Mexicans believe that the first year of USMCA was a success

Mexicans believe that the first year of USMCA was a success



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Hello everyone, and welcome from Mexico City, where we are studying the progress of the most important USMCA trade agreement with the United States and Canada over a year after replacing the North American Free Trade Agreement.

Mexican Economy Minister Tatiana Clouthier visited Washington last week to discuss progress with senior US officials and business leaders and resolve differences in implementation.

As we all know, the United States-Mexico-Canada agreement was negotiated on the orders of former U.S. President Donald Trump. Trump described the North American Free Trade Agreement as “the worst trade agreement ever signed” during his campaign. Threatened to quit.The stakes are high: American behavior 1.3 tons Annual trade volume with its two neighboring countries.

As President, Trump almost completely destroyed trade relations in 2019. Threatened to close the border Unless Mexico stops the surge in immigration. Trump’s hostility to the free trade agreement and Mexico’s history of tensions with its powerful northern neighbor has made many people worry about the worst-case scenario, but the USMCA’s results so far are surprising, as we will explain below.

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Success on both sides of the political spectrum

The presidency is almost halfway through Andres Manuel López Obrador splits the MexicansSupporters praised him for his approachability, his image of serving the people, and his emphasis on the poor. Businessmen and professionals protested against authoritarian tendencies, attacks on wealth creators, and preference for state-led development.

One thing that Mexicans do agree is that the USMCA proved successful in the first year, although not always for the reasons they imagined. The company is pleased that the transaction’s detailed regulatory and governance restrictions provide a layer of protection for Lopez Obrador’s more radical ideas. The president and his supporters liked the deal’s role as a job creator and its labor terms. These measures helped to increase the wages of Mexicans and led to actions against trade unions closely related to the opposition party.

Most importantly, the coronavirus pandemic highlights the importance of nearby manufacturing, which provides reasons for American companies already in Mexico to consider expanding their operations, even under the overall leadership of López Obrador. The business environment is far from ideal.

“USMCA has always been Mexico’s lifeline,” said Juan Carlos Baker (Juan Carlos Baker), Mexico’s main negotiator for the deal. “Without the USMCA, Mexico’s economic outlook would look very different. The recovery we are experiencing It happened because of the prospect of exports to the United States. “

Lopez Obrador’s close allies stated that his main motivation for turning from a USMCA skeptic to a supporter was the desire to create jobs. “The President thinks the USMCA is a magical thing,” said a former senior Mexican official. “He thinks the simple fact of owning it and signing it means that a lot of investment will come to Mexico.

This is not to say that the first year of USMCA was smooth sailing: far from it. The biggest cloud that is about to emerge is Mexico’s measures to restore the country’s control over the energy sector, and the United States’ attempts to interpret stricter rules of origin for auto parts in a stricter way.

In terms of energy policy, López Obrador Trying to twist the opening Private investment and renewable energy, and return Mexico to the state-led oil energy and power sector, run counter to the new trade agreement. Several key actions of the president have been challenged in court, but he may also face dispute litigation under the USMCA.

“The president either pretends that he doesn’t understand, or he really doesn’t understand what Mexico has signed in terms of energy pledges,” said Arturo Sarukhán, who served as Mexico’s ambassador to Washington in 2006-13. However, in general, he is generally optimistic about USMCA’s performance so far.

No matter how Lopez Obrador understands the impact of USMCA on energy, those familiar with him say that he will not back down: a nationalist energy policy is the cornerstone of his political thinking.

Shannon O’Neill of the New York Foreign Relations Committee said that the Mexican president “fundamentally supports state intervention and state-controlled companies, which is contrary to USMCA.”

When it comes to auto parts, disagreements are important because the auto industry is a key trade area under the USMCA, with more than 1 million employees in Mexico. In order to promote the return of auto manufacturing work, the agreement will increase the proportion of auto parts that must be manufactured in North America to 75% to qualify for tax exemption. How to define this ratio is now the focus of controversy.

Another challenge facing Mexico, López Obrador’s ambassador to the United States prior to February, Martha Bárcena, said that the agreement stipulated that 40-45% of auto parts workers would have a minimum wage of $16 per hour. “It is a good thing to raise wages in Mexico, but it will be very difficult to achieve this goal,” she said.

Also in the automotive sector, the first labor dispute initiated by the United States under the USMCA has so far not seen serious frictions. Mexico agreed that workers at GM’s Silao plant should vote freely on whether to approve the collective bargaining agreement before August 20 because they claim their rights have been taken away.

“The union that allegedly abused workers’ rights is an opposition union,” O’Neill said, adding that the dispute “is politically correct [López Obrador]” Because of.

Overall, like other Mexican experts, Barsena believes that USMCA has proven to be a successful trade framework. “There will be differences in interpretation, but the USMCA will resolve them there,” she added. “The important thing is to keep talking.”

A senior US official agreed, saying that recent history shows that “NAFTA can withstand any pressure.”

“Trump wanted to end it but was unsuccessful because of the pressure from the private sector [to keep it],” He says. “[López Obrador] Objected, then he turned to support it. This is the realization that you cannot break the level of integration achieved without paying huge costs. “

Or to put it another way: If North American Free Trade can survive the right-wing populist American president and the left-wing populist Mexican president, it can survive almost anything.

Concession waters

On Tuesday, the International Monetary Fund warned that developing economies have limited access to vaccines, threatening the global recovery from the pandemic.

The warning was issued after the fund raised its expectations for growth in multiple economies, including the United Kingdom, which has one of the most successful vaccination programs in the world, and downgraded the ratings of countries such as India, where the epidemic and vaccination The progress of the event has been far worse than predicted in the spring. Claire Jones

Trade ties

U.S. Secretary of Defense questioned Britain turns to Asia, Washington is keen on Europe to concentrate its limited military resources on Russia.Lloyd Austin emphasized U.S. concerns about European allies’ involvement in the Indo-Pacific region May weaken defenses closer to home.

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Hyun Shin of the Bank for International Settlements and Valentina Bruno of American University An interesting paper Watching The international role of the dollar And how the appreciation of the U.S. dollar restrains global trade.

If you want to hear something, William Dalrymple has Recorded a fascinating podcast Regarding the dark history of one of the most powerful trade organizations in history, East India Company. His book on the subject, Anarchy, It is also worth reading.

Finally, Nikkei Asia delves into danger Facebook’s growth strategy in Asia, Social networks and authoritarian governments make compromises on market access. (Nikkei Index, USD)

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