supply chains around the continent to take advantage of the three countries’ differing resources and strengths, lifting the continent’s economies and more than tripling America’s trade with Canada and Mexico since its inception. Economists contend that many workers have benefited from these changes in the form of higher wages and employment, but many workers have lost their jobs as manufacturing plants relocated to Mexico or Canada, making Nafta a target of labor unions, many Democrats and a few industries.

But most business leaders had hoped that the president, whose Nafta criticism has been unrelenting, would be content to oversee tweaks to modernize the agreement, and then call it a political transformation.

It sometimes looked as if that might be the case. The appointment of Robert Lighthizer as United States trade representative, who pledged in his confirmation hearing to “do no harm” to Nafta, reassured many on Capitol Hill, where Mr. Lighthizer had long served in aide roles. And when the administration released its negotiating goals in July for the deal, they echoed many priorities of previous administrations.

But now, eight weeks into trade talks that were originally supposed to conclude by year’s end, the administration continues to push for concessions that the business community warns would essentially undermine the pact, and which few observers believe Canada and Mexico could agree to politically.

“Everyone knows that much of what is being proposed in key areas are, in effect, non-starters, which begs the question as to what, exactly, the administration is trying to achieve,” Michael Camuñez, a former assistant secretary of commerce under President Barack Obama, wrote in an email. It’s not unreasonable to think that by accommodating the president’s most extreme positions, American negotiators are “simply giving Trump cover to do what he really wants: withdraw from the agreement,” he said.

Phil Levy, a trade adviser for the George W. Bush administration, said the president was most likely looking for a pretext to kill Nafta.

“Find me the last trade agreement that U.S. passed with the chamber in opposition,” Mr. Levy said. “You don’t have a chance. It’s hard enough with the U.S. Chamber in favor.”

The most controversial of the administration’s proposals, floated by Commerce Secretary Wilbur Ross, would incorporate a sunset clause in the deal, causing Nafta to automatically expire unless all three countries voted periodically to continue it. That provision has drawn swift condemnation from the chamber and other industry groups like the National Association of Manufacturers, which say that it would instill so much uncertainty in the future of Nafta that it would basically nullify the trade agreement.

Another contentious push by the United States centers on changing Nafta’s rules governing how much of a product needs to be made in North America in order to enjoy tariff-free trade between the countries. The United States is pushing for higher levels, including a requirement to make 85 percent of the value of automobiles and auto parts in North America, up from 62.5 percent currently, and an additional requirement for 50 percent of the value to come from the United States.

That has pitted some of the world’s biggest auto companies against the Trump administration. Industry representatives say such high and complex barriers could deter companies from manufacturing in the United States altogether.

The administration has also proposed limits on the number of federal government contracts that Mexican and Canadian companies can win, as well as significant changes to how disputes are resolved under Nafta.

Business groups say they are firmly opposed to an American push to curtail a provision called investor-state dispute settlement, which allows companies to sue Canada, Mexico and the United States for unfair treatment under Nafta. Meanwhile, Canada has said that it will not consider dispensing with another provision, Nafta’s Chapter 19, which allows countries to challenge each other’s anti-dumping and countervailing duty decisions before an independent panel.

In his remarks Tuesday, Mr. Donohue called the administration’s proposed changes to these provisions “unnecessary and unacceptable.”

Mr. Donohue’s remarks followed a sharp exchange of words between the Chamber of Commerce, the country’s most powerful business lobby, and the Trump administration on Friday.

John Murphy, senior vice president of international policy for the chamber, said the administration’s proposals had “no identifiable constituency backing them” and had sparked “a remarkable degree of unity in their rejection.” He added that business leaders had perhaps never been at odds with an administration over a trade negotiation on so many fronts.

Hours later, the administration fired back.

“The president has been clear that Nafta has been a disaster for many Americans, and achieving his objectives requires substantial change,” said Emily Davis, a spokeswoman for the trade representative. “These changes of course will be opposed by entrenched Washington lobbyists and trade associations. We have always understood that draining the swamp would be controversial in Washington.”

Mr. Trump is known for taking a tough negotiating stance, and analysts said the administration might view its ambitious opening requests as a way to gain more leverage in the Nafta negotiations.

But Mr. Murphy and others in the business community cautioned that such an approach would probably be ill-fated. In both Canada and Mexico, Mr. Trump is unpopular, and caving to his demands could have devastating consequences for local politicians. Mexican government officials have repeatedly said they would not negotiate with a gun to the head.

“There’s an old adage in negotiations, never take a hostage you wouldn’t shoot,” Mr. Murphy said.

