U.S. and Mexico Reach Agreement on Sugar Dispute

June 5, 2017  |  No Comments  |  by Nicole àBeckett  |  Blog

U.S. and Mexico have reached an agreement in the dispute over sugar trade today, according to sources (Reuters). The agreement will prevent a trade war in which the U.S. would have imposed steep tariffs on Mexican sugar imports and Mexico would have responded with equal tariffs on U.S. high-fructose corn syrup.

Details of the agreement are not yet public, but sources indicate the deal was made to benefit both countries. According to the Juan Cortina Gallardo, the president of Mexico’s sugar chamber, the managing of the sugar agreement will set a precedent for how further negotiations will play out (The New York Times). Since NAFTA was first negotiated in the early 1990s, the sugar industry has been the most contentious issue in U.S.-Mexico trade relations.

The current agreement will modify a 2014 agreement in which quotas and a price floor on Mexican sugar acted as an alternative solution to antidumping and antisubsidy duties. U.S. sugar companies had argued that the agreement was not doing enough to counter “unfairly subsidized” Mexican sugar companies, who could sell sugar in the U.S. at a price domestic companies could not compete with.

Stay up to date with the details of the agreement and other international trade news by following Mercatura Global on Twitter.

Commerce Secretary Ross Wants NAFTA Renegotiation by January

June 1, 2017  |  No Comments  |  by Nicole àBeckett  |  Blog

U.S. Secretary of Commerce Wilbur Ross indicated Wednesday that the best time period to complete the North American Free Trade Agreement’s negotiation is by early January. By setting this window, the Trump Administration hopes to have the renegotiation done before both Mexico’s general elections and the 2018 U.S. Congressional elections (Reuters).

According to Ross, Mexico’s elections will make the approval of NAFTA more complicated because it needs Mexican congressional approval. Mexican Economy Minister Ildefonso Guajardo also urged for a final deal by the end of this year (Bloomberg). In the U.S., presidential powers to negotiate trade deals that can accepted or rejected by Congress without amendments expires in July 2018, justifying the urgency of the Trump Administration

Ross also said Wednesday that the Commerce Department would impose anti-dumping and anti-subsidy duties on Mexican sugar and Canadian softwood lumber as part of the renegotiations if settlements over the disputes are not achieved. The Mexican government subsidies sugar companies and Canadian lumber producers utilize government-owned land to produce, making it difficult for U.S. competitors to compete in both industries. Ross hopes to resolve both of these issues before the official modernization of NAFTA.

NAFTA negotiations will formally begin around August 16, following a 90-day period of domestic consultations with U.S. lawmakers, industry, and the public.

Stay up to date with all trade news, including updates on NAFTA, by following Mercatura Global on Twitter. As an advocate of free trade, Mercatura Global can counsel your company on how best to enter international markets and increase your export revenue. To develop your market entry strategy and identify strategic partners, contact Mercatura Global today.

Robert Lighthizer to be Sworn in as U.S. Trade Representative Today

May 15, 2017  |  No Comments  |  by Nicole àBeckett  |  Blog

Robert Lighthizer will be sworn in at U.S. Trade Representative at 3pm today. The occasion comes after a months-long confirmation process, in which he was finally confirmed by an 82-14 Senate vote last Thursday.

Despite the overwhelming consensus, two notable Republicans, John McCain of Arizona and Ben Sasse of Nebraska, voted against his confirmation due to Lighthizer’s stance on the North American Free Trade Agreement (NAFTA). According to the GOP Senators, they do not believe Lighthizer understands “the North American Free Trade Agreement’s positive economic benefits to our respective states and the nation as a whole” (U.S. News & World Report). They claimed to fear Lighthizer did not appreciate the jobs created by NAFTA and worried he would not be a champion of U.S. agriculture.

The delay on Lighthizer’s confirmation has hindered President Trump’s trade agenda, especially in regard to his goal of renegotiating NAFTA. Before this formal process begins, the Trump administration must send a declaration letter to Congress detailing its intention to initiate negotiations in 90 days (Reuters). Renegotiations would likely focus on Mexico, as the U.S. trade deficit with Mexico has ballooned since the establishment of NAFTA in 1994 and has been largely criticized by the President.

