The San Diego Union Tribune, 11/25/2013
The New York Times, 11/24/2013
Despite challenges that may sometimes seem daunting, the relationship between Mexico and the United States has shown remarkable resilience and has been by and large mutually beneficial. Nafta is largely the catalyst to the strength of this relationship.
Nafta was conceived as a way to increase trade and investment flows by setting a set of common rules to govern trade relations. Trade flows among the three countries have grown well above total output, investment flows have also increased significantly, and the vast majority of trade and investment relations among the three partners occur without disputes.
Energy reform would positively affect Mexico’s economy and upstream oil production capacity, strengthen U.S. energy security, and provide greater opportunities for energy development and trade in North America.
Mexican oil production has been steadily decreasing since 2004, mostly due to aging oil fields, years of underinvestment, and diminishing returns for the nation’s largest oil field, Cantarell. The U.S. Energy Information Administration (EIA) estimates Mexican oil production will continue to decline over the next decade, assuming no dramatic changes in policy or technology. President Enrique Peña Nieto of the Institutional Revolutionary Party (PRI) introduced an energy reform proposal in August 2013 aimed at attracting greater investment from foreign companies to help boost oil production and build a stronger economy. His proposal includes constitutional amendments that would allow PEMEX to undergo profit-sharing contracts with private companies without affording them concessions. The Mexican oil industry would look similar to those of Brazil and Norway, which have state-owned companies that welcome foreign capital to invest in exploring and developing their fields. Experts suggest the administration has the necessary votes to pass legislation for constitutional change, but Peña Nieto is facing considerable opposition from a public that is skeptical of privatization and his greater reform agenda.
U.S. Secretary of Commerce Penny Pritzker, Canadian Minister of International Trade Ed Fast and Mexican Secretary of Economy Ildefonso Guajardo issue a joint statement at the North American Competitiveness and Innovation Conference in San Diego on strengthening the three countries’ trade and economic relationship.
Read the statement here.
The fight over Mexican tuna, and whether it is truly fished using dolphin safe practices, rages on. Mexico recently won a two decade long fight to get its tuna labeled dolphin safe. The WTO this month ruled in its favor. But the U.S. still refuses to allow Mexican tuna with a dolphin safe label on store shelves. Mexico says it’s had enough and is preparing to retaliate with trade sanctions on U.S. imports. Ensenada, Baja California, was once the thriving heart of the Mexican tuna industry.
Asia could become twice as important to Mexico as an export market over the next five years as the country strengthens trade ties with the fast-growing economies of the region, Mexican Economy Minister Ildefonso Guajardo said on Monday.
Latin America’s biggest exporter is working to diversify its trade to reduce its dependence on the U.S. market, which takes in more than three quarters of Mexico’s exports. For years a peripheral market for Mexico, Asia has been growing in importance, and Mexican President Enrique Peña Nieto has been at pains to bolster relations with China in particular since he took office at the start of December.
An effort to dramatically increase spending on U.S. border enforcement was a key reason for Senate passage of immigration reform and will be key to bipartisan support in the House. The debate has focused on walling off the border rather than thinking of it as a conduit. Yet border states such as California, and cities such as San Diego, have the unique opportunity to leverage proximity to Mexico to generate jobs and bolster economic growth for the themselves and the United States as a whole. By further integrating with its Mexican sister city, Tijuana, San Diego could become an international trade hub of more than 5 million people in a binational, regional metropolis.
The economic challenges of recent years have aroused fear and skepticism in the United States around global trade and outsourcing. While moving manufacturing outside the United States can cost American jobs, not all trade and outsourcing is equal. Mexico’s shared border with the United States mitigates the costs associated with trade and maximizes the benefits. Many goods imported from Mexico are actually coproduced on both sides of the border, creating jobs for American workers. In fact, according to a report from the Woodrow Wilson International Center for Scholars, 40 percent of the value of imports from Mexico was actually created in the United States by American workers — about 10 times the level of value created in the United States for goods imported from China. Coproduction keeps jobs in North America that might otherwise be lost altogether overseas.
Bets that the Mexican peso would appreciate were once one of the most popular emerging-market currency trades. Not anymore. The peso plummeted against the dollar in June, as investors fled emerging markets across the board on worries the Federal Reserve could taper its bond-buying stimulus program later this year. Such ultra-loose monetary policy in past years had helped drive investors to seek better returns in higher-yielding assets like the peso. From its 2013 high in May to its low for the year on June 20, the peso weakened 12.8% against the dollar, according to CQG.
The peso’s former popularity ended up hurting it, analysts say. As the emerging-market rout took off in late May and June, many investors had to liquidate their biggest positions, making their hefty bets favoring the peso victims of the risk unwind. “There has been a dramatic clearing of positions in the peso,” Brown Brothers Harriman analysts said in a recent note to clients, highlighting that the peso had been the largest gross long speculative currency futures position.
Consideration of the “gang of eight” proposal in the U.S. Senate has rekindled the national discussion about immigration reform and it’s high time that this discussion emphasizes a thorough understanding of the economic case for free trade in labor. A cursory understanding of recent history demonstrates that relatively free trade has lifted great masses of people out of poverty worldwide. The United States boasts a long record of relatively free trade and has always benefited from being essentially one big “free trade zone” internally. Goods and services, capital, and labor all move without governmental restriction throughout the nearly four million square miles of the United States.
Interference with the free flow of trade has always occurred along the arbitrary lines politicians have drawn on the map. During the 19th century, tariffs and other barriers restricted international trade in goods and services. However, for the most part, labor was free to enter or leave the United States. Following World War I, the federal government enacted a series of laws restricting immigration. The interwar years also witnessed significant restrictions on trade in goods and services.