Binational pact aims to keep industrial plants in border region

Binational Pact

Brownsville officials were among Rio Grande Valley economic development leaders who signed a bi-national collaboration agreement on March 5 between South Texas and the state of Tamaulipas, Mexico, aimed at boosting economies on both sides of the border.

The initiative was led by the Rio South Texas Economic Council and the Ministry of Economic Development of the state government of Tamaulipas, with the signing ceremony in Weslaco. Besides officials from Brownsville, also participating were economic development leaders from Alamo, Donna, Edinburg, Harlingen, Hidalgo, Laredo, McAllen, Mission, Palmview, Pharr, Roma, Rio Grande City, San Benito, Sullivan City and Weslaco.

From the Mexican side, in addition to Matamoros, were leaders from Altamira, Camargo, Ciudad Victoria, Diaz Ordaz, Guerrero, Madero, Mier, Miguel Aleman, Nuevo Laredo, Reynosa, Rio Bravo, Tampico and Valle Hermoso.

According to RSTEC, the agreement is intended to strengthen investment recruitment and job creation in communities north and south of the Rio Grande.

Mario Lozoya, executive director of the Greater Brownsville Incentives Corporation and one of the agreement's signatories, said the agreement was forged partly in response to a situation with U.S.-owned maquiladoras (industrial plants) in Matamoros that has prompted some of them to relocate to the United States or Mexico's interior.

A mandate from Mexico's new president, Andres Manuel Lopez Obrador, doubling the minimum wage along a narrow strip of the country's northern border, led to a dispute between labor unions demanding higher wages for employees making above minimum wage and "maquila" management, who refuse to raise wages, arguing that their employees were already making the wages Obrador sought to bring about.

Another piece of Obrador's northern-border program entailed slashing the value-added tax on maquilas in the border region so they could afford the wage increase. At any rate, tens of thousands of maquila workers have walked off the job in Matamoros.

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USMCA opens a can of worms

USMCA Agreement

Traditionally, Mexico has offered foreign manufacturers cost advantages in the form of low wages. That may change soon.

Labor organizations in the U.S. and Canada often cite low wages and paltry workers' rights as the reasons why many jobs have been lost to Mexico. Hence, it is no surprise that the U.S. and Canada made it a point to include provisions that addressed these issues in the proposed replacement for the North American Free Trade Agreement.

For example, in addition to increased regional value content rules, the new United States-Mexico-Canada Agreement includes labor value content requirements. Under those provisions, 40 to 45 percent of a vehicle's value must be manufactured by employees earning at least $16 an hour. Automakers will be able to credit up to 10 percent from R&D and 5 percent for assembly in high-wage regions.

The precise formulas will be addressed in the uniform regulations still under discussion.

The underlying intention of this new requirement is to slow the outsourcing of U.S. manufacturing to Mexico. The unintended consequence is the increased compliance cost that will ultimately be transferred to the consumer.

Further, as part of the concluded trade deal, Mexico agreed to reform its labor laws. Passage of the USMCA by the U.S. Congress is conditioned on it. The two main objectives of the Mexican reforms are:

  1. Achieving labor union democratization, transparency and liberty.
  2. Shifting the dispute settlement process from local employment courts to the federal judicial branch.

Perhaps most important to labor organizations is the first, the issue of workers' representation in unions. It is widely claimed that Mexican labor unions don't legitimately represent their members' interests, lack transparency in their governance and are structured to advance economic interests over workers' rights. That is why many believe wages in Mexico have remained so low despite overall good macroeconomic performance in the country.

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Suppliers and buyers clash over tomato trade policy change

tomatoes from Mexico

The debate surrounding this move to withdraw from the 6-year-old agreement with Mexico demonstrates that President Trump's "Buy American" ethos is not a simple concept in today's economy.

Supporters of withdrawal are mainly suppliers of tomatoes and say it didn't serve its purpose of protecting American farmers. Supporters include Florida tomato growers along with Sen. Marco Rubio and nearly 50 other lawmakers largely representing Southern and Eastern states along with Michigan, California and Puerto Rico. In a letter to the Secretary of Commerce requesting termination of the agreement, these parties wrote Mexico's market share of tomatoes sold in the U.S. has gone from one third to half of the market.

"The U.S. tomato industry has been the canary in the coal mine for domestic fruit and vegetable production over the last three decades. Immediately terminating the suspension agreement will reinvigorate the anti-dumping investigation on fresh tomatoes from Mexico and send the message that the U.S. will ensure vigilant enforcement of our existing trade laws and trade agreements," said Rubio in a statement.

