18-doing business with nafta

8/3/2019 18-Doing Business With NAFTA

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Doing Business with NAFTA(North American Free Trade

Agreement)

Learning Values:After reading this chapter the reader will have an understanding on:

1. The member nations and the essence of NAFTA.2. Intra trade and external trade of NAFTA members.3. Indias trade with NAFTA.4. Success of Indian business in NAFTA.5. Future potential for co-operation and prosperity.6. Current developments.

The status of economic super power is an outcome of three countrysintegrated efforts and harmony of North Americans, specially USAmaintained with world and focus on business, technology andinfrastructure.


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Members of NAFTA:

In January 1994, Canada, the United States and Mexico launched the NorthAmerican Free Trade Agreement (NAFTA) and formed the world's largestfree trade area.

The North American Free Trade Agreement (NAFTA) is a comprehensivetrade-liberalization agreement among Canada, Mexico, and the UnitedStates. NAFTA progressively eliminates most tariff and non tariff barriers totrade between these countries over a transition period that began on January1, 1994 and concludes on January 1, 2008. The agreement also facilitatescross-border investment, requires that sanitary and phytosanitary standardsfor trade be scientifically based, and expands cooperation regarding theenvironment and labor.

The Agreement has brought economic growth and rising standards of livingfor people in all three countries. In addition, NAFTA has established astrong foundation for future growth and has set a valuable example of the

benefits of trade liberalization. It also strengthened the rules and proceduresgoverning trade and investment throughout the continent.

The member countries of the North American Free Trade Agreement(NAFTA) form the world's largest trading bloc, with a gross domestic


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product (GDP) of US$ 12 trillion, or one third of the world's total GDP. Thethree countries have enjoyed a burgeoning relationship stemming from theirdecision to open doors and break down barriers. Markets continue to openup to a freer flow of goods, services and investments, and the economies are

becoming more integrated than ever.

Objectives of NAFTA:

a) Eliminate barriers to trade in, and facilitate the cross-bordermovement of, goods and services between the territories of theParties;

b) Promote conditions of fair competition in the free trade area;c) Increase substantially investment opportunities in the territories of the

Parties;d) Provide adequate and effective protection and enforcement of

intellectual property rights in each Party's territory;e) Create effective procedures for the implementation and application of

this Agreement, for its joint administration and for the resolution ofdisputes; and

f) Establish a framework for further trilateral, regional and multilateralcooperation to expand and enhance the benefits of this Agreement.

Labour Policies and the Environment:

The economic integration promoted by NAFTA has spurred betterenvironmental performance across the region. Through the North AmericanAgreement on Environmental Cooperation, the three partners are

promoting the effective enforcement of environmental laws.Through the Commission for Environmental Cooperation (CEC),

which was created from the NAFTA, all three countries have benefited fromcoordination which is increasing the effectiveness of North American

conservation efforts by:- Developing common priorities for the protection of certain species- Developing North American Conservation Action Plans for three sharedmarine species- Providing tools such as a map of terrestrial eco regions which managementagencies are using in their programs


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- Setting out common mechanisms for planning and monitoring birdconservation programs

Through the North American Agreement on Labour Cooperation,members are working together to protect, enhance and enforce basicworkers rights.

The NAFTA also establishes institutions and creates a formal processthrough which the public may raise concerns about labor law enforcementdirectly with governments. NAFTA partners have undertaken a wide-rangeof cooperative programs and technical exchanges on industrial relations,occupational safety and health, child labor, gender equality, and protectionof migrant workers.

CANADA

Capital: Ottawa

GDP (purchasing power parity): $1.165 trillion (2006 est.)

GDP (official exchange rate): $1.089 trillion (2006 est.)

GDP - real growth rate: 2.8% (2006 est.)
https://www.cia.gov/cia/publications/factbook/flags/ca-flag.html


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Industries: transportation equipment, chemicals, processedand unprocessed minerals, food products, woodand paper products, fish products, petroleumand natural gas

Exports: $405 billion f.o.b. (2006 est.)

Exports - commodities: motor vehicles and parts, industrial machinery,aircraft, telecommunications equipment;chemicals, plastics, fertilizers; wood pulp,timber, crude petroleum, natural gas, electricity,aluminum

Exports - partners: US 84.2%, Japan 2.1%, UK 1.8% (2005)

Imports: $353.2 billion f.o.b. (2006 est.)