 

 

 

 

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09Oct

How NAFTA Talks Could Fail

octubre 9, 2017 Jesus Aguirre NEWS

As nearly 700 officials gather this week to discuss overhauling the free-trade agreement between the United States, Mexico and Canada, participants and analysts say the negotiations are at an increasing risk of failure.

President Donald Trump’s Twitter bombs and rhetorical attacks on what he calls the “worst deal ever made” and his administration’s vague and confusing proposals have dismayed Canada, which is now exploring backup options. And they have infuriated Mexico ahead of a presidential election in which voters are demanding that their leaders stand up to the United States.

If officials cannot make more progress in revising the North American Free Trade Agreement this week — the meetings in Washington starting Wednesday are the fourth of seven scheduled rounds of negotiation — the odds of reaching a deal will fall even further. That would give an opening to Trump to exit the agreement, a move that could disrupt the North American economy.

This could be the decisive week. Canadian Prime Minister Justin Trudeau flies to Washington on Tuesday for a meeting with Trump about the negotiations and will then fly to Mexico to update President Enrique Peña Nieto. Meanwhile, the U.S. negotiating team is expected to finally reveal its hand at the fourth round of talks.

But there are growing risks that the U.S. negotiating stance could underestimate the limits of Mexican and Canadian leaders and inadvertently wreck the accord. “We’re being faced with a U.S. set of demands that is framed by an ‘America first’ perspective,” Lawrence Herman, a Toronto trade lawyer, said. “That colors the negotiations in a very negative way.”

Those who believe that Trump wants NAFTA to fail think he may plant poison pills so unpalatable that Mexico, which has a presidential election next July, might withdraw on its own. Others believe Trump is fulminating as a bargaining ploy.

“I think failure is an option,” said C. Fred Bergsten, a veteran trade expert and senior fellow at the Peterson Institute for International Economics. “It depends on whether the Trump people follow through on their rhetoric.”

 

Although Trump has blasted NAFTA, he has not yet submitted the formal six-months’ notice required to pull out of the treaty. Instead, his administration has floated the idea of a “sunset clause” that could terminate the agreement after five years, creating uncertainty and discouraging the international investment NAFTA was meant to promote.

And Trump’s team has talked of wiping out bilateral trade deficits — a move that trade experts call “economic nonsense” and one that could be a red line for Peña Nieto, who is worried about being seen as bowing to Trump on unreasonable demands.

One source of uncertainty and frustration in Canada and Mexico is that the Trump administration has not yet made concrete proposals on the most contentious issues — although these may be coming at the fourth round in Washington.

They include “rules of origin,” or the percentage of parts that must be made in North America for a product to qualify for free-trade status; language on how to settle disputes affecting foreign investors; changing Mexican labor standards; and Trump’s stated goal of reducing U.S. bilateral trade deficits.

Robert Lighthizer, the U.S. trade representative, has also blamed some of the problems with the talks on a “whole complicated process” that requires negotiators to clear positions with members of Congress and officials at other agencies.

The delay might also reflect disagreements within the Trump administration. Lighthizer, who is seen as solidifying his control over trade policy, is considered more aggressive about overhauling NAFTA than is Gary Cohn, head of Trump’s National Economic Council. Commerce Secretary Wilbur Ross probably falls in the middle. 

Peter Navarro, the trade hawk who initially had his own independent office, was moved last month to Cohn’s staff, with less direct access to the president.

In Mexico, “informed people are in favor” of striking a deal, said Jorge Guajardo, formerly Mexico’s ambassador to China and now a senior director at McLarty Associates. “But that doesn’t play well politically.” He added, “The mood is set in Mexico for the president to pull out, to call his negotiators back to Mexico City.”

Kurt Honold, president of the Tijuana chapter of Mexico’s Business Coordinating Council, a coalition that advises the country’s NAFTA negotiating team, agrees. “I think the moment could come when you say, fine, we have a lot of opportunities elsewhere, and the biggest losers will be the United States.” Honold said. “The only thing Trump is doing is isolating himself from the world.”

Some of Peña Nieto’s advisers, notably Foreign Minister Luis Videgaray, believe that Trump adviser and son-in-law Jared Kushner will persuade Trump to accept a moderate NAFTA revision. Others, such as Economy Minister Ildefonso Guajardo, are said to be more pessimistic.

Canadian officials are also up in arms. “There isn’t a shared vision, certainly on the part of the president of the United States, on what we’re trying to accomplish,” said Jean Charest, a former premier of Quebec.

