What Does the New USMCA Look Like for Mexico?

USMCA

August 2017, trade negotiators from the United States, Mexico and Canada met for the first time in Mexico City to begin hashing out a new North American Free Trade Agreement.

Two and a half years and many negotiations later, the U.S.-Mexico-Canada Agreement (USMCA) has finally passed both chambers of the United States' Congress. The agreement — which overhauls North America's trade relations — is now poised to become U.S. law and the region's governing economic framework, as Mexico's Congress has already passed the deal and Canada's Parliament is expected to follow suit in late January.

While the political negotiations are wrapping up, the next and final step will be the agreement's implementation across North America.

In the coming months and years, these new rules will shape the region's trade realities. Some rules may unleash investment, trade and better labor conditions, but they likely won't be without additional hurdles. In Mexico, the agreement will touch most parts of the country's $1.15 trillion economy, but it will be felt most immediately and strongly in the overall investment climate, the automotive manufacturing sector and in labor conditions.

USMCA Provides Predictability

While less tangible, the agreement's biggest shift will take place at the macroeconomic level, as the USMCA solidifies trade rules and provides greater certainty for North American businesses operating across the continent. Ever since the USMCA's negotiations began, the economic climate has been wracked by uncertainty, especially when specific issues threatened to derail the agreement or every time that the U.S. administration threatened to pull out of NAFTA without any viable alternative.

With the USMCA in place, Mexico has a stronger investment framework and more transparency, clarity and protections for businesses operating in the country.

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Trump signs revised trade deal with Mexico, Canada but shuts Democrats out of celebration

USMCA signing

WASHINGTON – Still facing a divisive impeachment trial in the Senate, President Donald Trump celebrated a rare bipartisan achievement Wednesday when he signed into law a revamped trade deal with Mexico and Canada.

Surrounded by business leaders wearing hard hats, Trump portrayed the new U.S.-Mexico-Canada Agreement, or USMCA, as "a colossal victory" for American farmers, manufacturers and other workers.

"For the first time in American history, we have replaced a disastrous trade deal that rewarded outsourcing with a truly fair and reciprocal trade deal that will keep jobs, wealth and growth right here in America," Trump said during a signing ceremony on the White House South Lawn.

Trump gave a shout-out to more than two dozen Republican lawmakers whom he credited with helping push the deal through Congress.

Left off of his list of plaudits and missing from the celebration: Congressional Democrats, who put their own stamp on the agreement and whose support was pivotal to helping it secure congressional approval. House Speaker Nancy Pelosi's office said no Democrats were invited to the ceremony.

The revised trade deal, one of Trump's top legislative priorities, is the product of months of negotiations and replaces the North American Free Trade Agreement, or NAFTA, which essentially eliminated tariffs on most goods traded among the three countries.

The agreement guarantees U.S. farmers greater access to Canada's agriculture market and puts new e-commerce rules in place. It also dictates that a higher percentage of autos be made from parts manufactured in North America and requires that at least 40% of vehicle production be done by workers earning at least $16 per hour.

In addition, the pact, which is supported by labor unions and business groups, includes stronger provisions on labor, enforcement and pharmaceuticals that Democrats had sought as a condition for their approval of the agreement.

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Texas No. 1 in foreign trade during third quarter

foreign trade

Texas continues to be a leader in international trade, ranking No. 1 in exports of manufactured and non-manufactured commodities for the third quarter, according to the U.S. Census Bureau.

Year-to-date, Texas has exported an estimated $155.8 billion in manufactured goods and $68.7 billion in non-manufactured commodities, ranking it No. 1 in both categories among U.S. states.

The four top states for exports of manufactured goods year-to-date after Texas are California at an estimated $93.7 billion; Michigan, $39 billion; Illinois, $38.8 billion; and Ohio, $35.5 billion, according to the U.S. Census Bureau's Exports by Metropolitan Area Report released on Dec. 19.

Mexico was the top destination for exports from Texas at $109.7 billion in 2018, representing 35% of the state's total goods exported, according to the census bureau report as well as data from the Office of the U.S. Trade Representative. Canada was second at $27.5 billion.

Texas has accounted for 16.5% of U.S. exports of manufactured and 34.9% of non-manufactured goods so far this year, according to the bureau's report.

The top manufactured commodities exported by Texas include crude oil and petroleum, propane, liquified natural gas and parts/accessories for automatic data processing machines. The top non-manufactured goods produced in Texas include cattle (beef), cotton, chickens, greenhouse and nursery products and dairy products.