Imports - commodities: machinery and equipment, motor vehicles andparts, crude oil, chemicals, electricity, durableconsumer goods

Imports - partners: US 56.7%, China 7.8%, Mexico 3.8% (2005)

Currency (code): Canadian dollar (CAD)Airports - with paved runways: 509

Railways: 48,467 km

Roadways: 1,042,300 km

Ports and terminals: Fraser River Port, Halifax, Montreal, Port Cartier,Quebec, Saint John's (Newfoundland), Sept Isles,Vancouver

Canada with a land area of almost 3.6 million square miles is secondin size only to Russia. The country is divided into 10 provinces and threeterritories.. Canada typically had a positive balance of payment, thanks to itsfood, energy and motor vehicle exports. Canadas primary trading partner isUS.

Canadas economic growth has been historically based on the exportof agricultural staples, especially grains and on the production and export ofnatural resource products such as mineral, oil, gas and forest products. Majorsecondary industries have also emerged and now Canada ranks among thetop 10 manufacturing nations of the world. Service industry is alsoexpanding rapidly, especially financial services in Toronto.

Almost 80% of manufacturing activity s located in Ontario andQuebec including the entire motor vehicle industry, which is Canadaslargest segment, while Calgary has now become a major high tech centre.Almost one quarter of all Canadas exports and imports are in autos and autorelated products.

. Canadas growth was helped by large inflows of FDI, today 40percent of the primary and secondary industries are foreign owned.


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As an affluent, high-tech industrial society in the trillion-dollar class,Canada resembles the US in its market-oriented economic system, pattern of

production, and affluent living standards. Since World War II, theimpressive growth of the manufacturing, mining, and service sectors hastransformed the nation from a largely rural economy into one primarilyindustrial and urban. The 1989 US-Canada Free Trade Agreement (FTA)and the 1994 North American Free Trade Agreement (NAFTA) (whichincludes Mexico) touched off a dramatic increase in trade and economicintegration with the US. Given its great natural resources, skilled labor force,and modern capital plant, Canada enjoys solid economic prospects. Exportsaccount for roughly a third of GDP. Canada enjoys a substantial tradesurplus with its principal trading partner, the US. Canada is the US' largest

foreign supplier of energy, including oil, gas, uranium, and electric power.

Canadas industrial climateThe Canadian economy is characterized by private enterprise.

However some industries, such as broadcasting and public utilities, aregovernment owned or subject to substantial government regulation..

Small business is a major part of the economy and accounts for almost80 % of all new employment in manufacturing. The service and retail trade

industries are characterized by a large number of industries that vary in size.70 % of Canadians work in service industries.

Export and ImportsExport permits are required for the shipment of goods having strategic

value, such as uranium. They are also required to implement the provisionsof various international agreements into which Canada has entered. Importdocumentation is also required, as well as payment of goods and sales tax(GST value added tax). This tax is collected by Canadian customs, which is

7 % of the value of the goods plus any import duties.

Banking and financeBanks in Canada offer a full range of financial services. There are six

large Canadian chartered banks with extensive national branch networks thataccount for 90 % of nations banking industry assets. There are also many


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small banks (foreign owned), these bank respond to the action of centralbank. Banks operate within the confines of the bank act.

Labor Relation

Labor relations are governed by both Federal and provincial laborlegislation. The Canada labor court is the federal law that covers suchmatters as wages, employment practices, work safety and conciliation in theevent of labor disputes. Provincial government has similar laws to coveremployer-employee relations at local level.

InvestmentsThe Investment Canada Act (ICA) was designed to create a welcome

climate for foreign investment by significantly loosening previous

restrictions (30 June 1985). Investment in certain industries is restricted forexample a license to operate a broadcasting station can be granted only to aCanadian citizen or corporation whose stock is 80 %. Under ICA a nonCanadian wishing to acquire a Canadian firm must make an application toICA for review and approval, if the assets are valued more than 5 milliondollars or the business relates to Canadas cultural heritage or nationalheritage.

There are numerous provincial statues that place restrictions onforeigners seeking to invest in particular industries or activities, for example,

individual have to be Canadian resident for at least a year in order to beregistered securities dealer. Similarly, who are registering ownership of landmust disclose their citizenship.