“While there is room to update and improve these hot-button issues, the U.S. position seems to be take it or leave it,” says Laura Dawson, director of the Canada Institute at the Wilson Center in Washington.

She said the Canadians are now considering plan B options, including an effort to persuade U.S. trade and business groups worried about a NAFTA breakdown to go to court to challenge the administration’s ability to unravel the deal without congressional oversight.

“The Americans came to the table in Round 1 and somewhat expected the Mexicans and Canadians to kind of just be ready to dance, and I think they were surprised by the fact that each country had its own red lines and made its own positions very clear,” said Michael Camuñez, a former U.S. assistant secretary of Commerce in the Obama administration.

Mexico’s brightest red lines are linked to a Trump administration proposal to “reduce the trade deficit with the NAFTA countries” as part of the negotiations, and to rules of origin.

The U.S. trade deficit with Mexico is $64.4 billion — roughly 6 percent of Mexico’s economy. Erasing that deficit would probably mean a sharp contraction in the Mexican economy. 

That in turn could lead to instability and more migrants to the United States.

Plus, there’s no mechanism for doing that. “How do you write that into a trade agreement?” said Chad P. Bown, a senior fellow at the Peterson Institute. “It’s the kind of thing that depends on the market.”

Moreover, the trade balance is changing. Mexico has opened up its state-run oil and gas sector to foreign companies. U.S. exports of natural gas to Mexico are growing quickly as new pipelines are completed. Cheniere, the Louisiana exporter of liquefied natural gas, said that Mexico is currently its largest customer. 

Mexico could also get hit by changes in the “rules of origin,” which are designed to prevent countries outside North America from using the treaty as a back door into the U.S. market. Under NAFTA, 62.5 percent of the value of an imported vehicle must originate in Canada, Mexico or the United States for that vehicle to get duty-free access to the region.

However, data from the National Highway Traffic Safety Administration shows that U.S.-Canadian content combined makes up just 24 percent of the value of vehicles exported from Mexico to the United States. The Trump administration is weighing a U.S.-only content requirement that could range from 35 percent to 50 percent, according to news reports.

Canada could get hurt if the United States insists on abolishing controversial special courts set up under NAFTA to review anti-dumping or countervailing duties.

Trump’s recent move to slap 219 percent tariffs on Canadian jetliners to block a sale to Delta have reinforced Canada’s view that the courts are needed to restrain U.S. measures.

Lighthizer is expected to try to nix another transnational court for investment disputes, and has backing from a wide variety of constitutional lawyers, environmental and labor groups, and conservative think tanks that say the special courts encroach on U.S. sovereignty.

But the heads of the U.S. Chamber of Commerce, National Association of Manufacturers and Business Roundtable wrote an Aug. 23 letter saying that weakening the process would “undermine business community support.”

The challenges to revising the NAFTA agreement don’t stop at the negotiating table. Even if Trump is able to hammer out an agreement with Canada and Mexico, he will have to take it to Congress for approval.

Rep. Sander Levin, D-Mich., a member of the House Ways and Means Committee, said Democrats and a number of Republicans will oppose the treaty if labor provisions aren’t strengthened.

Levin said Mexico’s Confederation of Mexican Workers has done little to boost wages there, telling an audience at the Council on Foreign Relations that BMW signed a contract in May with a starting salary of $1.10 an hour, moving up to $2.53 an hour.

“Mexico is a democracy with an authoritarian type of labor structure,” Levin said in an interview. “And they have to end that.”

Another dispute looms with the Trump administration’s push to expand an “America first” policy to government procurement.

In the end, however, the negotiations hinge largely on Trump.

“Ultimately, the key variable difficult to predict is the president himself,” said Christopher Wilson, deputy director of the Mexico Institute at the Wilson Center. 

“He has promised a major set of changes to what he has described as the worst agreement ever negotiated, and now it is up to his team to come up with fixes to transform the worst agreement ever into something the president could get behind.”

He added: “It is not easy to see what those changes would be.”

 

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04Oct

ArcelorMittal to invest $1 billion in Mexico

octubre 4, 2017 Jesus Aguirre NEWS

ArcelorMittal plans to invest $1 billion over the next three years in Mexico.

The global steelmaker, the world’s largest by volume, announced it would invest heavily in mining and steelmaking in Mexico, where many U.S. automakers have been shifting small car production. Luxembourg-based ArcelorMittal, one of Northwest Indiana’s largest employers, plans to construct a new hot strip mill that will boost its productivity in Mexico from 4 million tons a year to 5.3 million tons a year.