The top imports for Texas during the third quarter were crude oil, computers, car engines, cars and car parts and cell phones.

Houston was the top U.S. metro area in terms of exports in the third quarter at $31.3 billion, according to the study. Houston's economy is closely tied to the energy industry, particularly oil and liquefied natural gas.

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Ventus Global Logistics is strategically located in Laredo, Texas and specializes in land, air, and ocean freight. Ventus Global Logistics maintains a brokerage presence in all of Mexico's main customs offices. Get comprehensive data on your material inventory whenever you need it thanks to our web portal. Contact us today for a free consultation.

USMCA: The Vehicle Trade and Supply Chains

USMCA: The Vehicle Trade and Supply Chains

The U.S. House of Representatives passed the new trade agreement between U.S., Mexico, and Canada (USMCA) on December 19. The agreement is expected to be ratified by the Senate in 2020.

The USMCA replaces the 25-year old North American Free Trade Agreement (NAFTA), with several changes.

One of the most significant changes for the automotive sector is the update of country of origin rules. Automobiles must have 75 percent of their components manufactured in Mexico, the U.S., or Canada to qualify for zero tariffs, up from 62.5 percent under NAFTA.

This clause and the U.S. tariffs on steel and aluminium are protectionist measures aimed at U.S. automotive manufacturing jobs. The measures are against the free trade principles that drive increase competitiveness and lower prices. The increase in prices will be supported by the consumers, and the competitiveness of North American automotive sector will decrease compared to other regions.

In addition, new labor provisions require 40 to 45 percent of automobile parts to be made by workers who earn at least $16 an hour by 2023. Mexico has agreed to pass the labor laws that allow labor unions to inspect factories to ensure the new labor provisions are implemented.

One of the main automotive plants in Canada, the GM in Oshawa, Ontario, stopped producing vehicles on December 20, as announced in 2018. GM has been in operation in Oshawa since 1953, while the company first started producing vehicles in 1918. It is estimated that nine out of 10 vehicles assembled in Oshawa were exported to U.S. GM is investing CAD 170 million to transform part of the Oshawa assembly plant into a new GM Auto Parts manufacturing operation and to create the 55-acre "McLaughlin Advanced Technology Track" for testing autonomous and electric vehicles.

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Trump’s new USMCA trade deal looks a lot like NAFTA. Here are key differences between them.

USMCA Trade

President Trump and House Speaker Nancy Pelosi on Tuesday announced a deal on the United States-Mexico-Canada Agreement (USMCA) that will bring it to a vote in Congress and remove the last barrier to enact the trade pact. The Wall Street Journal reports the vote will be held next week.

The agreement between congressional Democrats and the White House comes after rounds of negotiations that stretched for more than two years between US, Mexican, and Canadian officials. Their intention to redraw the North American Free Trade Agreement, or NAFTA - the trade deal regulating international business around North America for over a quarter-century.

Trump tweeted early Tuesday morning and championed Democratic support for the deal, calling it a win-win for everyone in the United States.

"It will be the best and most important trade deal ever made by the USA. Good for everybody - Farmers, Manufacturers, Energy, Unions - tremendous support," Trump said. "Importantly, we will finally end our Country's worst Trade Deal, NAFTA!"

It was held up in the US as Democrats, particularly progressives, demanded tougher labor and environmental protections and stronger enforcement provisions. They were able to lock in those additional rules sought in the emerging deal.

The three leaders - President Donald Trump, Canadian Prime Minister Justin Trudeau, and Mexican President Enrique Peña Nieto - signed the agreement late last year but final revisions must also be approved by each country's legislature and leadership before it comes into effect. Mexico ratified the agreement in June and Canada is on its way to doing so.

Congress is expected to pass the agreement with bipartisan support, giving the president a major trade victory as he attempts to fight off Democratic-led impeachment proceedings and campaign for reelection.

Trump and other US officials have long called NAFTA dead, saying the USMCA is a wholesale overhaul of the agreement. Despite Trump's declaration, the USMCA still maintains large swaths of the original deal and is more of an update to the existing deal than a full-on rewrite. But there are some key differences.

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Ventus Global Logistics is strategically located in Laredo, Texas and specializes in land, air, and ocean freight. Ventus Global Logistics maintains a brokerage presence in all of Mexico's main customs offices. Get comprehensive data on your material inventory whenever you need it thanks to our web portal. Contact us today for a free consultation.