Business opportunities in CanadaUse of product standards as a trade barrier is prohibited and national

treatment of testing labs and certification bodies is established.Many restrictions on agriculture products, wine and distilled spirits,

auto parts and energy goods have been sharply reduced if not totallyeliminated.

The size of the government procurement markets that will be openedto suppliers from the other countries is slightly increased.

Travel by business investors, visitors, traders, professional andexecutives transferred intra company is facilitated.

The opportunity to make investments in each others country isfacilitated and encouraged through the adaptation of national treatment.


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Marketing in CanadaCompanies doing business in Canada need to know the distribution

practices and advertising and promotional channels. In many cases these aresimilar to those of other countries, but there are some important differences.

Distribution practicesDespite the countrys vast size, sales to Canadian industries are

characterized by short marketing channels with direct producer- to- userdistribution. Many Canadian industries are dominated by few large scaleenterprises that are highly concentrated geographically.

It is not unusual for 90 % of perspective customers for an industrialproduct to be located in or near two or three cities. Consumer goods marketis more diffused than the industrial markets, and the use of marketingintermediaries is often necessary. Firms having only one representative or

distribution point typically chose Toronto. The market is divided into threeareas; distributors are frequently putting Montreal, Ontario and Vancouver.Direct selling is another growing area. This includes the sale of goods frommanufacturing premises, by mail through home delivery, through personalselling and through non retail channels.

Wholesale and retail trade is also important forms of distribution.Because of the wide dispersion of customers, wholesale trade is critical.

ExportingOne of the most popular ways of doing business in Canada is through

exports. Canada is USs largest market. Every year Canada buy as much USgoods as do all the member nations of EU combined. In recent years theCanadian government has simplified the process of shipping goods into thecountry.

FranchisingCanada is dominant foreign market for US franchisers. Currently there

are more than 300 US franchise firms operating approximately 10000franchising units in Canada.In recent years Canadian banks have become more responsive to the needsof franchise operations. Canadian chartered banks now offer various loansand repayment plans and also offer payroll and cash management servicesfor franchises.


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Ease of... 2006 rank 2005 rank Change in rank

Doing Business 4 4 0

Starting a Business 1 1 0

Dealing with Licenses 32 32 0

Employing Workers 13 12 -1

Registering Property 22 25 +3

Getting Credit 7 7 0

Protecting Investors 5 5 0

Paying Taxes 22 21 -1

Trading Across Borders 8 8 0

Enforcing Contracts 16 15 -1

Closing a Business 5 4 -1

International rankings

Organization Survey Ranking

A.T. Kearney/Foreign PolicyMagazine

Globalization Index 2005 6 out of111

IMD International World Competitiveness Yearbook2005

5 out of 60

The Economist The World in 2005 - Worldwidequality-of-life index, 2005

14 out of111

Yale University/Columbia

University

Environmental Sustainability Index,

2005 (pdf)

6 out of

146Reporters Without BordersWorld-wide

Press Freedom Index 2006 16 out of168

Transparency International Corruption Perceptions Index 2005 14 out of159

Heritage Foundation/The WallStreet Journal

Index of Economic Freedom, 2007 10 out of161

The Economist Global Peace Index 8 out of121

INDIAS TRADE WITH CANADA

Indias exports to Canada:In 2005-06 Indias Export to Canada was 1,021.58 million US$ which