ArcelorMittal recently invested $200 million in improvements at its Indiana Harbor steel mill, including upgrades to the “Mighty 80” 80-inch hot strip mill on the east side. But it also idled many finishing lines there, including the hot strip mill at the former LTV mill on the west side. The steelmaker accounts for about two-thirds of the 15 million tons of steel produced in Northwest Indiana annually.

ArcelorMittal plans to spend the next three years building a new hot strip mill in Mexico capable of cranking out 2.5 million tons of flat-rolled steel coil for customers in Mexico.
 
“Construction of the new hot strip mill, alongside the other projects in our investment program which are geared towards enhancing the efficiency and quality of our operations, will enable us to optimize our asset base and increase the proportion of finished steel products for our domestic customers,” ArcelorMittal Mexico Chief Executive Officer Victor Cairo said in a news release. “The investments will help us to meet the demand requirements for higher-added value products we expect to see from domestic customers which today are heavily dependent on imports, while continuing to support ArcelorMittal’s NAFTA operations by providing high-quality semi-finished steel slabs.”

Lakshmi Mittal, chairman and CEO of ArcelorMittal, said the investment would create 800 new jobs in Mexico.

“In order to make investment decisions of the scale we have announced today we need both a (favorable) investment environment and confidence in long-term domestic growth prospects,” he said in the release. “I therefore warmly welcome the confirmation of the Special Economic Zones by the Mexican government, which establishes a positive regulatory investment framework aimed at facilitating economic and infrastructure development in the south of the country.”

Mittal said the company’s investment aligned with the Mexican government’s objectives will enable the firm to benefit from the anticipated increased demand for higher-added value steel products from domestic Mexican customers.

The steelmaker estimates it will be able to produce 2.5 million tons of flat rolled steel, 1.8 million tons of long steel and 1 million tons of semi-finished slabs a year in Mexico after completing the investments.

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29Sep

Mexico opens way for NAFTA talks to run into 2018

septiembre 29, 2017 Jesus Aguirre NEWS

OTTAWA (Reuters) – Mexico on Wednesday opened the possibility that talks to revamp the NAFTA trade agreement were so complex that they could run into 2018, beyond an end-December deadline designed to avoid Mexico’s presidential election campaign which kicks off in March. 

The United States, Canada and Mexico said at the end of a five-day session in Ottawa there had been progress made in the talks but acknowledged that much work remained to conclude the negotiations by the end of the year. 

Mexico’s Economy Minister Ildefonso Guajardo said there would be “substantial challenges” in the next round in Washington on Oct. 11-15. 

“We have the ambition, we have the strength to try to move forward with a view to closing a negotiation but no one can assure with total certainty that we will be able to do it,” Guajardo told reporters. 

“That is our expectation and, therefore, it must also be considered that in this process dates will have to be considered, if necessary, for the start of the next year,” he added. 

The three countries have rushed to finish talks to modernize the 23-year-old North American Free Trade Agreement even though trade experts dismissed the deadline as impossible. 

The Trump administration has been criticized by Canadian and Mexican officials for not yet presenting some of the most contentious issues in NAFTA, including content rules of origin. 

“Staff are working at a pace that is unheard of (in trade negotiations) … and any suggestion that we’re not operating beyond a normal pace is just flat wrong,” U.S. trade envoy Robert Lighthizer told reporters. 

 

Strains between Ottawa and Washington also emerged on Wednesday, a day after a U.S. trade panel said it would impose preliminary subsides on Canadian jet manufacturer Bombardier Inc after rival Boeing Co accused Canada of unfairly subsidizing its CSeries jets. 

Lighthizer said Canada had “mentioned” the U.S. ruling during talks on Wednesday. 

Asked whether the dispute could affect NAFTA talks, Lighthizer told reporters: “I‘m not saying it doesn’t have an effect on relationships, it does, but not on this negotiation.” 

Negotiators said they had wrapped up one chapter on small and medium-sized enterprises in Ottawa and expected to finish another on competition before the next round. 

Lighthizer said the United States would “hopefully” present draft text by the next round on the thorny issue of rules of origin, which outlines how much of a product needs to originate in a NAFTA country, and on a dispute settlement mechanism. 

Canada’s Foreign Minister, Chrystia Freeland, has said it was typical of trade talks to wrap up the “bread and butter” issues first before getting into more challenging topics. 

“We never said this was going to be easy,” Freeland told reporters. 

Trade among the three nations has quadrupled since NAFTA came into effect in 1994, surpassing $1 trillion in 2015. 

