Mexico first to ratify USMCA trade deal, Trump presses U.S. Congress to do same

USMCA Trade Deal

MEXICO CITY (Reuters) - Mexico on Wednesday became the first country to ratify the United States-Mexico-Canada Agreement (USMCA) agreed late last year to replace the North American Free Trade Agreement (NAFTA) at the behest of U.S. President Donald Trump.

By a vote of 114 in favor to 4 against, Mexico's Senate backed the deal tortuously negotiated between 2017 and 2018 after Trump repeatedly threatened to withdraw from NAFTA if he could not get a better trade agreement for the United States.

Mexican President Andres Manuel Lopez Obrador had already anticipated ratification this week in the Senate, where his leftist National Regeneration Movement (MORENA) and its allies have a comfortable majority in the 128-member chamber.

There has been little parliamentary opposition in Mexico to trying to safeguard market access to United States, by far Mexico's top export destination, and the trade deal was approved with overwhelming cross-party support in the Senate.

Mexico sends around 80% of its exports to the United States, and Trump last month vowed to impose tariffs on all Mexican goods if Lopez Obrador does not reduce the flow of U.S.-bound illegal immigration from Central America.

Lopez Obrador says he wants to avoid conflict with Trump, but noted at the weekend that the tariff dispute showed Mexico needed to become more economically self-sufficient.

Trump congratulated Lopez Obrador on Twitter for Mexico's approval. "Time for Congress to do the same here!" he wrote.

Lopez Obrador, meanwhile, posted a video on Twitter in which he called the Senate's approval "very good news" and said it augured well for Mexico's relations with the United States.

Canada, which has also fought with Trump over trade, is pressing ahead to ratify the deal. The main question mark hanging over its ratification is in the United States, where Democratic lawmakers have threatened to block the process.

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With U.S.-Mexico reaching agreement, trade tensions at southern border lessen

Mexico/ US Border Crossing
Canadian border with the USA. Canadian customs.

By Jeff Berman, Group News Editor • June 10, 2019

With last Friday's news that the United States and Mexico reached a deal that will put off the implementation of tariffs by the United States on Mexico, which it had planned to start today as a countermeasure to what President Trump called an "ongoing illegal immigration crisis" at the Southern border, it is likely cross-border trade stakeholders are breathing a collective sign of relief.

Had the U.S. tariffs come to fruition, it would have begun with the U.S. imposing a 5% tariff on all goods imported from Mexico and then raised to 10% on July 1, 15% on August 1, 2019, to 20% on September 1, 2019 and to 25% on October 1, 2019.

As previously reported, President Trump said in late May that tariffs would permanently remain at the 25% level unless and until Mexico substantially stops the illegal flow of aliens coming through its territory. And he added that if Mexico fails to act, tariffs will remain at a high level, with Mexican-based companies potentially moving back to the U.S. to make their products and goods, and companies that relocate to the U.S. not subject to tariffs or be otherwise impacted. Trump added that aside from immigration being the primary impetus for these planned tariffs that: "[o]ver the years, Mexico has made massive amounts of money in its dealing with the United States, and this includes the tremendous number of jobs leaving the country."

Well, quickly and fortunately, it looks like things are not going to get to that point, according to a joint declaration issued by the U.S. and Mexico that stated Mexico will "take unprecedented steps to increase enforcement to curb irregular migration, to include the deployment of its National Guard throughout Mexico, giving priority to its southern border."

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House Funding Leaders Easily Advance Fiscal 2020 Transportation Bill

Transportation Bill

Legislation that would increase funding for infrastructure grants and the agency overseeing trucking regulations was easily approved by a subcommittee in the U.S. House of Representatives on May 23.

The fiscal 2020 transportation funding bill would provide $1 billion for the Better Utilizing Investments to Leverage Development, or BUILD, grants, a $100 million increase above the 2019 enacted level.

The Federal Motor Carrier Safety Administration, with jurisdiction over trucking and bus operations, would receive $677 million, which would be $10 million above the 2019 enacted level.

The bill advanced by a voice vote to the Appropriations Committee, which is expected to consider the measure in the coming weeks.