was 0.9909 percent of India's Total Export in that year. This was 17.86 percent increase from the last year. India exports readymade garments,textiles, cotton yarn, carpets, floor spreads, gem & jewellery & precious
http://en.wikipedia.org/wiki/A.T._Kearneyhttp://en.wikipedia.org/wiki/Foreign_Policyhttp://en.wikipedia.org/wiki/Foreign_Policyhttp://www.atkearney.com/main.taf?p=5,4,1,116http://en.wikipedia.org/wiki/IMD_Internationalhttp://www01.imd.ch/wcy/http://www01.imd.ch/wcy/http://en.wikipedia.org/wiki/The_Economisthttp://www.economist.com/theworldin/international/displayStory.cfm?story_id=3372495&d=2005http://www.economist.com/theworldin/international/displayStory.cfm?story_id=3372495&d=2005http://en.wikipedia.org/wiki/Yale_Universityhttp://en.wikipedia.org/wiki/Columbia_Universityhttp://en.wikipedia.org/wiki/Columbia_Universityhttp://www.yale.edu/esi/ESI2005_Main_Report.pdfhttp://www.yale.edu/esi/ESI2005_Main_Report.pdfhttp://en.wikipedia.org/wiki/Reporters_Without_Bordershttp://www.rsf.org/http://en.wikipedia.org/wiki/Transparency_Internationalhttp://www.transparency.org/policy_research/surveys_indices/cpi/2005http://en.wikipedia.org/wiki/Heritage_Foundationhttp://en.wikipedia.org/wiki/The_Wall_Street_Journalhttp://en.wikipedia.org/wiki/The_Wall_Street_Journalhttp://www.heritage.org/research/features/index/http://en.wikipedia.org/wiki/The_Economisthttp://en.wikipedia.org/wiki/Global_Peace_Indexhttp://en.wikipedia.org/wiki/A.T._Kearneyhttp://en.wikipedia.org/wiki/Foreign_Policyhttp://en.wikipedia.org/wiki/Foreign_Policyhttp://www.atkearney.com/main.taf?p=5,4,1,116http://en.wikipedia.org/wiki/IMD_Internationalhttp://www01.imd.ch/wcy/http://www01.imd.ch/wcy/http://en.wikipedia.org/wiki/The_Economisthttp://www.economist.com/theworldin/international/displayStory.cfm?story_id=3372495&d=2005http://www.economist.com/theworldin/international/displayStory.cfm?story_id=3372495&d=2005http://en.wikipedia.org/wiki/Yale_Universityhttp://en.wikipedia.org/wiki/Columbia_Universityhttp://en.wikipedia.org/wiki/Columbia_Universityhttp://www.yale.edu/esi/ESI2005_Main_Report.pdfhttp://www.yale.edu/esi/ESI2005_Main_Report.pdfhttp://en.wikipedia.org/wiki/Reporters_Without_Bordershttp://www.rsf.org/http://en.wikipedia.org/wiki/Transparency_Internationalhttp://www.transparency.org/policy_research/surveys_indices/cpi/2005http://en.wikipedia.org/wiki/Heritage_Foundationhttp://en.wikipedia.org/wiki/The_Wall_Street_Journalhttp://en.wikipedia.org/wiki/The_Wall_Street_Journalhttp://www.heritage.org/research/features/index/http://en.wikipedia.org/wiki/The_Economisthttp://en.wikipedia.org/wiki/Global_Peace_Index


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stones, organic chemicals, coffee, spices, light engineering goods, iron &steel articles, footwear and leather products, rice, cereals, processed foodsand marine products to Canada. India's major items of import from

Canada include newsprint, wood pulp, asbestos, potash, peas, iron

scrap, copper, minerals and industrial chemicals. Some of the majoritems exported to Canada are:

(In US$)

MAJOR ITEMS 2004 2005 2006DIAMONDS - NON-INDUSTRIAL - WORKED -NOT MOUNTED OR SET 67857477

81553278 114848018

T-SHIRTS, SINGLETS AND OTHER VESTS -KNITTED - COTTON 33917644

35573360 45302344

ARTICLES OF JEWELLERY - PRECIOUS METALS(OTHER THAN SILVER) 15986215

17559404 37247906

SHRIMPS AND PRAWNS - FROZEN 303470482850780

6 35017275

OTHER HETEROCYCLIC COMPOUNDS NES(INCLUDING MORPHOLINE, SULTONES,SULTAMS AND NUCLEIC ACIDS) 4307830

11381621 29200730

WOMENS/GIRLS BLOUSES, SHIRTS AND SHIRT-BLOUSES - WOVEN - COTTON 13888889

17621618 21651083

MEN'S/BOYS SHIRTS - KNITTED - COTTON 229705112024915

1 20557802

MENS/BOYS SHIRTS - WOVEN - COTTON 200301232193245

5 20110918

WOMENS/GIRLS SKIRTS AND DIVIDED SKIRTS -WOVEN - COTTON 3741523

16152994 19250698

PARTS OF TAPS, COCKS, VALVES OR OTHERSIMILAR APPLIANCES 16739479

18985495 18319068

Indias imports from Canada:

In 2005-06 Indias import from Canada was 919.87 million US$which was 0.6167 percent of India's Total import in that year. This was