But U.S. President Donald Trump regularly calls the treaty a disaster and has threatened to walk away from it unless major changes are made, claiming NAFTA has resulted in U.S. job losses and a trade deficit with Mexico. 

The Bombardier decision is likely to further harden Canada’s stance on keeping a key dispute-settlement mechanism in NAFTA, which the Trump administration wants to eliminate. 

Lighthizer said the U.S. decision on Bombardier still had several stages to go through before it was finalized. 

“There are several more stages, we don’t even know whether it is going to be successful, and in addition there are off-ramps in the litigation,” he said. “It’s too early to tell.” 

 

Freeland has suggested that Canada could walk away from the NAFTA talks over the so-called Chapter 19 dispute mechanism, under which binational panels make binding decisions on complaints about illegal subsidies and dumping. The United States has frequently lost such cases. 

A lengthy fight over Chapter 19 could also drag out the negotiations. 

The U.S. delegation presented draft text on NAFTA labor standards on Tuesday and put forward proposals on investment and intellectual property at the weekend. 

Laxer labor standards and lower pay in Mexico have swelled corporate profits at the expense of Canadian and U.S. workers, the U.S. administration claims, making the issue one of the major battlegrounds of the NAFTA talks. 

While the U.S. draft text on labor standards did not detail wage levels, Lighthizer said all sides were interested in getting into wage specifics to help Mexican workers 

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28Sep

Mexico appears willing to improve conditions for workers

septiembre 28, 2017 Jesus Aguirre NEWS

OTTAWA—Under pressure from Canada and the U.S., Mexico appears willing to agree to enforceable labour standards to improve working conditions as the price for ensuring duty-free trade with its North American neighbours.

Moises Kalach, the head of trade for the Mexican national business council that is in close consultation with Mexico’s negotiating team, told the Star that Mexico is prepared to accept tougher labour provisions than are in the 23-year-old NAFTA.

“In the end, Mexico will sign to a deal that is a balanced pact, that will be beneficial to Mexico. If that balanced pact or new deal has a labour provision inside of it and that focuses a higher standards, probably yes, but it has to be a whole thing.”

“We’ve been very clear, a good deal has to have no tariffs, has to be a free trade agreement. You cannot limit exports. We would not sign into something that’s lower than what we have in NAFTA,” he said in an interview at the Mexican embassy.

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26Sep

Texas business keeping a close eye on NAFTA talks

septiembre 26, 2017 Jesus Aguirre NEWS

The North American Free Trade Agreement needs to be updated because of advances in technology and other changes since it was enacted in 1993, the CEO of the Texas Association of Business told a conference in Longview.

“We have 23 years of looking at how the trade agreement has functioned,” Jeff Moseley said Friday during the 2017 International Trade Summit hosted by the Longview Chamber of Commerce. “Look at how much the world has changed.” 

As negotiators from Canada, Mexico and the United States headed to Ottawa, Ontario, for a third round of talks beginning this weekend on the agreement , Moseley was arguing for the sorts of change that would allow cross-border trade to continue to flourish despite uncertainty caused by the election of President Donald Trump.

Moseley, who heads an organization with 4,000 members statewide, compared mobile phones from the early 1990s that “looked like a briefcase” to smartphones small enough to fit in a pocket.

“Today, you can carry a walking computer,” he said. “You see how much technology has advanced.”

Southern border crossings date from the Eisenhower administration, he said, noting that 14,000 trucks daily enter the United States through Laredo. He suggested new technology, such as facial recognition software, could both secure and expedite border crossings to grow commerce.

The stakes are high for Texas. Moseley said 400,000 Texans work in trade, primarily with Mexico. So the business association put together the Texas-Mexico Trade Coalition, a binational group of business interests seeking to keep Mexico Texas’ No. 1 trading partner.

On Friday, the Trump administration was taking another side, releasing data it said proves the NAFTA playing field is tilted against U.S. manufacturers. A report issued by the Commerce Department contains data showing the United States is playing a diminished role in manufacturing products that are bought and sold around the continent. Meanwhile, countries outside of North America — like China — are capitalizing on NAFTA’s weak rules and benefiting from the trade agreement, the report said.

The administration’s report was expected to dominate this weekend’s NAFTA discussions over “rules of origin.” Those rules govern how much of a good must be produced in North America to qualify for NAFTA’s zero tariffs on many products.

The United States is expected to push for raising those limits. Negotiators also appear poised to argue for a new requirement on how much of those goods need to be made in the United States.