Overall, the legislation would provide the U.S. Department of Transportation $86.6 billion, slightly more than President Donald Trump's request and $167 million above the 2019 enacted level.

For the Federal Highway Administration, the measure would provide $48.9 billion, $1.7 billion above the president's request, and $404 million below the 2019 enacted level.

For other agencies, the measure would provide the Federal Transit Administration $13.5 billion, $1.1 billion more than the president's request, and $60 million above the 2019 enacted level. The Federal Railroad Administration would receive $3 billion, which would be $877 million above the president's request, and $96 million more than the 2019 enacted level.

And the National Highway Traffic Safety Administration would receive $1 billion, which would be $81 million above the president's request, and $44 million more than the 2019 enacted level.

The bill also would provide Amtrak $2 billion, highway infrastructure programs would receive $1.75 billion, and the Port Infrastructure Development Program would be provided $225 million.

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Trade War Update: Port Of Los Angeles No Longer Top ‘Port’ — It’s Laredo

Port of Los Angeles

The Port of Los Angeles is no longer the nation's leading port, further evidence that the U.S.-China trade war is scrambling the deck chairs of U.S. trade.

Laredo, a city of 260,000 hard on the U.S.-Mexico border, is.

In the month of March, the latest U.S. Census Bureau data available, Port Laredo's trade was $20.09 billion while trade through the Los Angeles port's was $19.66 billion. Laredo's trade was up 9.52% from February while the Port of Los Angeles' trade was down 10.01%.

Although it is just one month of trade, and although the Port of Los Angeles remains the nation's top-ranked port year-to-date among the more than 450 airports, seaports and border crossings, it is just one more sign that President Trump's efforts to force change in China's policies is having an impact.

In previous columns, I have written how China went from buying 57% of all U.S. soybeans to dropping 94.75% in one month. I have written about how China went from being the second-leading buyer of U.S. oil to buying none. I have written about how U.S. trade with China fell fasterearlier this year than at any time in at least 17 years. I have written that China now accounts for a lower percentage of U.S. imports than at any time since 2012. And I have written that Mexico is now the United States' leading trade partner, having replace China.

And now this.

At work, in part, is how important Mexico trade is to Laredo and how important China trade is to Los Angeles. Laredo, in particular.

No other port has handled more trade with one country than Laredo does with Mexico, more than $228 billion in 2018. That''s because last year and this year, Mexico has accounted for more than 97% of all Port Laredo trade.

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Freight costs still a concern at U.S.-Mexico border

US/ Mexico border delays

Wait times for trucks importing and exporting cargo across the U.S.-Mexico border have dropped considerably from April crisis levels but industry experts warn threats to the supply chain haven't been eliminated.

"I've been telling my members that maybe this is a blessing in disguise," said Bob Costello, Chief Economist and Vice President of International Trade Policy for the American Trucking Associations (ATA).

Costello, speaking at the annual Global Supply Chain summit hosted by the U.S. Chamber of Commerce on May 16, was referring to the backups and delays that ensued at the southern border after President Trump in late Marchthreatened to shut it down in response to immigration issues. The problem was exacerbated when federal cargo inspectors were redeployed from cargo entry ports to help deal with the migration problem.

"[Wait] times have proved significantly, but we now have another reminder of how critical this trade is, and the modes of transportation that have to move it. Sometimes we need those reminders…that if you shut down the border for a week, you're in a recession, I can almost promise you that."

Costello emphasized the importance trade on the southern border is to American trucking and the U.S. economy: 32,000 U.S. truck drivers participate in cross-border freight moves, representing roughly $1.1 billion worth of cargo per day.

The U.S. automotive sector feels delays and border closure threats particularly hard. Shutting down a single assembly line for an hour due to a lack of parts can cost an automaker $1.3 million per day, said Kristin Dziczek, Vice President of Industry, Labor, and Economics for the Center for Automotive Research, who participated on the panel. "You can't make a car without the parts, and some very critical parts are supplied by Mexico and countries south of Mexico. We were predicting the whole [automotive] industry would be down within a week if the southern border is closed."