18.58 percent increase from the last year.(In US$)

MAJOR ITEMS 2004 2005 2006NEWSPRINT - IN ROLLS OR SHEETS 122092891 155405417 179363996

COPPER ORES AND CONCENTRATES 10931576 38986198 131689853

PEAS - DRIED AND SHELLED 74731438 132367480 118482710

POTASSIUM CHLORIDE 69182316 114647461 104473822


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HELICOPTERS OF AN UNLADEN WEIGHT(MORE THAN 2,000 KG) 8288574 15140204 51845002

SEMI-CHEMICAL WOOD PULP 30830553 25074852 50289796

CHEMICAL WOODPULP - SODA OR SULPHATE- CONIFEROUS, BLEACHED 16574816 21071509 36241932

PARTS OF ELECTRICAL APPARATUS FOR LINETELEPHONE OR LINE TELEGRAPHY 11033491 20588372 34134104

NICKEL - UNWROUGHT, NOT ALLOYED 12343673 10917299 29300703

ASBESTOS 28415254 25034180 28155402

UNITED STATES OF AMERICA

Capital: Washington, DC (capital)
https://www.cia.gov/cia/publications/factbook/flags/us-flag.html


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GDP (official exchange rate): $13.22 trillion (2006 est.)


Industries: leading industrial power in the world, highlydiversified and technologically advanced;

petroleum, steel, motor vehicles, aerospace,telecommunications, chemicals, electronics, foodprocessing, consumer goods, lumber, mining

Exports: $1.024trillionf.o.b.(2006est.)

Exports - commodities: Agricultural products (soybeans, fruit,corn)9.2%,industrial supplies (organic chemicals) 26.8%,capital goods (transistors, aircraft, motor vehicleparts, computers, telecommunicationsequipment) 49.0%,consumer goods (automobiles, medicines) 15.0%(2003)

Exports partners Canada23.4%,Mexico13.3%,Japan6.1%Imports: $1.869 trillion f.o.b. (2006 est.)

Imports - commodities: agricultural products 4.9%, industrial supplies32.9% (crude oil 8.2%), capital goods 30.4%(computers, telecommunications equipment,motor vehicle parts, office machines, electricpower machinery), consumer goods 31.8%(automobiles, clothing, medicines, furniture,toys) (2003)

Imports - partners: Canada16.9%,China15%,Mexico10%,Japan8 %

Currency (code): US dollar (USD)

Airports - with paved runways: 5,119Railways 226,605 km

Roadways: 6,430,366 km

Ports and terminals: Corpus Christi, Duluth, Hampton Roads,Houston, Long Beach, Los Angeles, NewOrleans, New York, Philadelphia, Tampa, TexasCity

The US has the largest and most technologically powerful economy

in the world, with a per capita GDP of $43,500. In this market-orientedeconomy, private individuals and business firms make most of the decisions,and the federal and state governments buy needed goods and services

predominantly in the private marketplace. US business firms enjoy greaterflexibility than their counterparts in Western Europe and Japan in decisionsto expand capital plant, to lay off surplus workers, and to develop new

products.


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At the same time, they face higher barriers to enter their rivals' homemarkets than foreign firms face entering US markets. US firms are at or nearthe forefront in technological advances, especially in computers and inmedical, aerospace, and military equipment; their advantage has narrowedsince the end of World War II. The onrush of technology largely explainsthe gradual development of a "two-tier labor market" in which those at the

bottom lack the education and the professional/technical skills of those at thetop and, more and more, fail to get comparable pay raises, health insurancecoverage, and other benefits.

Imported oil accounts for about two-thirds of USconsumption. Long-term problems include inadequate investment ineconomic infrastructure, rapidly rising medical and pension costs of an aging

population, sizable trade and budget deficits, and stagnation of familyincome in the lower economic groups. The merchandise trade deficit reached

a record $750 billion in 2006.

FinanceThe U.S. banking market comprises several types of financial institutions,including commercial banks, investment banks, savings banks, savings andloan associations and credit unions. In addition, specialized institutions,including leasing companies, finance companies and factoring companies,offer asset-based financing. Commercial banks supply the most funds to

businesses. Short-term financing is usually arranged as a line of credit.