Since 1994, NAFTA has knit together the North American economy by lowering the barriers companies face when they ship products across borders. While most studies suggest the deal has had a modest overall effect on the U.S. economy, it has encouraged companies to reorganize their supply chains by moving lower-cost operations to Mexico. And it has become a huge source of controversy, with Trump describing it as the “worst trade deal ever made.”

Responding to a question from chamber President and CEO Kelly Hall, Moseley said a draft trade agreement could be negotiated by mid-December, giving Congress until June to approve it.

However, he also expressed concerns that an anti-American candidate could be elected president in Mexico in July.

At least one large Longview-based manufacturer is watching the NAFTA talks with interest. Todd Anderson, president of Stemco, told the conference a big chunk of his company’s business is based on exports to Mexico and other countries. It also has manufacturing operations in Mexico.

Stemco, the Longview-based subsidiary of EnPro Industries Inc., manufactures a line of systems and components for the commercial vehicle industry. The Longview plant has about 370 employees.

Anderson said Mexico and Canada combined account for about 25 percent of Stemco’s sales, adding, “We are growing in some key international markets.”

Stemco also has trained more than 60,000 people throughout the United States, Mexico and Canada in recent years, Anderson said.

He said NAFTA also is important to Stemco because the company manufactures air springs in Mexico. Stemco acquired a production operation in Mexico in 2015.

Other speakers at Friday’s summit discussed governmental agency services that aim to help small businesses land export opportunities.

The mission of the U.S. Commercial Service of the U.S. Department of Commerce is to promote the export of goods and services by small- and mid-sized businesses, Senior Commercial Officer Sheryl Maas told the conference. She added her agency also represents American business interests internationally and helps businesses find qualified partners in other countries.

She said the Longview chamber may want to arrange a trade mission, adding, “We can help you with that.”

Kelly Kemp, regional director the North Texas branch of the U.S. Export-Import Bank, said his agency operates through the private sector to provide support in more than 155 countries. The Export-Import Bank provides insurance guarantees on principal and interest for export-related inventory and accounts/receivables.

Small businesses face challenges to expanding their export businesses that include lack of information, capital and access to markets, said Alale Allal, regional export trade finance manager for Texas and Oklahoma of the Office of International Trade of the U.S. Small Business Administration.

He said SBA provides services that include export loans with 90 percent guarantees for lenders, and cited the availability of credit insurance for risks such as not being paid.

Allal advised audience members seeking to export to make initial contact through their banks for loans. Lenders then send paperwork to the SBA.

 

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15Sep

Amazon to Build Massive Warehouse in Mexico

septiembre 15, 2017 Jesus Aguirre NEWS

Amazon is gearing up to open a massive warehouse in Mexico as it aims to tap into the e-commerce market that has yet to take off in the country. Citing sources familiar with the project, Reuters reported that the 1-million-square-foot warehouse will be located in Tepotzotlan, near Mexico City, and is slated to be completed in 2018. With the new facility, Amazon’s distribution space in the country will triple, noted Reuters.

While U.S. consumers have long been fans of online shopping, shoppers in Mexico aren’t as willing to purchase things from the internet. Online shopping accounts for only around 3% of retail sales in the country, reported Reuters. In the U.S., more than 10% of retail sales come from the internet. Fraud and a lack of credit cards have been two reasons for the low adoption rate in Mexico.

The Seattle-based retailing giant wants to change that. According to Euromonitor International, it is currently Mexico’s third biggest e-commerce company, posting sales in 2016 that more than doubled from 2015. As in its other markets, it wants to be the leader in Mexico as well. It doesn’t hurt that if the North American Free Trade Agreement (NAFTA) is overhauled, the U.S. could get Mexico to raise the limits on online purchases that can be imported into the country duty free. Currently the cap is at $50, noted Reuters.

Julio Gil, a spokesman for Amazon, wouldn’t comment on the impending warehouse but told the news service the company is looking to expand the number of products it offers in Mexico, as well as decrease delivery times and make it easy and secure to make online purchases. The goal is to get more people comfortable shopping online. The new warehouse will be able to handle shipping larger products to Mexican consumers, such as furniture. It may also act as a distribution point for shipments to the U.S., noted the report.

China’s largest online retailer, recently inked a deal with the Mexican government to enable small and medium-sized businesses to sell their products to the millions of Chinese consumers online. Under the e-commerce partnership, which was signed by Mexican President Enrique Peña Nieto and Alibaba head Jack Ma, the Chinese company will work with Mexico’s Ministry of Economy to aid businesses in selling their products to other businesses in China. In the initial stage of the deal, Alibaba will create a tailored program so that the Mexican businesses can take advantage of its business-to-business trading platform. It will also provide logistics and a payment platform to enable cross border e-commerce and to lure Chinese tourists to Mexico.