Port San Antonio OKs Pact to Develop Innovation Center

Port San Antonio, TX

Port San Antonio's board of directors on Wednesday took the first steps toward building a new facility that leaders of the sprawling industrial campus in South San Antonio hope will make it a destination for sports enthusiasts, science education, and innovation.

The board voted unanimously at its monthly meeting to contract American Triple I Partners, a local development firm chaired by former Mayor Henry Cisneros, to lead the design and construction management efforts for an innovation center to be constructed on the 1,900-acre Port San Antonio campus.

The Port's leadership plans for the center to host esports tournaments, conferences, concerts, and other events. In addition, it will serve as the home of the San Antonio Museum of Science and Technology, or SAMSAT, which houses artifacts and gadgets from the technological past, as well as showcase technology built by Port tenants.

Co-working space and a makerspace, for building devices and working on other projects, will serve both early-stage entrepreneurs and students on the innovation center grounds.

The center will also procure food and beverage vendors.

"We want this facility to represent not just what the Port is today, but what the Port is striving to be and what San Antonio is striving to be – a truly first-class facility," said Jim Perschbach, the Port's president and CEO.

The draw of the gaming community is expected to be the main revenue driver at the facility. Perschbach cited market research that predicts esports will trump the income potential of all sports except the NFL. The global esports market is expected to reach $3 billion by 2025, according to recent analysis.

In early 2018, Perschbach took the reins of the Port, a public entity created in the wake of the 2001 closure of Kelly Air Force base, with the charge from board members to pursue a vision that reimagined the Port as a high-technology hub to complement its traditional tenants in the manufacturing, logistics, aviation, and defense sectors.

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Chick-fil-A and Starbucks Distributor to Move California Headquarters to Texas

Distributor to Move California Headquarters to Texas

A distributor to move its corporate headquarters to Texas from California to centralize its operations. The organization is a distributor to major restaurant chains such as Chick-fil-A, Chipotle and Starbucks.

Quality Custom Distribution is a part of Golden State Foods, and a global supplier to the quick-service restaurant and retail industries. The organization is leasing 10,784 square feet of office space at 2801 Network Blvd. in Frisco, Texas. Frisco is 27 miles north of downtown Dallas, for its headquarters. It sets the new office to open in January 2020.

The company expects some employees to move from California to Texas with the corporate headquarters. Also, they have plans to "provide a variety of new jobs," at the Dallas-area office.

The company has already begun posting job openings in Frisco, which include finance, accounting, customer service and purchasing positions. Quality Custom Distribution has 17 active job postings on online job websites. Officials were not immediately available to comment beyond a statement.

The move from Irvine, California, helps centralize the company's corporate operations. It better aligns and supports its distribution center market and its customers, said Ryan Hammer, corporate vice president and president of Golden State Foods Logistics.

The distributor to move from California Headquarters to Texas will grow its distribution network and secure its position as a main player in the food industry. The Dallas-area's central location, large talent pool, and business-friendly community fed into the decision to move to the North Texas region said, Hammer.

The company's distribution network includes two centers in Texas, one in the Dallas area and another in San Antonio. The Dallas-area location sits in Lancaster at 3900 N. Dallas Ave., which is 14 miles south of downtown Dallas. According to CoStar data, Quality Custom Distribution leases about 55,000 square feet of industrial space in the building.

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Ventus Global Logistics is strategically located in Laredo, Texas and specializes in land, air, and ocean freight. Ventus Global Logistics maintains a brokerage presence in all of Mexico's main customs offices. Get comprehensive data on your material inventory whenever you need it thanks to our web portal. Contact us today for a free consultation.

Warehouse or store? Picking the wrong place to unpack can cost you

warehouse or store

Retailers can see "considerable savings" if they unpack case packs (packages shipped by the supplier) into the individual consumer units at a distribution center before shipping the product to the final store, according to a 2017 paper published in the European Journal of Operations Research that focused on grocery retailers in the Netherlands and Germany. The amount of savings will vary depending on the SKU, and they are even greater if a model is used to determine the "optimal solution" for a given retailer.

The paper examined two different scenarios for a given SKU:

  1. Stores are sent case packs of the SKU and unload them onsite.
  2. Store are sent a custom number of consumer-level packaging units based on their inventory needs.

