Building Partnership with Mexico

E. Anthony WayneCareer Ambassador (ret.)

Public Policy Fellow, Wilson Center

wayneea@gmail.com

@EAnthonyWayne

Convergencias2018, October 2018

Building a Partnership with Mexico

• U.S.-Mexico ties touch more U.S. lives daily than any other country via trade, border connections, tourism, and family ties as well as illicit flows. Also true for Mexico.

• An estimated 35 million U.S. citizens are of Mexican heritage.• The shared 1990-mile border (3,201 km) creates overlapping

security, economic and environmental interests.• In recent years, government-to-government collaboration has been

unprecedented, including on public security.

PresenterPresentation Noteshttp://www.pewhispanic.org/2015/09/15/hispanics-of-mexican-origin-in-the-united-states-2013/

A Massive Relationship

Currency in USD. Source: BEA 2017

US-Mexico Trade

2017 Trade in goods and services:

US trades over 1 million per minute with Mexico.

616 Billion

$276 Billion

$340 Billion

PresenterPresentation Noteshttps://ustr.gov/countries-regions/americas/mexico

https://www.bea.gov/newsreleases/international/trade/tradnewsrelease.htm

US-Mexico Trade

Mexico is:• 2nd largest export market• 3rd largest trading partner • 3rd largest Ag export market: $19 billion in 2017• 1st or 2nd export market for 28 U.S. States• 1st export market for U.S. Southern Border States

PresenterPresentation NotesBEA and Census match2016 only goods

Source: Bureau of transportation statistics, 2016

Each day there are over

1 million border crossings

US-Mexico Border Crossings

• Trade Facilitation • Economic competitiveness• Energy• Border management and migration• Public security and justice collaboration• Fighting drug trafficking & organized crime• Counter-terrorism• Central America, the region, international• Consular Issues for US and Mexican citizens• Health issues• Education, Innovation• Environment• Human rights

Areas of U.S.-Mexico Bilateral Work

Trilateral Work: Canada, Mexico and the U.S.

• Finalizing USMCA• Energy & Environment Cooperation• Regional and global priorities• Trilateral Trusted Traveler Program• Dialogue on Countering Illicit

Drugs

PresenterPresentation Notes-Remove

Strengthening Mexican law enforcement institutions and

bilateral cooperation

Surging Criminal Violence in Mexico

U.S. drug demand and cross-border criminal networks

Migration & border Management

Potential Terrorism

Countering Corruption

Reducing poverty in Mexico

Negative public perceptions

Serious Challenges to Address

Finalizing USMCA

Central American migrants

PresenterPresentation NotesPolls in speech (added already in sources)

-Maybe replace Modernizing NAFTA with AMLO-Trump Relationship

Economic Security

$0$200$400$600$800

$1,000$1,200$1,400

Mexico-Canada Trade U.S.-Canada Trade U.S.-Mexico Trade

4 times larger since 1993

North American Trade in Goods and Services

Source: Secretaria de Economia, 2017; BEA, 2017; Census Bureau, 2017.

PresenterPresentation Noteshttps://www.gob.mx/cms/uploads/attachment/file/244415/Anual-Exporta.pdfhttps://www.gob.mx/cms/uploads/attachment/file/244416/Anual-Importa.pdfhttps://ustr.gov/countries-regions/americas/mexicohttps://ustr.gov/countries-regions/americas/Canadahttps://www150.statcan.gc.ca/n1/pub/13-609-x/13-609-x2018003-eng.htm

North American Trade

• Canada, Mexico and the US trade $1.3 trillion a year, • $3.6 billion a day, reflecting major shared production networks.• More than US trade with all the European Union and 1.9 times

more than with China.• 14 million US jobs are supported by trade with both neighbors.• 50 percent of NAFTA trade is intermediate goods.

Source: Secretaria de Economia, 2017; BEA, 2017; Census Bureau, 2017, Brookings Metropolitan Policy program, 2017.

PresenterPresentation Noteshttps://piie.com/blogs/trade-investment-policy-watch/why-renegotiating-nafta-could-disrupt-supply-chainshttps://www.brookings.edu/blog/the-avenue/2017/03/30/how-u-s-states-rely-on-the-nafta-supply-chain/

0.0100,000.0200,000.0300,000.0400,000.0500,000.0600,000.0700,000.0

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Total goodsTotal services

40% Since 2010

• The U.S. sells more to Mexico than to all the BRICS countries together

Source: The Wilson Center, “Charting a new course”, 2017; US Census Bureau, 2017; BEA, 2017

U.S. Trade with Mexico has multiplied by 6 since 1993

Rank Order: Top US States’ Trade with Mexico 2017

State Volume $USD(Billions) StateVolume $USD(Billions)

