Secretary Ross and the Commerce Department Wrongly Conclude NAFTA Rules are Bad for the U.S.

10/4/2017 Forbes

Flag_of_the_North_American_Free_Trade_Agreement_(standard_version).svgBy Luis de la Calle

U.S. Secretary of Commerce Wilbur Ross published an important op-ed (These NAFTA rules are killing our jobs) in the Washington Post this past Friday, September 22nd.  In it, he claims to offer a serious analysis to show that the trade deficit with Mexico and Canada and lower U.S. value-added in Mexican and Canadian U.S. imports are proof the United States is losing under the North American Free Trade Agreement (NAFTA).  Secretary Ross aims to end the “loose talk” about industrial integration for automobile production in the region.

The problem with the article and the U.S. Department of Commerce paper it is based on is that they cherry pick statistics out of the March 2017, Trade in Value-Added (TiVA) database by the Organization for Economic Cooperation and Development (OECD), in an attempt to confirm the Trump’s administration bias that trade deficits are bad and lead to job losses.  This wrongheaded approach (the trade deficit with Mexico does not harm the United States) does a growing disservice to the comprehension of the importance of international trade for the economy and further politicizes the issue. More worryingly, it shows civil service officers can be influenced so that their analysis comports with White House views on trade.

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The View from Mexico | Border Adjustment Tax: Economic Impact & WTO Consistency

1/18/2017 Forbes.com, Mexico Institute Blog

By Luis de la Calle

Donald Trump has been elected U.S. President as disrupter in chief; somebody that can get things done and change the status quo.

One of the centerpieces of his program appears to be a complete revamp of the U.S. tax system. “I understand the tax laws better than almost anyone. And that is why I am one that can truly fix them,” he said several times in debates and rallies. The idea is to end up with a system that favors investment on infrastructure and capital goods.

His background as a developer and his penchant for not paying taxes have led him to believe that the best way to promote growth and generate government revenue is taxing consumption rather than investment. Furthermore, his infrastructure ambitions need significant private investment funds that might only come with a favorable regime. The idea is to prompt firms and banks holding more than a trillion dollars in cash to put it to work.

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Better Late than Never: Lessons Learned from Mexican Truck Drivers in the United States

By Luis de la Calle

Truck2The opening of the United States to freight trucking companies from Mexico will change the border and its competitiveness.

Mexico must always demand the rule of law and compliance with commitments.

On Friday, January 9, 2015, the United States Department of Transportation made an important announcement that has not received the recognition it deserves: the Department of Transportation will begin to process applications of Mexican land freight trucking companies wishing to provide international services in the United States.

This announcement ends the pilot program that was established as a palliative measure in response to the longstanding dispute with Mexico. This topic is worth remembering for the lessons it leaves us with.

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This article was originally published in Spanish on El Universal

Interview: “The Economy is Growing due to NAFTA”

NAFTAInterview with Luis de la Calle, a Mexico Institute Advisory Board Member

Reforma, 1/2/2014

With the North American Free Trade Agreement (NAFTA), Mexico is better today than it was 20 years ago, Luis de la Calle asserts.

A key actor in the agreement’s negotiations when he served as Minister of Trade Issues for the Mexican Embassy in Washington, DC, he observes that the next step is for the country to convert into a North American export platform.

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The Power of Omission

energy- oil pumps 2By Luis de la Calle

On August 11th, President Enrique Peña Nieto sent his energy reform proposal to Congress, despite the fact that he did not have the full support for the reform from all parties included in the “Pacto por Mexico.” The proposal, as he had promised, is transformative, suggesting several significant changes to the Constitution.

The reform, which will be discussed in the Senate this October, seeks to amend articles 27 and 28 of the Mexican constitution. Although it has not been recognized as such, the President’s proposal is revolutionary not because of the language it adds, but rather, because of the language it omits. The reform erases the word“contracts” in the phrase “For oil and solid, liquid or gaseous hydrocarbons or radioactive minerals, no concessions or contracts shall be granted” found in Article 27. From Article 28, it omits the words “oil and other hydrocarbons, basic petrochemicals, electricity” from the list of strategic areas.

By proposing to eliminate these words and phrases from the law, President Peña Nieto has crossed the Rubicon, laying the foundation for a reform devoted to transforming the energy sector. These changes have the potential to convert the sector into a competitive energy market that promotes the country’s industrialization.

Continue reading “The Power of Omission”

Mexico’s middle class: Too bourgeois to bus tables

woman with shopping bags and credit cardThe Economist, 6/24/2013

OUR report this week from the Mexican-American border points out that Mexicans are becoming too bourgeois to cross illegally into the United States. These days they’d rather stay in high school than risk deserts, rattlesnakes, murderous bandidos and La Migra (as the gringo migration authorities are known) just to bus tables north of the border. In fact, according to an exhaustive report in May by North American experts, known as the Regional Migration Study Group, Mexicans are much more likely to have a degree before going north than they were seven years ago, and the number of years of schooling of 15-19-year-olds is now pretty similar to that in United States. If more educated workers emigrate, it raises their earning capacity, which gives them and their families even more chance of rising up the ranks of the middle class when they and the money flow back to Mexico. In which case, even fewer will need to go to el Norte. That is real progress.

In Mexico, however, many are reluctant to admit that the country has become a middle-class nation. This is partly because so much of Mexico’s historical narrative is about poverty; half a century ago, 80% of Mexicans were poor. It is also because, for armchair socialists, the ways of defining the middle class includes access to things that are often considered abhorrently American, such as those sold through chains like Walmart.  To them, it is almost as if those who cannot afford such trappings of middle-class life are somehow more authentically Mexican.

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Mexico’s Growing Middle Class is Good News for U.S.

woman shopping for water in big box storeABC / Univision, 6/14/2013

A new study on Mexico helps to explain the recent fall in Mexican immigration to the U.S. It suggests that Mexico is slowly becoming a “middle class country.”

The study by Mexico’s National Statistics and Geography Institute [INEGI] says that 42 percent of Mexican homes qualify as “middle class” while 39 percent of the country’s overall population falls into this social category. It also points out that at the turn of the century the middle class was only somewhat smaller, as it made up 38 percent of Mexico’s homes and 35 percent of the country’s inhabitants.

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Passengers on Mexican domestic flights have tripled since 1989 – #MexFacts

MexFact - Domestic flights

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Access to credit has increased Mexicans’ capacity to acquire motor vehicles: 20 million in 2008 – #MexFacts

MexFact - Vehicles

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