The researchers developed a model to determine the best unpacking location for a given SKU. This was then tested in a "hypothetical environment" that used data from a European retailer (referred to as Delta in the study), information on its current operations practice and cost data from a second retailer. When the researchers tested their model in the hypothetical environment, they found a 5.3% drop in the overall cost when the retailer moved from its current operating model to what the paper referred to as the "optimal solution."

The optimal solution in this paper was a model in which all stores follow the same unpacking method for a given product (either delivering case packs to the store or unpacking it into consumer units at the distribution center) depending on what is the lowest cost for all stores. Retailers must determine the lowest cost option for each product.

Marginally more cost savings were seen if each store used the unpacking method that reduced its individual cost (as opposed to the cost to the entire retailer) but this can be especially hard to put in place at the distribution center level, Rob Broekmeulen, the paper's author and assistant professor at the Eindhoven University of Technology, told Supply Chain Dive in an interview.

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As fleets adopt technology, the public remains skeptical of safety focus

freight technology

Commercial drivers are among the safest drivers on the roadways, but based on general public perception, and anti-trucking safety groups that highlight the number of yearly incidents involving big rigs, it would be difficult to tell that.

According to data within the Federal Motor Carrier Safety Administration's Motor Carrier Management Information System (MCMIS), there were 164,529 large trucks involved in crashes in 2018, with 79,879 injuries and 4,708 deaths reported. Those numbers were comparable to 2017's figures, with 154,634 crashes, 75,985 injuries and 4,858 deaths.

In 2013, the American Trucking Associations released results of a research project conducted by the University of Michigan Transportation Research Institute. That study looked at 8,309 fatal car-truck crashes and found that in 81% of the incidents, the car driver was assigned fault, versus just 27% of truck drivers to which fault was assigned. Similarly, a 2003 study by the National Highway Traffic Safety Administration (NHTSA) identified 10,092 fatal car-truck accidents and assigned blame to the car driver 91% of the time in head-on crashes. It also found that 71% of the time the car driver was responsible for rear-end crashes.

The American Transportation Research Institute (ATRI) said that commercial trucks traveled over 9.4 billion miles in 2017. While the numbers can be significant, when putting them in context based on the number of miles traveled and compared to automotive-only numbers, a different story emerges.

According to the Insurance Institute for Highway Safety (IIHS), 0.94 passenger car occupants were killed in 2017 per 100 million truck miles traveled. Conversely, 1.16 people were killed per 100 million miles traveled overall in 2017. Statistically speaking, fewer people die in truck-car crashes than in car crashes alone.

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Experts say Nuevo Laredo should focus on becoming a logistics and foreign trade hub

Laredo Texas

The Mexican border city of Nuevo Laredo should "bet more on logistics and foreign trade" than on attracting more maquiladoras, according to trade experts.

"Nuevo Laredo no longer needs to invest in maquiladoras, because it is a city more oriented towards customs and services," said Cirila Quintero, a professor at El Colegio de la Frontera Norte (College of the Northern Border) in Tijuana, Mexico.

The college is a prestigious Mexican institute specializing in teaching and research on border issues. Quintero specializes in the research of Mexico's maquiladora industry.

Quintero was part of a recent study conducted by the Mexico City-based Economic Information Bank (BIE), which indicated in recent years the number of export maquiladoras in Nuevo Laredo has decreased.

Quintero said one reason not to rely too heavily on maquiladoras for economic growth in the future is changing technology.

"I think that if local governments want to bet on the maquiladoras, they should understand that the maquiladoras have already changed and are something else," Quintero said in an interview with Primerahora.com.

Quintero added, "the only ones [maquiladoras] that are going to exist are the ones that are going to export, and many of those are going to be robotized, and the point is that if you want to invest in maquiladoras, you should no longer see them at the local level, but in the case of Nuevo Laredo you have to see Laredo, Texas, and see which sectors in Laredo are developing the most."

Nuevo Laredo – located directly across the U.S.-Mexico border from Laredo, Texas – has 35 maquiladoras that employed 29,878 workers, according to the BIE study. In contrast, in the Mexican cities of Reynosa and Matamoros, maquiladoras are still trending upward.

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Ventus Global Logistics is strategically located in Laredo, Texas and specializes in land, air, and ocean freight. Ventus Global Logistics maintains a brokerage presence in all of Mexico's main customs offices. Get comprehensive data on your material inventory whenever you need it thanks to our web portal. Contact us today for a free consultation.