Texas 187 Indiana 9.8

California 73.1 Florida 9.7

Michigan 65.5 Pennsylvania 9.5

Illinois 22 Louisiana 8.6

Arizona 15.5 North Carolina 8.3

Ohio 14.7 Kentucky 7.7

Tennessee 11.7 New Jersey 7.4

Georgia 10.4 New York 6.4Source: Secretaria de Economia, 2017

PresenterPresentation Noteshttps://www.naftamexico.net/

Source: BEA, 2017

U.S. Trade Deficit with Mexico dropped

2.7%as a portion of Total U.S.-Mexico Trade between 2010-2017

US Trade in Goods Deficit but Service SurplusMexico,

8.9% Canada, 2.1%

European Union, 19.0%

Japan, 8.6%

China, 47.1%

Others, 11.2%

US Trade in Goods and Services 2017

-$69

$3

-$336

$7 $25$40

-$76-$22

-$376-$400-$350-$300-$250-$200-$150-$100

-$50$0

$50$100

Mexico Canada China

Bill

ions

of D

olla

rs

Trade Services Goods

$25 billion surplus in services & $3 billion total trade surplus with Canada

$7 billion surplus in services with Mexico

Source: BEA, 2017

(Surplus)

40%

25%

8%5% 4% 3% 2% 2% 2% 1%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45% Value of U.S. Content in Manufactured Imports from Selected Economies2010 Study

Mexico Canada Malaysia Korea China Brazil European Union Japan India Russia

Source: Robert Koopman et al. “Give Credit Where Credit is Due: Tracing Value Added in Global Production Chains”. NBER Working Paper No 16426.

More U.S. Content in Imports from Mexico and Canada

Source: OECD Stats, 2015

24.46%23.2%

16.52%

4.47% 4.41%2.99%

2.01% 1.79% 1.74% 1.50%

0%

5%

10%

15%

20%

25%

30%

VehiclesElectrical machinery and equipmentNuclear reactors, boilers, machinery and mechanical appliancesOptical and medical instrumentsMineral fuels and oilsFurniturePlasticsVegetablesPrecious stones ands metalsIron or steel products

Leading Mexican Products Exported to the US Manufactured Goods Dominate 2015

PresenterPresentation Noteshttp://stats.oecd.org/BrandedView.aspx?oecd_bv_id=itcs-data-en&doi=data-00054-en#

Leading U.S. Products Exported to Mexico 2017

Machinery

Electrical machinery

Mineral fuels

Vehicles

Plastics

$0 $10 $20 $30 $40 $50Billions

Source: Office of the U.S. Trade Representatives , 2017

Corn

Soybeans

Pork & pork products

Dairy products

Beef & beef products

$0 $1 $1 $2 $2 $3 $3Billions

Leading U.S. Agricultural Exports to Mexico 2017

PresenterPresentation Noteshttps://ustr.gov/countries-regions/americas/mexico

Competition from China2 - 2.4 million

New Technology4.7 million

Source: Autor et. Al, 2016; Hicks and Devaraj, 2015

Where have the manufacturing jobs gone?

U.S. Manufacturing Employment and Output

PresenterPresentation Noteshttps://fred.stlouisfed.org/series/MANEMP

Source: The Wilson Center, 2016; Clinton Administration Statement on the NAFTA, 1993.

Some 5 million US jobs depend on trade and investment ties with Mexico (2015), compared to an estimated 700,000 jobs in 1993.

Mexico trade supports some 5 million jobs

U.S.-Mexico and North American Investment

In 2015, Canada’s and Mexico’s FDI in the US reached $388 billion

The US had $452 billion FDI in Canada and Mexico.

Source: US BEA, data last published on July 25, 2016.

Mexico’s FDI in the US

$17 billion

US FDI in Mexico

$88 billion

PresenterPresentation Noteshttps://www.bea.gov/iTable/iTable.cfm?ReqID=2&step=1#reqid=2&step=10&isuri=1&202=1&203=22&204=10&205=1,2&200=2&201=1&207=55&208=2&209=25

Source: Wilson Center, 2015.

U.S. Jobs Created by Mexican Investment2016• Mexican investment supports 123,000 US jobs.

Reforms and Partnership

Mexico’s Major Reforms(2013-2018)

• Education• Telecommunications• Energy• Judicial and Law

Enforcement

More partnership with the U.S.

Energy and the Environment

Energy and the Environment

• Increased U.S. investment in Mexico’s energy sector following reform

• Increased U.S. natural gas and gasoline sales to Mexico• New dialogues between energy regulators• U.S. and Mexico work to protect border environment, river

basins, and endangered species• AMLO’s plans may bring changes, e.g. bigger role for

PEMEX, reduce exports of Mexican crude

PresenterPresentation NotesNo more clics

U.S. Energy Trade Surplus with Mexico

$11.46

$25.63

0

10

20

30

40

50

Bill

ions

Imports Exports

Source: US Census Bureau, 2017

• Pemex has signed joint operating agreements with Exxon, Chevron, Shell, etc.• Exxon Mobil plans to invest $300 million in Mexico over the next 10 years.• Sempra Energy is investing $800 million: $500 million in a pipeline project

between Texas and the Mexican Gulf port of Tuxpan.• U.S. energy equipment exports enhanced via new investment.• In 2017, U.S. and Mexico authorities agreed to work on expanding cross-border

energy infrastructure, including in electricity.• North American cooperation, investment and trade help ensure reliable low-cost

energy to power manufacturing across region and build Energy Security.• AMLO seeks more Mexican refineries, will slow new offerings, export less.