Communications and transportationThe nation has a comprehensive network of internal and externalcommunications systems, which includes all forms of wired connections,almost 100 percent universal coverage for cellular technologies and aquickly growing implementation of wireless networks

Regulatory environmentThe U.S. regulatory environment is a combination of open competition andconsumer protection. For a business that is specifically intrastate (within

one state), such as a restaurant, all regulatory powers reside within the stateand its local governmental units. It is important to verify any regulatoryinformation because laws and legal interpretation of the laws are frequentlymodified.


Doing Business 3 3 0


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Starting a Business 3 3 0

Dealing with Licenses 22 18 -4

Employing Workers 1 1 0

Registering Property 10 10 0

Getting Credit 7 7 0

Protecting Investors 5 5 0

Paying Taxes 62 55 -7Trading Across Borders 11 10 -1


Closing a Business 16 16 0

INDIAS TRADE WITH USA

In 2005-06 Indias Export to USA was 17,353.06 million US$ whichwas 16.8328 percent of India's Total Export in that year. This was 26.06

percent increase from the last year. India's main exports to US are preciousstones, metals (worked diamonds & gold jewellery), Woven apparel, Knitapparel, miscellaneous textile article, Fish and seafood (frozen shrimp),Textile floor coverings, Iron/steel products, Organic chemicals and

Machinery (taps, valves, transmission shafts, gears, pistons, etc)

(In US$)MAJOR ITEMS 2004 2005 2006DIAMONDS - NON-INDUSTRIAL - WORKED -NOT MOUNTED OR SET

2851661350

3079551682 3256065523

ARTICLES OF JEWELLERY - PRECIOUSMETALS (OTHER THAN SILVER)

1426187019

1676280032 2308507783

OTHER FLAT ROLLED PRODUCTS NES -IRON/NON-ALLOY STEEL (WIDTH >600MM) -PLATED/COATED WITH ZINC 462064375 246552857 509916724

WOMENS/GIRLS BLOUSES, SHIRTS ANDSHIRT-BLOUSES - WOVEN - COTTON 306184600 336494491 373569165

COTTON TERRY TOWELS AND HOUSEHOLDLINEN OF COTTON TERRY FABRICS 194358172 247302060 315279301

SWEATERS, SWEATSHIRTS AND WAIST-COATS - KNITTED - COTTON 202622832 270871452 299329902

MEN'S/BOYS SHIRTS - KNITTED - COTTON 139359998 215201065 294374386

HEAVY PETROLEUM OIL PREPARATIONS 121148438 400441746 290012993

BEDSHEETS, PILLOWCASES AND BED LINEN(INCL SETS) - WOVEN, NOT PRINTED -

149154918 211578998 264483994


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COTTON

WOMENS/GIRLS SKIRTS AND DIVIDEDSKIRTS - WOVEN - COTTON 81596011 281198633 248722347

Indias imports from USA:In 2005-06 Indias import from USA was 9,454.74 million US$ which

was 6.3384 percent of India's Total import in that year. This was 35.04percent increase from the last year. India imports sophisticated machinery(computers and components, gas turbines, telecom, etc), Electrical

machinery (recording/sound media), Medical and surgicalequipment/instruments, Aircraft, spacecraft (small aircraft), Precious stones,metals (diamonds, not mounted or set), jewellery, Organic chemicals,

Plastic, Cotton and cotton waste and Wood pulp, etc.(In US$)

MAJOR ITEMS 2004 2005 2006AIRCRAFT NES OF AN UNLADEN WEIGHT(MORE THAN 15,000 KG) 228369178

467539354 1313325729

DIAMONDS - NON-INDUSTRIAL - WORKED -NOT MOUNTED OR SET 365183207

430735170 589396743

FERTILIZERS (CODE VALID ONLY FOR U.S.EXPORTS) 118700591

423744224 586668998

ARTICLES OF JEWELLERY - PRECIOUSMETALS (OTHER THAN SILVER) 142417976

207642165 256454410

OILS/OTHER PRODUCTS OF THEDISTILLATION OF HIGH TEMP COAL TAR;SIMPRODUCTS,NES 113832364 98948109 217565760

PARTS OF ELECTRICAL APPARATUS FORLINE TELEPHONE OR LINE TELEGRAPHY 91397484

103805667 125817572

OTHER AUTOMATIC DATA PROCESSINGMACHINES, PRESENTED IN THE FORM OFSYSTEMS 83598237

113252166 124137976

ALMONDS - IN SHELL 67090325 94346274 114296938

PARTS OF BORING OR SINKING MACHINERY(WHETHER OR NOT SELF-PROPELLED) 86606449 98534035 112298619

AIRCRAFT LAUNCHING GEAR, DECK

ARRESTORS AND SIMILAR GEAR 61119274 59846878 105789025


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UNITED MEXICAN STATES

Capital: Mexico (Distrito Federal)


GDP (official exchange rate): $741.5 billion (2006 est.)