But other U.S. constituencies, mostly on the buy-side of industry, are less supportive of the tack by the Commerce Department. The Border Trade Alliance called the decision "a move that attempts to tilt trade policy in favor of parochial Florida farmer interests, but jeopardizes the health of the national agriculture industry."

The Fresh Produce Association of the Americas is also against withdrawing, stating: "Even a 5% reduction in supplies of Mexican tomatoes would result in consumers paying up to 25 cents more per pound at supermarkets, or up to $790 million more per year for tomatoes."

There is still a chance that a resolution may be reached in the intervening 90 days, but the timing is particularly demonstrative of how no trade deal, no matter how specific, happens in a vacuum. With the USMCA still not ratified by the U.S., Mexico or Canada, these smaller fights may have an impact far beyond farms and grocery stores.

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What Auto Manufacturers Need to Know About Mexico Under the USMCA

Mexico and USMCA

Building upon the centuries-old business relationship between Mexico and the United States, NAFTA allowed both countries to benefit from a seamless workshop that clearly made the pie larger. The 25-year-old contract needed to be revised, though, with motor vehicles and auto parts taking the lion's share of the modifications (for better or worse depending on how well your company coordinates upstream and downstream operations and record-keeping).

Mexico's economic relevance to the United States is frequently overlooked. The 11th largest economy in the world, Mexico has a population (126 million) roughly 40 percent that of the U.S. and is close to three times the size of Texas. The country has a network of 12 Free Trade Agreements (FTAs) with 46 countries, and seven additional ones will be added with the renewed Trans-Pacific Partnership (an agreement now known as CPTT, Comprehensive and Progressive Agreement for Trans-Pacific Partnership, TPP 11 in short), from which the U.S. withdrew under the Trump Administration.

Mexico was, in 2018, either the first or second largest export market for more than 50 percent of states in the Union. (It was first for six states –Arizona, California, Kansas, Nebraska, New Mexico and Texas, and second for 22 States–Colorado, Georgia, Illinois, Indiana, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennessee, and Wisconsin.) It is also the third-largest source of imports in the U.S.; has an expanding middle class that has grown accustomed to purchasing American goods and services; has demonstrated to be a near-shore, reliable manufacturing partner; as well as will benefit from a demographic bonus during the next several years that will help neutralize the dwindling U.S. population (and necessarily its workforce).

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Making the Autonomous Supply Chain a Reality

Supply chain

Supply chains are evolving in the face of greater customer demand, soaring expectations, and endless purchasing opportunities. Retailers, manufacturers and third-party logistics companies are having to move quicker and produce more with shorter turnarounds and greater transparency. Companies are digitizing their supply chains to meet these new challenges, but this alone isn’t enough to answer the questions businesses are asking every day: what’s going to happen tomorrow, next week, next month and next quarter?

An autonomous supply chain can help businesses respond with immediacy and decisiveness. This technology is designed to deliver on-demand, navigate disruptions months in advance and help keep your business ahead of any changes in customer buying behavior. The three core tenants for an autonomous supply chain are:

Reading the signals

The more information a business has access to and uses, the more it can help understand any changes in supply and demand. In the past, the main challenge was having the processing capability necessary to collect reliable data and harness it to represent the realities of changing conditions. The capacity to measure and recognize external conditions is critical to predicting supply and demand. The autonomous supply chain requires a significant increase in external signals, which relies on the reporting of evolving climate and market conditions in real time.

So how can you read the signals? Using artificial intelligence (AI), machine learning (ML) and IoT, you can manage and interpret signals such as weather events, temperatures jeopardizing fresh products and any online social trends influencing customer demand. Businesses need to make use of as many signals as possible, because if dimensions are missing it will difficult to get a clear picture.

It sees everything

To truly understand their entire supply chain, businesses need to manage the complexity and volume of intelligence — billions of pieces of information that are time-stamped with their own varying amounts of information. Let’s set the stage: imagine sensors inside a lorry, which is on its way to deliver fresh goods to a grocery retailer. Sensors are able to detect the temperature inside and outside of the lorry, the speed it is travelling at, and if there are any road works which will slow the delivery down. Every detail is pinpointed with time and date stamps.

Read the entire article here.