 

 

 

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11Sep

The story of NAFTA, as told from a Canadian auto plant in Mexico

septiembre 11, 2017 Jesus Aguirre NEWS

SAN JUAN DEL RIO, Mexico — Looming above a Canadian auto-parts plant, keeping watch over workers, is a painting of the Virgin Mary. This same plant plans a celebration of its latest expansion with a party featuring a mariachi band.

It’s far from Windsor. It’s close to Mexico City.

The story of the Exo-s factory is the story of NAFTA: manufacturing booming in Mexico, while surviving in the north; supply chains that are internationally interconnected and extra-efficient; and a Mexican workforce seeing the most modest gains and longing for more.

Canadian auto-parts companies have more than 120 plants and 43,000 employees in Mexico, and this Quebec-based plastics-maker is among them. It has grown a bit in Canada, but exploded here: when it opens a new warehouse on its property, its Mexican workforce will have nearly tripled to 300.

While workers hammer and weld together the new warehouse frame, the plant manager explains why Mexico was a must.

His company’s customers — GM, Cadillac, Fiat Chrysler — are here and need plastic products. They opened plants here because of Mexico’s low costs, government incentives, and free-trade agreements with 47 countries allowing tariff-free shipment throughout Latin America.

“For us it was a no-brainer,” Francois Ouellet said.

“When (our customers) open a new plant they want us to be close to them. If not we would have put at risk our actual business we have in Canada and the United States… We would have a problem to keep our business (without Mexico).”

The company’s U.S. and Canadian branches are still adding jobs, albeit more modestly. Canada has about 127,000 auto jobs today, the same the year before NAFTA was signed in 1993.

But something dramatic then happened. Canada’s long-term trendline looks like a steep mountain: employment climbed toward a peak in 2000, dropped, then plunged catastrophically after the 2008 recession and is now slowly inching back to early 1990s levels.

The Great Recession was a near-death experience for many companies, including the precursor to Exo-s. It relied upon GM for three-quarters of its revenues — and that giant’s near-collapse almost pulled down an entire ecosystem of suppliers.

Exo-s responded by diversifying. It not only spread operations to Mexico; it spread beyond the auto sector, beyond its core business of under-the-hood plastics like engine covers and coolant tanks.

On the same Mexican plant floor that produces car parts, an overhead machine spits down black, plastic trash bins. Someone strips away excess plastic, then hands the bins to Nataly Jacobo.

She grabs one bin to insert a wheel, then another, then another. She repeats this over an eight-hour shift, six days a week. The 23-year-old usually works on car parts, producing more than 3,000 pieces a week.

Her weekly salary is about Cdn $61.

This represents a raise for her. She arrived here three months ago from a job that paid $51. She also gained benefits here: the company subsidizes half her meals, offers free transport, and built a shower with hot water which many households here lack.

Ask her whether she deserves more, and she squirms. But she answers a broadly phrased followup: What if NAFTA were adjusted, so people in your country earned more?

“Mexicans make very little,” Jacobo replied.

“(Salaries) could be a bit higher… It would be good if they kept us in mind (at the negotiating table) — the Mexicans.”

Salaries have indeed increased in this manufacturing area. Ouellet estimates that his average worker makes about $6-$7 an hour with benefits, and it’s going up because of an acute labour shortage here.

“Go around everywhere. You’re going to see signs that they need employees. All companies — hotels, restaurants,” Ouellet said. “It’s really hard to find employees. So there’s (salary) increases.”

That’s in this manufacturing area.

But the overall story of NAFTA, in Mexico, is one of flat wages. In fact, they’ve declined overall because traditional corn-farming communities have been hard-hit by U.S. competition since 1993.

The Canadian government is pushing for higher labour standards in a new agreement. It has consulted closely with union leader Jerry Dias, who has done multiple interviews in Mexico spreading the message that Mexicans deserve a pay raise.

Dias said workers across the continent would benefit if Mexicans got more independent unions, freer collective bargaining, and pay hikes. The Unifor boss repeatedly told media assembled at last week’s NAFTA talks: “Mexican workers deserve to be able to buy the products that they make.”

It’s more complicated than that, according to industry and some analysts.

For starters, it’s unclear how an international agreement would enforce local labour laws. Dias favours an international panel. But the U.S. wants to end the international panels that already exist for intra-industry disputes.