In addition to renegotiating NAFTA, Lighthizer is expected to tackle other trade issues detailed by the Trump administration. This includes establishing bilateral trade deals with allies like the United Kingdom and Japan, and take a tougher stance on China (Politico). Future trade policy will have an “America First” focus, with the goal of bringing back manufacturing and other industrial jobs back to the U.S.

After Lighthizer is sworn in today, the Trump administration will be able to begin acting on measures outlined in President’s campaign. This could mean a lot of changes for trade. To stay up to date with all things related to trade, follow Mercatura Global on Twitter.

Will New Tariffs on Canadian Softwood Lumber Cause U.S.-Canada Trade War?

April 26, 2017  |  No Comments  |  by Nicole àBeckett  |  Blog

On Monday, U.S. President Donald Trump announced an increase in tariffs from 3% to 24% on softwood lumber imports from Canada. Most lumber companies in Canada are state-owned and subsidized by the Canadian government, and the U.S.-Canada dispute over softwood lumber is decades old (The New York Times). American mills recently filed a complaint, and the U.S. Commerce department responded by imposing a tariff equivalent to the subsidy amount (24%) on five Canadian companies. For all other Canadian lumber companies, the tariff rate was set at 20%.

According to the Wall Street Journal, Commerce Secretary Wilbur Ross claimed it had been a “bad week for U.S.-Canada trade relations.” This statement also reflects President Trump’s complaints about Canada’s system of protections on its dairy industry, leading to unfair treatment of American dairy farm workers.

Both softwood lumber and the dairy industry were left out of the initial North American Free Trade Agreement in 1994, so it is easy for the U.S. to bring up the issues without formal negotiations (Reuters).

In Canada, the country is considering some sort of aid package to the companies that will be hit by the tariff (Bloomberg). In Quebec, 60,000 people work in the forest-products industry, and the province is putting in place a program of loan and loan guarantees that is expected to be worth 300 million Canadian dollars.

In the past, disputes around the softwood lumber industry were always won be Canada. However, if it becomes a legal fight, it is likely that the process will take a few years to be settled. Stay up to date with current U.S.-Canada trade relations by following Mercatura Global on Twitter.

Trump Administration with Seemingly Softer Stance on NAFTA

April 4, 2017  |  No Comments  |  by Nicole àBeckett  |  Blog

A White House draft circulating around Congress reportedly details only minor changes to the North American Free Trade Agreement (NAFTA). According to the Wall Street Journal, the proposed NAFTA alterations as mainly “modest” changes while keeping most of NAFTA’s controversial provisions the same.

There were two specific changes outlined by the draft proposal. The first proposal would allow member nations to levy tariffs on imports they consider to cause “serious injury” or “threat of serious injury” to domestic outfits (US News). This proposal could be potentially leveraged against Mexican imports that contribute to the U.S. deficit in goods trade.

A second proposal refers to a section of NAFTA that requires member governments to consider companies based in their foreign counterparts for “public sector procurement” projects such as infrastructure ventures. Under current NAFTA provisions, foreign suppliers are guaranteed to be treated no less favorably than domestic companies competing for the same procurement opportunities (International Trade Administration). With the new provision, rules would be established that require government procurement to be conducted consistent with U.S. law and the administration’s policy.

The letter also supposedly call for leveling the playing field in tax treatment, expanding opportunities for agriculture, and creating stricter intellectual property enforcement and digital protection.

It is likely that this draft will be altered further before any formal NAFTA negotiations, which would be initiated through a formal 9-day notice of President Trump’s intent to revisit the deal. To stay up to date on the future of NAFTA and U.S. trade policy, follow Mercatura Global on Twitter.

A Closer Look into U.S. Trade With Mexico

January 30, 2017  |  No Comments  |  by Nicole àBeckett  |  Blog

The past week has been rocky between the U.S. and Mexico. In addition to conflict over a Mexico-U.S. border wall, President Donald Trump also has raised concern over the trade imbalance with Mexico, claiming “Mexico has taken advantage of the US for long enough” (Politico).

While the U.S. did run a $49.2 billion deficit on the $583 billion total bilateral trade with Mexico in 2015, these numbers do not tell the full story. Within the category of professional services, the U.S. actually ran a surplus of $9.2 billion, including industries such as travel, transportation, and computer software (Global Trade Magazine). On the other side, Mexico mainly exports manufactured goods that typically require cheaper labor.

