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U.S.-Mexico Border Means Opportunity, Not Just Drugs and Thugs

December 18, 2013

by Kezia McKeague

The U.S. House Foreign Affairs Western Hemisphere Subcommittee chose the fitting location of Tucson, Arizona, to convene a field hearing on trade facilitation in the border region on December 9. Dotted with cacti, this college town lies at the heart of the desert landscape that belonged to Mexico until the Gadsden Purchase of 1853. Today, Mexico is Arizona’s largest trading partner, yet perceptions of the border often identify it as a security threat rather than as an economic opportunity.

Last week’s hearing marked a refreshing effort to rebalance policymakers’ attention. In his opening statement, Chairman Matt Salmon (AZ-R) defined the objective: “to get at what we need to do in the public and private sectors to improve border infrastructure and better facilitate trade without letting down our guard on security efforts.” Recognizing that the two economies are deeply intertwined, he pointed to “the good news”—that the commercial relationship continues to grow—and “the bad news”—that ports of entry face significant challenges in keeping up with this growth.

Western Hemisphere Subcommittee Ranking Member Albio Sires (NJ-D) alluded to the solutions needed to resolve tensions between border security and trade facilitation, while Representative Kyrsten Sinema (AZ-D) criticized “long and unpredictable wait times” at the border. Representative Ron Barber (AZ-D) unequivocally stated that “we must expedite the legal flow of traffic,” and Representative David Schweikert (AZ-R) cited the “amazing opportunity” represented by the potential for lower energy costs bolstering a manufacturing renaissance on both sides of the border.

On both sides of the aisle, the consensus was that the security-versus-trade debate has been overly skewed towards the former.

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Tags: Mexico, Mexico-U.S. Relations, trade

A Trade War of Words between Brazil and the U.S.

October 17, 2012

by Lucy Jordan

Protectionism made news again in Brazil recently, when Finance Minister Guido Mantega announced that Brazilian firms could avoid a 30 percent tax increase on the auto industry by improving fuel efficiency, using Brazilian-made parts and investing in Brazilian research and development. Foreign automakers without a manufacturing plant in Brazil will be subject to the tax hike, Veja noted.

The program is designed to encourage innovation in technology and fuel efficiency, Mantega argued. Any negative effect on foreign imported cars, he said, was merely collateral damage.

It’s no surprise he is feeling a little defensive.

Last month, Brazil and the United States had something of a war of words over trade issues.

First of all Mantega, in an interview with the Financial Times, called the United States’ latest round of quantitative easing (QE) “protectionist.” QE, which has been deployed liberally by the U.S. and other industrialized nations in response to the economic crisis, floods the market with dollars—which Brazil has complained drives up the value of the real, making Brazilian exports less competitive.

“Any country that manipulates its currency is practicing protectionism,” Mantega told the FT. “We don’t do that.”

The U.S. responded in kind, with a leaked letter criticizing Brazil’s announcement of plans to increase import tariffs on some 100 items, including potatoes, tires and x-ray equipment, with more tariff hikes expected to be announced this month.

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Tags: Brazil, tariffs, trade

U.S.-Mexico Trade War Looms in Tomato Dispute

September 28, 2012

by Kezia McKeague

Fears of a trade war between the United States and Mexico escalated on Thursday following a preliminary decision in the politics of tomatoes. In a surprising and premature ruling, the Commerce Department sided with Florida tomato producers in terminating an agreement that has set a minimum price on Mexican tomatoes imported into the United States over the past 16 years.

The Mexican Government has already threatened to retaliate, with ramifications for other commodity producers caught in the cross-fire. Earlier this week, Secretary of Economy Bruno Ferrari had promised that if the United States makes a hasty decision, instead of conducting a standard 270-day review, “Mexico will use all our legal means to defend our producers.” A final ruling could also endanger talks over other bilateral trade disputes.

For Mexican tomato growers, termination of the agreement would allow U.S. growers to file formal complaints accusing the Mexicans of unfair trade practices, which they did repeatedly before the agreement’s adoption in 1996. The Mexicans argue that they are being punished for their success—for growing a superior product and for honoring the pact over 16 years.

Thursday’s announcement seemed particularly harsh given the timing: Mexican tomato producers were scheduled to meet with officials at the Commerce Department on Friday to discuss ways to resolve the dispute. The growers have said they are willing to accept a higher floor price for their tomatoes.

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Tags: Mexico, tomato growers, trade, U.S. Commerce Department

U.S.-Mexico Trade War Looms in Tomato Dispute

September 28, 2012

by Kezia McKeague

Fears of a trade war between the United States and Mexico escalated on Thursday following a preliminary decision in the politics of tomatoes. In a surprising and premature ruling, the Commerce Department sided with Florida tomato producers in terminating an agreement that has set a minimum price on Mexican tomatoes imported into the United States over the past 16 years.

The Mexican Government has already threatened to retaliate, with ramifications for other commodity producers caught in the cross-fire. Earlier this week, Secretary of Economy Bruno Ferrari had promised that if the United States makes a hasty decision, instead of conducting a standard 270-day review, “Mexico will use all our legal means to defend our producers.” A final ruling could also endanger talks over other bilateral trade disputes.