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Mexico says it is close to U.S. metals tariff deal, waiting for Canada

Mexico Tariffs

WASHINGTON (Reuters) - Mexico is close to resolving its dispute with the United States over steel and aluminum tariffs without quotas but hopes Canada can reach a similar agreement before completing it, a senior Mexican official said on Wednesday.

Jesus Seade, Mexican deputy foreign minister for North America, told Reuters by telephone that a deal to remove the so-called Section 232 tariffs was "very close" but he wanted Canada to be in the same position in its negotiations with Washington.

"What we've been talking about for a week," he said, "is eliminating the 232 without any quotas," noting that it was "very possible" Canada could sign up to a "similar" deal.

Sudden movements in future trade could be handled via a "consultation and monitoring system," he added, noting Mexico still had the option of sealing a deal without Canada.

U.S. Treasury Secretary Steven Mnuchin also expressed optimism about a resolution to the steel dispute, but a top Canadian official avoided direct comment on that possibility.

"I think we are close to an understanding with Mexico and Canada," on resolving the tariffs, Mnuchin said at a U.S. Senate Appropriations subcommittee hearing. He did not provide any details about the potential agreement.

Canadian Foreign Minister Chrystia Freeland said she discussed the tariffs on Canadian metals with U.S. Trade Representative Robert Lighthizer on Wednesday, but declined to say whether the two countries were close to a deal.

"We made the case as we have been doing for some time that the best outcome for both Canadians and Americans would be to lift those tariffs and to have free trade between our two countries who have this fantastic trading relationship in place," she told reporters after the meeting in Washington.

A USTR spokeswoman declined comment on the meeting.

Asked about prospects for a deal, Freeland said she would not discuss Canada's negotiating strategy. She added that if Washington kept the tariffs in place, it would be "very, very problematic" for Canadian ratification of the new U.S.-Mexico-Canada Agreement trade deal (USMCA).

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OEMs Offer Over-the-Air Software Updates as Latest Advance in Truck Maintenance

Latest Advance in Truck Maintenance

Computer and smartphone users don't have to take their devices to their dealers for each software update. Now, the same can be said for trucks.

Truck manufacturers increasingly are enabling fleets to update truck software and programming parameters "over the air" — an innovation that is saving days of downtime.

Ken Calhoun, fleet optimization manager at Altec Service Group, said the potential benefits are "huge."

"Obviously, our greatest desire is always to be able to keep the truck on the road doing its job, and if we can eliminate a significant portion of those service events, how is that not a win?" said Calhoun, who also is general chairman of American Trucking Associations' Technology & Maintenance Council.

Volvo Trucks North America introduced its remote programming offering in the fourth quarter of 2018 after a soft launch with certain customers earlier in the year. The service provides software updates for powertrain components, with more updates on the way, and 250 parameter updates for speed limiters and other functions. Updates are available for both over-the-road and vocational applications.

Ashraf Makki, product marketing manager, said Volvo fleet customers are notified by an agent that a software update is available. Software updates require about 20 minutes. Parameter updates require 10 minutes, including the conversation between the agent and the driver. The truck must be parked due to safety concerns, with the battery healthy enough to ensure the service won't be interrupted.

The challenge during testing wasn't on the technical side, Makki said. Instead, the company had to train its agents to communicate with customers to instill confidence so they would change their long-standing procedures.

As of late April, Volvo had 783 customers using the service with a total of 18,535 trucks. Those using the service range from large national fleets to single-truck customers.

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Trucking industry sifts through an abundance of tech options

technology in the trucking industry

As the transportation industry adapts to a digital world, owner-operators to large fleets are all grappling with how to adopt new technology.

"There are more technology choices than ever. Bob's trucking, Sue's trucking, Mario's trucking are hearing from nine million different sources, trying to sort that out," said industry consultant Randy Mullett of Mullett Strategies during Transparency19 on May 8.

Matt McLelland, innovation strategist at Covenant Transport (NYSE: CVTI) and Mario Pawlowski, CEO of iTrucker.com, joined Mullett in a discussion with FreightWaves Associate Editor John Paul Hampstead about how technology trends are affecting the transportation industry.