In Blow to Trump, America’s Trade Deficit in Goods Hits Record $891 Billion

America’s Trade Deficit

WASHINGTON — America’s trade deficit in goods with the rest of the world rose to its highest level in history last year as the United States imported a record number of products, including from China, widening the deficit to $891.3 billion and delivering a setback to President Trump’s goal of narrowing that gap.

The increase was driven by some factors outside Mr. Trump’s control, like a global economic slowdown and the relative strength of the United States dollar, both of which weakened overseas demand for American goods. But the widening gap was also exacerbated by Mr. Trump’s $1.5 trillion tax cut, which has been largely financed by government borrowing, and the trade war he escalated last year.

It is a case of textbook economics catching up with some of Mr. Trump’s unorthodox economic policies. Economists have long warned that Mr. Trump’s tax cuts would ultimately exacerbate a trade deficit he has vowed to reduce, as Americans, flush with extra cash, bought more imported goods.

His trade war with Beijing also widened the gap: Stiff tariffs on Chinese goods helped slow China’s economy, crimping American exports, which declined nearly 50 percent in December from the same month a year before.

"All countries run trade deficits whenever they consume more than they produce,” said Kimberly Clausing, an economist at Reed College in Oregon. “And when we borrow to finance tax cuts, like we did with the Tax Cuts and Jobs Act, we make these imbalances worse."

The trade deficit is the difference between how much a country sells to its trading partners and how much it buys. It generally includes both goods and services, though Mr. Trump has focused almost exclusively on the deficit in goods. He has long boasted that his trade policies would reduce that gap, which he views as a measure of whether partners like China and the European Union are taking advantage of the United States, a diagnosis few economists share.

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Doing Business in Mexico

NAFTA

NAFTA boosted the centuries-old business relationship between Mexico and the United States by allowing both countries to benefit from a seamless workshop that undoubtedly made the pie larger. As with any 25-year-old contract, however, NAFTA needed to be revised. Negotiations required delicate balancing between technical and political issues, with motor vehicles and auto parts requiring the lion´s share of the modifications.

In this article, we take stock of the revised agreement and, at the same time, look ahead at what the 2019 business calendar may bring in Mexico through the following top four issues:

  1. The (possible) execution of the US-Mexico-Canada Trade Agreement (USMCA), and what it means, particularly, for motor vehicles and auto parts manufacturing and sales in North America
  2. The newly elected (2018-2024) Lopez-Obrador administration
  3. New Product Safety Requirements and Recall Procedures
  4. The New Mexican Anti-corruption Law

Read the entire article here.
Originally publish in The National Law Review.

Ventus Global Logistics has 30 years of experience providing freight and distribution services for international companies that do business in Mexico. Contact us today to find out how Ventus Global Logistics can facilitate seamless import and export of your goods across North America.

Mexico Trade Spurs Largest Regional Spec Build

Laredo, TX

Laredo, TX is the third largest port in the U.S. after Los Angeles, and New York City and 60% of U.S. / Mexico trade occurs in Laredo, TX. Last year trade in Laredo surpassed $300 billion. This robust trade has driven the need for the largest regional class-A industrial spec space to be developed. It is no wonder why international companies are looking to Laredo to establish logistics operations.

Read the full article here.

Published in GlobeSt.com

We Launched a New Website!

Our new website provides a clear message of who we are, what we stand for and where our value lies when providing efficient logistics, freight, and custom broker solutions. The website also boasts a clean design and intuitive and consistent site-wide navigation system with improved menu functionality that directs you to the information most relevant to you. It is also fully responsive with mobile devices, making it easy to navigate on a wide range of web browsers and portable devices.

Amongst the new features the site contains are integrated social media buttons for Facebook, Twitter and Linkedin, and online chat to foster improved communication with our clients and future customers.

Our new blog provides a easy sign-up for periodic updates and access to articles that matter to you through smart topic filters.

We will be constantly updating our content with helpful information, articles, news, newsletters, company announcements and client successes in the Blogs section.

We hope you find the new website with a fresh look, easy to access information and we also wish to establish this portal as a source of information for those who visits our site.

For any questions, suggestions, feedback or comments, please E-mail us.

Thank you,
Ventus Global Logistics Team

About Ventus Global Logistics

With a track record stretching over three decades of reliable performance, we've established ourselves as the transparent, honest, experienced customs broker and logistics solutions provider for a wide range of businesses and industries in Mexico and the U.S. From web-based tracking and reporting systems to our bonded warehousing and ISO-9001-2015 certification, we hold ourselves accountable to our clients – and to a high standard of quality.