Transition from NAFTA to USMCA October 2018 -New Trade Deal Removes Uncertainty- SECRETARÍA DE ECONOMÍA MÉXICO MX-US Trade www.naftamexico.net More information: naftadsk@naftamexico.net 1
North America s economic development & success depends on a strong regional trade partnership POPULATION 480 Million GDP $21 Trillion ANNUAL GOODS TRADE $1 Trillion Source: World Bank, and import data from Statistics Canada, BANXICO and US Census Bureau. 2
A predictable market Trusted partners invest in each other. UNITED STATES CANADA MEXICO U.S. companies have invested nearly $363 billion in Canada and $87 billion in Mexico Canadian firms have invested $353 billion in the U.S. and $12.5 billion in Mexico Mexican companies have invested about $58 billion in the U.S. and $501 million in Canada Source: IMF, CDIS, 2016 outward Foreign Direct Investment positions (stock). 3
Importance of NAFTA today NAFTA increases trade, supports jobs, and strengthens ties with Mexico. 5 million jobs in the U.S. rely on trade with Mexico 1 U.S.-Mexico trade has grown nearly seven-fold since 1993. $557 billion World class supply chain Efficient production $84 billion 1993 2017 1 Source: Woodrow Wilson Center 4
Importance of NAFTA for jobs NAFTA supports jobs. 5 million U.S. jobs depend on trade with Mexico, across many states and industries. OR CA 57.2 565.5 #REF! WA 106.8 NV AK ID 23.3 UT 43.6 46.7 10.7 AZ 89.3 #REF! MT 16.8 WY 9.1 CO NM 26.8 88.0 13.4 15.4 NE KS TX ND SD 33.9 OK 47.7 382.0 #REF! 50.6 MN 92.9 IA 53.1 MO 97.4 AR WI 41.6 IL IN #REF! 200.2 95.5 #REF! 99.7 MS MI 138.0 #REF! 40.8 67.2 LA #REF! 65.4 96.3 WV 23.3 OH #REF! 178.2 61.3 KY AL TN GA 152.5 VT PA 199.9 #REF! VA 133.8 NC #REF! 151.5 70.4 SC FL 290.2 NY 322.2 ME 11.4 22.4 NH 22.1 MA118.5 RI CT 16.9 61.1 NJ 140.8 DE 15.2 MD 96.5 HI 23.6 100+ 50-99 Less than 50 Job numbers in thousands Source: Jobs figures are from 2014, according to Growing Together: Economic Ties between the United States and Mexico, Mexico Institute, Woodrow Wilson International Center for Scholars, 2016. 5
Importance of NAFTA for U.S. exports Mexico is the U.S. s 2nd largest export market. U.S. EXPORTS WORLDWIDE 16% Mexicans buy: 16% of U.S. exports worldwide nearly $243 billion of goods in 2017. 13% 11% Of all food products, animal, and vegetable the U.S. exports worldwide. Source: US Census Bureau using NAICS industry codes 6 Of all automotive, rail, vessel and aerospace equipment the U.S. exports globally.
We are more than neighbors we are partners Our economic ties are highly integrated. About 40% of Mexican final exports to the U.S. are U.S.-made value added. 1 Mexican Exports Exports to U.S.: U.S. made 40% Exports to World: 37% U.S. made Moreover, Mexican exports to the world include 37% U.S.-made content. 1 Source: NBER, Global Value database in Koopman, Powers, Wang, Wei (revised March 2011). 7
Importance of NAFTA for auto manufacturing industry Since NAFTA, U.S.-built auto exports have doubled, supporting thousands of jobs In 2017, nearly 3X as many vehicles were produced in the U.S. as in Mexico. Over 300 hundred thousand more vehicles were produced in the U.S. in 2017 than in the year before NAFTA. 1 4 M 11.2 M 10.9M 11.2M 1993 2017 There is an average of $4,070 in Mexicanmade auto parts per vehicle produced in the U.S., but $4,870 in U.S.-made auto parts per vehicle produced in Mexico a 20% higher value for U.S.-made parts. Since NAFTA, U.S.-built auto exports have more than doubled. 2 978,155 1,981,873 1993 2017 Source: 2016 data from the World Bank, OICA, and USDOC. 8 1 Bureau of Transportation Statistics, Department of Transportation 2 USDOC, International Trade Administration, Office of Transportation and Machinery
North America: An Emerging Energy Powerhouse Mexico is the US largest energy market, consuming over $26 billion in energy goods Canada is the US biggest energy supplier, providing over $73 billion in commodities $2.4 B $5.1 B $50.1 B $4.8 B $7.3 B $2.0 B $184 M $2.5 B $6.1 B $5.5 B $2.5 B $8.7 B $11.9 B $2.0 B $2.5 B $1 B $9.8 B Electricity Diesel & fuels Crude oil Gasoline Natural gas Liquefied gases
Importance of NAFTA for agriculture Agricultural exports to Mexico support billions in sales and thousands of U.S. jobs Main Export Markets for U.S. Agricultural Goods Canada 17% $24bn U.S. Agricultural Goods Exports Growth 2009-2017 China 14% $20bn RoW 47% Every $1 billion of U.S. agricultural exports requires approximately 7,550 American jobs throughout the economy. Mexico 13% $19bn U.S. Exports State Exports of Agricultural Goods to Mexico ($ Billions, 2017) $3.7 Seven states all export over $1 billion of agricultural goods to Mexico. $2.1 $1.6 $1.4 $1.3 $1.1 $1.0 $0.7 $0.6 Rest of the World Mexico Source: Mexico s Ministry of the Economy (SE Washington) with data from WiserTrade, using NAICS. Agricultural Goods comprises: Agricultural Products; Livestock and Livestock Products; Food and Kindred Products; and Beverage and Tobacco Products. 10