For Mexican tomato growers, termination of the agreement would allow U.S. growers to file formal complaints accusing the Mexicans of unfair trade practices, which they did repeatedly before the agreement’s adoption in 1996. The Mexicans argue that they are being punished for their success—for growing a superior product and for honoring the pact over 16 years.

Thursday’s announcement seemed particularly harsh given the timing: Mexican tomato producers were scheduled to meet with officials at the Commerce Department on Friday to discuss ways to resolve the dispute. The growers have said they are willing to accept a higher floor price for their tomatoes.

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Tags: Mexico, tomato growers, trade

The Politics of Tomatoes: U.S. Risks Trade Dispute with Mexico

September 13, 2012

by Kezia McKeague

On October 8, Mexico is set to become a full partner in the Trans-Pacific Partnership (TPP) negotiations.  As Mexican Ambassador to the United States Arturo Sarukhan is fond of saying, with TPP Mexico and the U.S. are playing chess, not checkers. Indeed, Mexico’s participation in the high-standards pact represents a unique opportunity to consolidate our strategic bilateral partnership and deepen our economic integration in the context of like-minded countries along the Pacific Rim.

Yet even as we celebrate cooperation at the level of geopolitics and multilateral negotiations, we cannot ignore the more prosaic frictions that inevitably arise in such a broad and dynamic relationship. Recently, these have included spats over chickens and washing machines, while the latest issue revolves around tomatoes.

Tomato disputes have a long history. With the advantages of ideal soil and climate conditions and low labor costs, Mexico became a major player in the U.S. market following the embargo placed on Cuba in 1962. After decades of tomato trade wars, the signing of the North American Free Trade Agreement (NAFTA) in 1992 eliminated tariffs on Mexican tomatoes over a ten-year transition period, despite the opposition of Florida agricultural producers. In 1996, at the behest of Florida’s tomato industry, the U.S. Commerce Department initiated an anti-dumping investigation to determine whether tomato imports from Mexico were being sold at less than fair market value. To suspend the investigation, Mexican producers agreed to a minimum price for imports. This so-called “suspension agreement” has been honored for 16 years, with two renewals as well as adjustments of the reference price.

Fast forward to the electoral year of 2012, and Florida tomato growers have requested that the Commerce Department end the suspension agreement so they can initiate a new anti-dumping investigation against Mexican tomatoes. They argue that the agreement is outdated and fails to protect them against the Mexican competition; their critics accuse them of a transparent attempt to use a swing state’s political clout on behalf of protectionist interests. 

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Tags: trade, Arturo Sarukhan, Mexico, Trans-Pacific Partnership

India and CELAC: Beyond Commodities

August 28, 2012

by Hari Seshasayee

On August 7, India’s foreign minister held the country’s first dialogue with a troika representing a recently formed 33-nation Latin American group, the Comunidad de Estados Latinoamericanos y Caribeños (Community of Latin American and Caribbean States—CELAC). The meeting drew little attention, and most media outlets dismissed it as a routine affair, akin to India’s engagements with other multilateral blocs. A more nuanced look, however, indicates a window of opportunity for both India and Latin America.

First, we must explore Latin America’s changing geopolitical priorities over the past few years.

The very nature of the CELAC grouping is reflective of this shift: it was formed in defiance of the Organization of American States to leave out the United States from its political confabulations. Latin America now looks less to its traditional trade partners—Europe and the U.S.—which are preoccupied with their debt crises and political transitions, and the region also no longer sees them as a model they can emulate.

As a result, China is a dominant player in Latin America, with an annual trade of $240 billion. The Chinese presence there is maintained by two pillars: primarily, by a massive exchange of commodities and natural resources, and secondly, by a large Chinese diaspora totaling upwards of 2 million people. This will continue to sustain China’s relationship with Latin America, though more recently there has been a subtle change of policy positioning toward Beijing. Some perceive the flooding of Chinese goods into their markets as a risk; others simply want to engage with new markets.

This is where India comes in. It presents Latin America with an opportunity to diversify and opens the door to a large and promising market.

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Tags: trade, energy, Agriculture, India, CELAC

Argentina Suspends Automobile Trade Agreement with Mexico

June 27, 2012

by AQ Online

Yesterday the Argentine government announced it would suspend the Acuerdo de Complementación Económica (Economic Complementation Agreement, also known as ACE-55) with Mexico for three years, discontinuing tariff preferences in the automotive sector for the latter. The agreement was suspended following Brazil and Mexico’s agreement in March of this year to limit their trade in automobiles and set specific export and import quantities for the next three years, which violated the established terms of the ACE-55, the Argentine government said.

The ACE-55 was signed in 2002 between Mexico and the countries of the Mercosur bloc, comprising Argentina, Brazil, Uruguay, and Paraguay, and entered into force on January 1, 2003. Its principal objective was to promote free trade between Mexico and Mercosur countries and integration of their automotive sectors. In 2007 Mexico and Argentina signed a Strategic Partnership Agreement to increase economic cooperation and coordinate trade approaches. In the agreement signed with Brazil earlier this year, Mexico agreed to limit automobile exports to Brazil to help prop up Brazil’s ailing automobile industry.