The wide-ranging conversation included the current struggles among some owner-operators to adapt to electronic logging devices (ELDs), to the ultimate implications of 5G wireless technology and green trucking.

"If drivers and small fleet owners don't adapt, they are going to be out of business," said Pawlowski, whose company provides ELDs and other tech solutions.

At Covenant, McLelland is tasked with identifying emerging technology and working with executives to incorporate it into the fleet.

"We're figuring it out. We don't have a lab or a testing facility," McLelland said.

The company will be taking delivery on a 2020 Freightliner Cascadia, which includes Level 2 automation, largely covering safety features.

The adoption of 5G networks may not deliver any immediate benefits to the industry. But it will open the door to bigger breakthroughs in technology because of the additional bandwidth.

"That may translate into someone who can drive a truck with a joystick sitting in a room somewhere," Mullett said.

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Tomatoes from Mexico could soon get a lot more expensive in U.S.

tomatoes from Mexico

Fresh tomatoes may soon be in short supply, and those still available are going to cost significantly more, as the Trump administration is readying a new tariff on the produce imported from Mexico.

The administration on Tuesday said it had terminated an agreement that had continued a non-protectionist policy in play since 1996, paving the way towards a 17.5 percent tariff, or tax, on tomatoes from Mexico.

"The Department of Commerce remains committed to ensuring that American domestic industries are protected from unfair trading practices," Commerce Secretary Wilbur Ross said in a statement. "We remain optimistic that there will be a negotiated solution."

The ruling could be a victory for U.S. growers, mostly in Florida, who contend Mexican producers unfairly undercut them on prices and have far lower labor costs.

In the wake of the Commerce Department's announcement, Mexico's economy ministry said American consumers can expect to pay 38 percent to 70 percent more for tomatoes. Mexico supplies about half the tomatoes consumed in the U.S., which receives about $2 billion worth of tomatoes from its southern neighbor.

Experts at Arizona State University calculate U.S. consumers might end up having to pay 40 percent to 85 percent more for fresh tomatoes. Costs might increase 40 percent from May to December, then skyrocket further in the colder months, when there are fewer domestic supplies available, according to economists led by Timothy Richards, the Morrison chair of agribusiness at ASU.

"U.S. consumers pay for the lion's share of the tariff impact because the demand for tomatoes in the U.S. is relatively inelastic, meaning that consumers do not change how much they purchase in response to higher prices," Richards said in a statement.

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Mexico Border Delays Seen Weighing on US Investment, Factories

Border Delays

More cargo from Mexico to the United States is being held up at the border, accompanied by increasing evidence that such delays are dimming prospects for American companies.

Slower trade between the countries since federal border officers recently were redirected to deal with a surge in migrants has been socking businesses with additional shipping costs. The effects likely will cause a modest headwind for second-quarter nonresidential investment growth — which cooled at the start of the year — and already helped to push a U.S. factory gauge to a two-year low in April, according to Bank of America Corp.

"The delays generate a meaningful direct cost for businesses," economist Stephen Juneau said in an e-mail May 6. The disruption may have a significant impact on the flow of goods, as more than 86% of Mexican imports enter the U.S. by land, and impose some $5.5 million in additional costs on U.S. businesses each month, he wrote in a report May 3.

Trucking company Werner Enterprises Inc. said on an April 25 earnings call that it expects border crossing to be "slow for the foreseeable future."

"Freight is still crossing the border at a very slow rate by comparable standards," said Derek Leathers, CEO of the Omaha, Neb.-based company.

Werner ranks No. 15 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

U.S. Customs and Border Protection said March 27 that trade processing would slow, with as many as 750 officers from crossings in the San Diego, Tucson, Ariz.; El Paso and Laredo, Texas, regions being re-assigned. President Donald Trump the next day renewed threats to close the border.

The Institute for Supply Management's factory survey last week showed April conditions at the weakest since October 2016, though still expansionary. The production component also fell to a more than two-year low, which Juneau said likely was in part because of border delays.

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