Industries: food and beverages, tobacco, chemicals, iron andsteel, petroleum, mining, textiles, clothing, motorvehicles, consumer durables, tourism

Natural resources: petroleum, silver, copper, gold, lead, zinc, naturalgas, timber

Exports: $248.8 billion f.o.b. (2006 est.)

Exports commodities: manufactured goods, oil and oil products, silver,fruits, vegetables, coffee, cotton

Exports partners: US 85.7%, Canada 2%, Spain 1.4% (2005)

Imports: $253.1 billion f.o.b. (2006 est.)

Imports - commodities: metalworking machines, steel mill products,
https://www.cia.gov/cia/publications/factbook/flags/mx-flag.html


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agricultural machinery, electrical equipment, carparts for assembly, repair parts for motor vehicles,aircraft, and aircraft parts

Imports - partners: US 53.4%, China 8%, Japan 5.9% (2005)

Currency (code): Mexican peso (MXN)

Airports - with paved runways: 228Railways: 17,562 km

Roadways: 235,670 km

Ports and terminals: Altamira, Manzanillo, Morro Redondo, SalinaCruz, Tampico, Topolobampo, Veracruz

It is third largest nation in Latin America. The country federaldemocratic republic divided into 31 states and the Federal District (MexicoCity)

Mexico has a free market economy that recently entered the trilliondollar class. It contains a mixture of modern and outmoded industry and

agriculture, increasingly dominated by the private sector. Per capita incomeis one-fourth that of the US; income distribution remains highly unequal.Trade with the US and Canada has tripled since the implementation of

NAFTA in 1994. Mexico has 12 free trade agreements with over 40countries including,Guatemala, Honduras, El Salvador, the European FreeTrade Area, and Japan, putting more than 90% of trade under free tradeagreements.

LaborLabor is relatively plentiful and inexpensive. However, although there

are numerous engineers, MNEs report a serious shortage of skilled labor andmanagerial personnel, particularly at the middle and upper levels of theorganization.

DEMOGRAPHY AND SOCIAL INDICATORS


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Petroleum cluster1. The country has second largest proven oil reserve after Venezuela and

is the world fifth largest producer. The largest firm is the state ownedPetroleos Mexicanos (PEMES) which is the worlds largest crude oil

producer (does not include refining). The company has a work forceof 135000 employees and assets of nearly 60 billion dollars including

pipelines, refineries, tankers, aircrafts and railcars. The commoditynature of the energy business provides little opportunity to insulateitself from the cyclical changes of both pricing and demand in thiscluster.

Automotive cluster

The global auto industry is currently undergoing worldwiderestructuring. In this process Mexico is emerging as a major car and truck

producer. Over the last decade the big three US automakers have beenexpanding their capacities in Mexico while closing the plants in US andCanada. At the same time European and Japanese firms are investing inMexico, in effort to tap such low-cost, low capital cost, proximity to largestauto market in the world, growth of domestic demand, and accessibility torelated support industries.

Mexico has strong, rich resources base supporting its automotivecluster. There is an abundance of young, skilled, adaptable labor. Foreignauto firms are finding that these workers are particularly effective after theyhave been given training in total quality management, just in time deliveryand related concepts. In addition, unions in Mexico are much, morecooperative with management than their counterparts in the north. As aresult, this resource base is now producing some of the highest quality cars


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and trucks in North America, and the Hermosillo plant is widely regarded asthe number one auto factory on the continent.

Strategies for doing business with Mexico

1. Wholly owned subsidiary:This can be an expensive strategy, but it gives the company a total

control and allows management to make quick and effective decisions. Quietoften a local manager runs the subsidiary and almost always the majority ofmanagement team is locals. However headquarters exercises the key control.