The year before NAFTA was enacted, total bilateral trade with Mexico stood at only $85 billion. In 2015 alone, the U.S. annual exports to Mexico stood at $236 billion (The Washington Post). This is almost triple the total bilateral trade between the two countries in 1995. Now, Mexico is America’s third-largest trading partner, and the two economies are highly intertwined.

In recent days, the White House has been warning against imposing a 20% tariff on Mexican goods. While America could experience a shortage of fresh vegetables and fruits, it is likely that Mexico’s economy would be devastated by such a tax (The New York Times). However, imposing a tariff on Mexico would imply that the U.S. pulls out of NAFTA, which would greatly harm American consumers and businesses alike.

 

APEC Leaders Push Back Against Protectionism at Summit in Peru

November 29, 2016  |  No Comments  |  by Nicole àBeckett  |  Blog

The Asia-Pacific Economic Cooperation (APEC) met on Sunday, November 20th in Lima, Peru. APEC is comprised of 21 Pacific Rim nations, including the United States, and member nations account for about 60% of global GDP.

Conversations at the summit centered around the recent U.S. election and president-elect Donald Trump’s protectionist trade stance. During his campaign, he had pledged to pull out of the TPP, threatened to impose steep tariffs on China, and urged for a renegotiation of NAFTA. In Peru, leaders of APEC nations vowed to persuade Trump of the benefits of trade. Peruvian President Pedro Pablo Kuczynski claimed they must “give an unequivocal message to the world that trade continues to be beneficial” (The Wall Street Journal).

Obama attended the summit, and he continued to argue that the TPP would benefit the U.S. economy. Further, he believes that failing to move forward with the agreement would “undermine” U.S. influence and give an upper hand to China (Reuters). At the summit, TPP member nations asserted that they intended to move forward with the agreement, even if the U.S. did not participate. They also claimed they may be willing to implement slight changes to the agreement to please the U.S. president-elect.

Further, China pushed its alternative vision of free trade in the region through its Regional Comprehensive Economic Partnership (RCEP). This agreement would not include the U.S., so it would exclude U.S. workers and businesses from better access to such markets.

Overall, the summit solidified the 21 Pacific-Rim nations’ broader goal of accomplishing free trade in the region. They intend to keep markets open and fight against protectionism.

Advanced Goods Manufacturing Exports Benefits Service Industries

November 11, 2013  |  No Comments  |  by Nicole àBeckett  |  Blog

Delving further into the Brookings report discussed last week shows how important advanced manufacturing has become to North American trade. The NAFTA trade bloc exported over $1.2 trillion to the rest of the world last year with the bulk of exports represented by advanced industries such as electronics ($115 billion), transportation equipment ($100 billion), pharmaceuticals ($39 billion) and medical devices ($26 billion). Advanced industries accounted for 35% of all U.S. exports in 2011.

While it is difficult for the NAFTA countries to compete on cost vs other regions, particularly the U.S. and Canada, there is tremendous advantage in offering superior quality and value-added in advanced industries. Brookings states that for every dollar of manufacturing output, 19 cents of services such as logistics, advertising and engineering are required. In 2012, the U.S. economy realized a $200 billion trade surplus in services. Combined with lower wages in Mexico than China, according to BofA Merrill Lynch economist Carlos Capistran, the NAFTA zone is back on a cyclical upturn to make it more competitive than ever in global trade.

Brookings Illustrates Importance of Trade Among North American Neighbors

November 9, 2013  |  No Comments  |  by Nicole àBeckett  |  Blog

The 20 year anniversary of the ratification of NAFTA will take place next month and Brookings has just released a report expertly illustrating the impact of trade among the neighbors.

Key findings focused on the importance of cross-border trade between metropolitan areas. LA-Mexico City led the way between US & Mexico metros with $2.2 billion in trade and New York-Toronto led US-Canada trade with $3.7 billion.  In total, $884+ billion was traded between North American countries in 2010 with $512 billion (58%) derived from metropolitan areas.

What is even more significant  is the shared value in finished products added through co-production. The Woodrow Wilson Center for International Scholars states that 40% of the content the US imports from Mexico is produced in the US vs 4% from China. That represents a return of 40 cents on every dollar spent on imports from Mexico.

As China loses competitiveness from increased labor wages and transportation costs the importance of exploiting the virtues of NAFTA becomes even greater.

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