There’s also the question of unintended economic consequences.

Industry insists profit margins are tight, and big salary hikes would just steer jobs like Jacobo’s toward Asia — or to machines. Canada’s auto-parts association says these jobs simply won’t ever return to Canada.

But the association’s Flavio Volpe said Canada does benefit from being part of supply chains that include Mexico.

That includes a certain plastics maker from Richmond, Que. It is planning a party in its other home — about a 43-hour drive south, off a road lined with taco eateries and women selling colourful, hand-woven indigenous clothing.

 

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07Sep

‘Important progress’ at NAFTA talks, ministers say

septiembre 7, 2017 Jesus Aguirre NEWS

 OTTAWA—Canada, the U.S. and Mexico put a positive spin Tuesday on what sources say was a tough five-day round of negotiations to rewrite North American free trade rules.

Canada’s Foreign Affairs Minister Chrystia Freeland, U.S. Trade Representative Robert Lighthizer and Mexican Secretary of the Economy Ildefonso Guajardo presented a united front on a stage as talks wrapped up in Mexico City.

Each in turn praised the “hard work” negotiators did at the table. Lighthizer said their efforts consolidated into two dozen chapters that will form the basis for the next round of talks to be held in Ottawa Sept. 23-27.

A joint statement issued by the three after their appearance emphasized that “important progress was achieved in many disciplines” and said more is expected in the coming weeks as negotiators take a break to consult with their respective industry associations and political decision-makers.

The communiqué said all three countries “reaffirmed their commitment to an accelerated and comprehensive negotiation, with the shared goal of concluding the process towards the end of this year.”

However speaking to reporters in Mexico City, Freeland acknowledged there are disagreements even as she insisted “North American relations are fundamentally solid.”

“Of course this doesn’t mean we’re going to agree on all points. But our deep friendship will permit us to resolve disagreements which arise at times” she said, as negotiators focus on the “difficult task of modernizing NAFTA.”

She said all “wholeheartedly share the goal of reaching a mutually beneficial agreement.” She rhymed off data to say the North American Free Trade Agreement has benefited the U.S. to the tune of an extra $127 billion in economic activity each year since it was signed.

And in contrast to U.S. President Donald Trump’s threat to ditch the talks and kick-start the legislative process to kill NAFTA, Trump’s chief trade envoy Lighthizer agreed there was “mutual agreement on many important issues.”

But Lighthizer also stressed a new NAFTA that benefits U.S. workers and industry is a “very important priority” for Trump.

“That’s why American delegation focused on expanding opportunities for American agriculture services and innovative industry, but …we also must address the needs of those harmed by the current NAFTA, especially our manufacturing workers.”

“We must have a trade agreement that benefits all Americans and not just some at the expense of others,” Lighthizer said. “I am hopeful that we can arrive at an agreement that helps Americans workers, farmers and ranchers while also raising the living standards of workers in Mexico and Canada.”

Guajardo struck a conciliatory note after last week, saying Mexico had to work on a “plan B” and anticipate a failure of the talks. He said Tuesday that Mexico was committed to a process that accommodates “each country’s interests.”

“In the process, I recognize we have responsibility to translate our negotiations into a final result that will imply more jobs in North America, jobs that are well-paid jobs, and to strengthen basic principles in this continent,” he said.

It was a diplomatic dance that belied many of the difficulties behind the scenes. Sticking points include the U.S. insistence on gaining greater access to Canada’s dairy and poultry sectors, its demand to end independent dispute resolution processes, and its demand that “Buy American” provisions — whether for auto parts or for government procurement projects — be protected.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said in an interview that one of the difficulties is that although the U.S. insists it wants to increase American content in the automotive sector by drafting tougher “rules of origin” or stiffer tracing of the origin of auto parts, it still has not put any substantive numbers on the table. Right now, vehicles and auto parts are required to have 62.5-per-cent North American content to travel tariff-free across continental borders.

Volpe suggested the failure of the U.S. trade representative (USTR) office to put a hard number on the table may in fact be a good thing. He said the USTR may be documenting for the Trump White House data that negotiators, senators and congressional leaders, especially those with auto plants in their districts, already know, having recently gone through trade negotiations for the Trans-Pacific Partnership that also dealt with “rules of origin” debates.

“The fact that we haven’t seen a number and we haven’t seen proposals confirms for me that the USTR is doing the hard work of inventorying where the American assets are, and they’re going to get to the same conclusion that we did: the American assets and interests are all over the map in North America. It’s going to be very difficult to cleave them off.”

 

 

 

 

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