2. To become part ofMaquiladora program:This strategy works best for the firms aiming to export most of their

output back to US. The Maquiladora arrangements allows manufacturing,assembling and processing plants to import the materials, components, andequipments duty free, complete the work with Mexican labor and then shipthe finished products. Under recent changes company can sell one third ofthe output in Mexico and still be the member.

3. Shelter program:Under this agreement local contractors assume responsibility for all

aspects of manufacturing operations from site selections to recruitment ofpersonnel to run the factory. After a predetermined time, however the USCompany can buy out the shelter operator at a present price and take overthe business.

4. Joint VentureThis combines foreign company with financial and manufacturing

know how and local partner who knows how to market the output. Numberof US firms has opted for this approach including Ford, DuPont and GE.


Doing Business 43 62 +19Starting a Business 61 93 +32

Dealing with Licenses 30 28 -2

Employing Workers 108 110 +2

Registering Property 79 73 -6

Getting Credit 65 59 -6

Protecting Investors 33 133 +100

Paying Taxes 126 128 +2

Trading Across Borders 86 77 -9


20/21


Closing a Business 25 21 -4

Indias exports to Mexico:In 2005-06 Indias Export to Mexico was 443.07 million US$ which

was 0.4298 percent of India's Total Export in that year. This was 20.21percent increase from the last year. Some of the major items of export are:

(US$ million)MAJOR ITEMS 2003-04 2004-05 2005-06TRANSPORT EQUIPMENT 27.10 102.09 105.42

DRUGS, PHARMA AND FINE CHEMICALS 76.96 61.92 80.64

RMG OF COTTON INCL. ACCESSORIES 41.91 37.24 42.30

INORGANI/ ORGANIC CHEMICALS 14.15 18.57 23.94

MANUFACTURES OF METALS 12.09 17.07 23.87

MACHINERY AND INSTRUMENTS 11.20 14.71 19.45

ELECTRONIC GOODS 5.73 12.98 14.08

MAN MADE YARN FABRIC MADE UPS 8.14 9.36 9.65

RESIDUEL CHEMICAL AND ALLIED

PRODUCTS

1.30 2.44 7.88

DYES & INTERMEDIARIES ETC. 6.61 6.77 7.86

Indias imports from Mexico In 2005-06 Indias import from Mexico was 97.61 million US$ which

was 0.0654 percent of India's Total import in that year. This was 18.14percent increase from the last year. Some of the major items of import are:

(US$ million)MAJOR ITEMS 2004-05 2005-06 % growth

ARTICLES OF IRON OR STEEL 4.21 4.18 -0.6

ELECTRICAL MACHINERY AND EQUIPMENT ANDPARTS THEREOF; SOUND RECORDERS ANDREPRODUCERS, TELEVISION IMAGE AND SOUNDRECORDERS AND REPRODUCERS,AND PARTS.

15.04 30.23 100.9


21/21

IRON AND STEEL 3.63 7.1 95.

NUCLEAR REACTORS, BOILERS, MACHINERY ANDMECHANICAL APPLIANCES; PARTS THEREOF.

11.31 15.22 34.5

OPTICAL, PHOTOGRAPHIC CINEMATOGRAPHICMEASURING, CHECKING PRECISION, MEDICAL OR

SURGICAL INST. AND APPARATUS PARTS ANDACCESSORIES THEREOF;

2.63 3.99 52.0

ORES, SLAG AND ASH. 4.28 4.11 -4.0

ORGANIC CHEMICALS 26.27 10.04 -61.7

PLASTIC AND ARTICLES THEREOF. 3.13 5.97 90.4

IMPORTANCE TO INDIA

NAFTA has played important role in over all development of all the threenations. Progressive elimination of tariffs and trade barriers, disputesresolution, commitment to intellectual property and environmental

legislation, as well as mutual entry into governmental bidding, financial andother service sectors. All the three countries have contributed to each other

by its resources. United States contributes by supplying technology, servicesand data processing, medical and space research, and capital. Canadasupplies minerals, forest products, energy, and technological expertise; andMexico has a vast supply of labour, huge reserves of petroleum, and massiveagriculture potential. The potential had increased in economic power and has

been utilized not just in competing for regional markets of NAFTA, but inglobal markets as well. Its been a win-win situation for all the NAFTA

nations.

18-doing business with nafta

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