Importance of NAFTA for the services industry U.S.-Mexico trade in services has doubled since 1999 U.S.-Mexico Trade in Services U.S. EXPORTS US Exports US Imports $59.5 B Telecommunications 3% Other 16% Financial services 5% Royalties 10% Travel 52% $23.8 B $26.3 B Transport 14% $9.7 B $14.1 B $33.3 B 1999 2017 Source: USDOC with data from BEA. 2016 services data from U.S.-Mexico Trade Facts, USTR. Trade in services by sector with 2015 data. Financial services include financial and insurance services, telecommunications include IT services, royalties include charges for the use of intellectual property. 11 Telecommunications 5% Financial services 2% Royalties 3% Transport 11% U.S. IMPORTS Other 17% Travel 62%
Importance of NAFTA for the transportation industry Transportation and logistics are key for trade US Mexico Trade by mode of transportation value in $ billions 600 2017 % Share $ billion 500 Truck 385 70% Rail 80 14% Vessel 53 9% 200 Air 17 3% 100 Pipeline 4 1% Other 19 3% 400 300 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: SE-Washington with data from USDOT/ Bureau of Transportation Statistics. 12
We have to continue working together Challenges evolved to Opportunities with new USMCA 13
Rising protectionism Trade protectionism is not the answer 14
Diversifying markets Mexico s ambitious ongoing trade negotiations EFTA CANADA 1.1 T 863 333 199 1.3 T 1.5 38 1.2 T EUROPEAN UNION JAPAN 4.9 T 608 1.4T 417 TURKEY 16.5T 9.1 T 5.2 T 39 19 JORDAN 0.6 201 10 VIETNAM 174-2.3 297 0.57 BRAZIL 172 143 724 140 4.4 ARGENTINA 297 IMF GDP (billion dollars) WTO IMPORTS (billion dollars) 545 56 39 IMF 2016. World Trade Organization 2016. UNCTAD 2016 FDI outward stock 168 127 1.8 T PACIFIC ALLIANCE MALAYSIA UNCTAD FDI (billion dollars) 15 CP TRANS-PACIFIC PARTNERSHIP 682 SINGAPORE 292 NEW ZEALAND AUSTRALIA 182 1.3 T 196 402 17 36
Increasing regional competitiveness NAFTA evolution to USMCA, the most important trade negotiation 16
NAFTA 2.0 The negotiation required partners to compromise Automotive Industry Energy -Rules of Origin -Labor Value Content Sunset Intellectual Property Rights Clause Investment Labor Protections Dispute Settlement Mechanisms Agricultural Trade 17
Increasing regional competitiveness NAFTA results and Opportunities Preferential access Obstacles for free trade Regulatory harmonization Puts in place the WTO government Procurement agreement. It does not eliminate the Buy American, but it s better Access than was being proposed Regional competitiveness Cooperation & Development State Owned Enterprises government procurement Certainty in trade and investments SMEs Investment Competition Temporary entry Environment New chapter New 3 country Competitiveness Committee: Address problems Improve Competitiveness Coordinate efforts to favor manufacturers competitiveness, especially when it comes to efficient supply chains Inclusive & Responsible Trade Anticorruption 18 Labor New Chapter WLO Standards Chapters XIX and XX remain unchanged dispute settlement mechanisms
Increasing regional competitiveness NAFTA results and Opportunities Energy: significant additions made: E-Commerce / online Shopping / Minimis Agreement on higher limit for imports to be Duty free: Canada : from 20 USD to 150 Canadian D and 40 Canadian D for Tax exempt Mexico from 50 to 100 USD US : 100 USD Energy integration Opportunities of the 21st century economy Tax exemption in addition to a duty Exemption Digital trade 19 Intellectual property Clean up cross-border rules and procedures The Chapter recognize the sovereign right to regulate and modify the Mexican legal framework, including the Constitution. As well reaffirms Mexico s inalienable and impresciptible property on hydrocarbons in Mexico s subsoil.
USMCA will strengthen North Americas Competitiveness A robust economic agenda and trade diversification continues to be a high priority for Mexico USMCA agreement will gives North America the tools to compete in the 21 st century economy USMCA will bring all three Nations together in competition with the rest of the world. The global economy waits for no one 20
Annex
Thank you Nicole Felix Huesca Trade and Investment Commissioner for Alabama, Georgia and Tennessee ProMexico SECRETARÍA DE ECONOMÍA MÉXICO www.naftamexico.net More information: naftadsk@naftamexico.net 24