Regional Development Key to a Strong North American Trade Bloc

North American Trade Bloc

For many years now, a concern of mine has been that the purpose of free trade and the agreements that envelop trade between regions has not been properly explained or promoted to communities, especially at the grass roots level.

Recently, Guillermo Malpica, trade commissioner of Mexico and executive director at the American Chamber of Commerce in Monterrey, Mexico, paid San Antonio a visit for a series of roundtables and presentations on the United States-Mexico-Canada Agreement(USMCA). At an energy sector meeting with Malpica, San Antonio energy industry leaders investing in Mexico were expecting to get a sense of direction and clarity regarding Mexico's energy policies.

One roundtable participant asked "what industries are the winners and the losers" in the USMCA. When you ask questions like these, you are basically taking apart a macroeconomic tool and looking at the individual parts. Separate parts don't work unless they are put together like a precision clock.

These types of agreements are not meant to be dissected. Not unlike the cute little frog you dissected in school, the innards don't look pretty. Trade agreements are macroeconomic tools that are designed to benefit economies. Yes, there were industries that were hit very hard once NAFTA came into play, but those industries were not ready.

The signals were clear when Mexico agreed to enter the General Agreement for Trade and Tariffs GATT in 1978 (today the World Trade Organization). My father, the Deputy Director General for the Foreign Trade Institute of Mexico during the 1970s, would have conferences and meetings with Mexican manufacturers, warning them to be ready to compete, up their quality, and export.

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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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Delays at U.S.-Mexico border crossing hits autos, trucks still lining up

border slowdown

CIUDAD JUAREZ/MEXICO CITY -- Long delays at the U.S.-Mexico border crossing for goods destined for American plants and consumers are hitting the U.S. auto industry, and the gridlock reduced by half the number of northbound trucks that crossed the entry point last week

Washington's decision to move some 750 agents from commercial to immigration duties to handle a surge in families seeking asylum in the United States has triggered the delays at crucial ports on a border that handles $1.7 billion in daily trade.

"The situation in Ciudad Juarez is very serious because these auto parts go to plants in the United States and obviously they put at risk the operation in the United States," Eduardo Solis, the president of the Mexican Auto Industry Association (AMIA), said on Monday.

The North American auto industry is highly integrated and many car parts cross the border several times before they are finally installed on a vehicle.

Seventeen 17 hours before the crossing to El Paso even opened on Monday morning, trucks were already lining up in Ciudad Juarez to avoid the fate of some 7,500 trailers that failed to cross last week, said Manuel Sotelo, vice president at the Mexican National Chamber of Freight Transport's north division.

That is roughly half the number of trucks per week that usually cross there, carrying everything from car and plane parts to refrigerators, washing machines, TVs, cellphones and computers.

"This is not normal. We had never seen this before in Ciudad Juarez," said Sotelo.

Despite elevated costs, some Mexican exporters are turning to air freight to avoid the mile-long lines at the border.

"We're using charter (planes) which cost between $35,000 and $100,000 depending on the volume and merchandise," said Pedro Chavira, who heads the manufacturing industry chamber INDEX in Ciudad Juarez.

Air freight is typically a last resort used by automakers and suppliers to get parts to an assembly plant for just-in-time delivery.

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