Mexican Minister of the Economy Bruno Ferrari requested that the Argentine government reconsider the decision to cancel the ACE-55, which he said “has proven to be beneficial to the bilateral trade relationship.” Further, Ferrari said that Mexico will maintain a strong position in this situation and will use every legal means at the international level to defend its interests. Mexico and other countries are currently preparing to challenge Argentina before the World trade Organization over protectionist policies.

Tags: trade, Mexico, Argentina, Argentina-Mexico relations

NAFTA Partners Deserve Quick Entry into TPP Talks

April 4, 2012

by Kezia McKeague

Assembled in the White House Rose Garden for a joint press conference on Monday, the “three amigos” of North America projected an image of trilateral comity in keeping with the depth of their countries’ relationships. Yet Mexican President Felipe Calderón and Canadian Prime Minister Stephen Harper departed the one-day North American Leaders’ Summit without a firm commitment from U.S. President Barack Obama on their request to join the Trans-Pacific Partnership (TPP). Buried in the penultimate line of the lengthy joint statement was a coy response: “The United States welcomes Canada’s and Mexico’s interest in joining the TPP as ambitious partners.”

As President Obama acknowledged in the Rose Garden, TPP’s high-standards approach “could be a real model for the world.” Indeed, the goal of the original four TPP members—Brunei, Chile, New Zealand, and Singapore—was to create a uniquely comprehensive agreement to which like-minded countries on both sides of the Pacific could accede, thus linking Asia and the Americas. Similarly, the U.S. decision to join TPP made more sense for the bloc’s potential to grow than for the market-access gains to be found in the members’ relatively small economies.  For Washington, TPP carries significant strategic weight as long as it continues to expand.

To its credit, the Obama administration recognizes the geopolitical benefits of TPP in the context of increased U.S. engagement with the Asia-Pacific.  Its reluctance to advocate for expanded participation from the Western Hemisphere, however, risks a gross strategic oversight. As Harper candidly remarked to an audience at the Woodrow Wilson Center on Monday, while “most of the members of the Trans-Pacific Partnership would like to see Canada join, I think there’s some debate, particularly within the (Obama) administration, about the merits of that."

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Tags: NAFTA, Canada, trade, Mexico, Stephen Harper, Barack Obama, Felipe Calderon, Trans-Pacific Partnership

U.S. Suspends Trade Preferences for Argentina

March 27, 2012

by AQ Online

The United States announced on Monday that it was suspending trade benefits for Argentina under the Generalized System of Preferences, which waives import duties for select goods from developing countries. In 2011, the U.S. imported approximately $500 million worth of goods under the GSP program from Argentina. This sanction will mostly affect the wine, beef, sugar, and olive oil industries.

The decision came after years of wrangling over a 2005 ruling when the World Bank’s International Centre for Settlement of Investment Disputes ruled against Argentina in a $300 million case involving two American companies, Azurix and Blueridge—a case that dates back to the Argentine debt default in 2002. Although the settlement was widely accepted by the international community, Argentina has refused to pay damages stemming from the case. 

A working paper published by Buenos Aires-based Red Latinoamericana de Comercio Exterior in anticipation of the expect U.S. decision notes that “this sanction is effectively null in the context of the overall trade with the US. It only represents 14 percent of total sales to the U.S. and even a smaller .0007 percent when compared with worldwide Argentine exports.” Although this does not represent a big economic hit for the South American country, experts say that it still has important political consequences.

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Tags: trade, Argentina, United States, Argentina Debt Default

Li Jinzhang Appointed China’s Ambassador to Brazil

January 30, 2012

by AQ Online

Chinese President Hu Jintao made seven ambassadorial appointments yesterday, according to a statement from the Standing Committee of the National People’s Congress—with Vice Minister of Foreign Affairs Li Jinzhang filling the post of ambassador to Brazil. Jinzhang, who spoke with AQ for the Spring 2011 issue, said at the time that “the potential for growth in cooperation and trade is huge” with Latin America.   

The choice of Li Jinzhang is significant to Brazil, China’s fellow BRIC country, as Jinzhang has occupied many diplomatic posts related to South America, and was also director of the Latin American Affairs Department at China’s foreign ministry. In his AQ interview, Jinzhang highlighted three policy goals for the People’s Republic in Latin America: promoting mutual respect and trust to expand common ground; deepening cooperation and achieving “win-win” results; and boosting common progress and intensifying exchanges.

The newest issue of Americas Quarterly shows that China has supplanted the United States as Brazil’s largest export destination. As ambassador, Li Jinzhang will oversee a growing Brazil–China relationship. In 2010, Chinese state-owned enterprises made significant investment in Brazilian firms, acquiring a 40 percent stake of oil giant Repsol YPF Brasil S.A. and a 100 percent stake of electricity company Expansión Transmissão Itumbiara.

Tags: trade, Brazil, China, Foreign Direct Investment, Li Jinzhang, Hu Jintao

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