Investment and Cooperation in the Energy Sector

PresenterPresentation Noteshttp://www.houstonchronicle.com/business/energy/article/Exxon-Mobil-Pemex-and-more-are-growing-on-both-11159812.phphttp://www.reuters.com/article/mexico-pemex-idUSL2N0RX16I20141002https://www.bloomberg.com/news/articles/2016-11-28/pemex-seen-attracting-oil-majors-interest-in-deepwater-jvhttp://www.reuters.com/article/us-mexico-ienova-idUSKBN1501UMhttps://www.reuters.com/article/us-usa-mexico-energy-idUSKBN19Y1ZN

Border Management Licit and Illicit Flows

Moving toward Co-Management of the Border

2008-2016 from blame to “shared responsibilities”

• Making the border more open to legitimate travel and commerce.• Working to align customs regulatory frameworks; increase joint use

of customs facilities on the border; improve infrastructure.• New mechanisms to communicate, coordinate and more effectively

counter illicit trade and travel: drugs, guns, money and people.• Steps to increase security and reduce cross-border violence.• New programs to share information on potential border crossers. • Working to create a Trilateral Trusted Traveler Program.• Cooperation slowed in 2018

PresenterPresentation Noteshttp://www.sat.gob.mx/PITA/Paginas/default.htm

Trucks Crossing the US-Mexico Border

4,526 4,4274,678

4,8834,866

4,291

4,743

5,104

5,415

5,8036,040

4,000

4,500

5,000

5,500

6,000

Thou

sand

s

Source: Bureau of Transportation Statistics, 2017

PresenterPresentation Noteshttps://explore.dot.gov/t/BTS/views/BTSBorderCrossingAnnualData/BorderCrossingTableDashboard?:embed=y&:showShareOptions=true&:display_count=no&:showVizHome=no

Source: Ipsos Poll, 2018

Americans’ Views towards Border Wall

Total Democrat Republican Independent

Support building a wall along the US-Mex border 38% 18% 68% 32%

Agree that building a wall along the US-Mex border wastes taxpayer money

60% 81% 35% 57%

Agree that building a wall along the US-Mex border is necessary for national security

35% 20% 61% 29%

Border: Migrant Flows

Migrant Flows

• The flow of Mexican immigrants to the U.S. is at the lowest levels since the 1990s.

• The number of Mexican immigrants in the U.S. has been dropping since 2007.

• In FY 2017, apprehensions of Mexican unauthorized immigrants declined 31.22% from FY 2015.

PresenterPresentation Noteshttps://www.cbp.gov/sites/default/files/assets/documents/2017-Dec/BP%20Total%20Apps%2C%20Mexico%2C%20OTM%20FY2000-FY2017.pdf

Source: PEW Research Center, 2016

22.9

4.5

6.96.4

5.6

5.6

1.5

2.8

4.1

5.3 55.4

5.7

0

1

2

3

4

5

6

7

8

1990 1995 2000 2007 2009 2015 2016Mexican Other

Number of Unauthorized Immigrants in the U.S.

670

1,3901,000

2,940

1,370

870

0

500

1000

1500

2000

2500

3000

95 to '00 05 to '10 09 to '14U.S. to Mexico Mexico to the U.S.

Source: Pew Research, 2017

Net Migration from Mexico

• In 2016, there were 1.3 million fewer unauthorized Mexican immigrants in the U.S. than in 2007

PresenterPresentation NotesAs Mexican share declined, U.S. unauthorized immigrant population fell in 2015 below recession levelhttp://www.pewresearch.org/fact-tank/2017/04/25/as-mexican-share-declined-u-s-unauthorized-immigrant-population-fell-in-2015-below-recession-level/

Recent Apprehensions

43,251

31,576

11,127

18,187

25,484

29,086

26,666

40,335

37,544

41,473

05,000

10,00015,00020,00025,00030,00035,00040,00045,00050,000

Source: U.S. Border Patrol Monthly Apprehensions (FY 2017 - FY 2018)

USBP Southwest Border Monthly Apprehensions

PresenterPresentation Noteshttps://www.cbp.gov/newsroom/stats/sw-border-migration

41,473 in Sep

Update all of the numbers

Source: U.S. Border Patrol Monthly Apprehensions (2008-2017)Unidad de Politica Migratoria (2008-2017)

U.S. Southwest Border Apprehensions from countries other than Mexico & Mexican Apprehensions from Latin America and the Caribbean

94,527

82,269

184,070

111,799

51,970 46,997

148,988145,316

175,978

0

50,000

100,000

150,000

200,000

250,000

300,000

by Mexico by the U.S.

PresenterPresentation Noteshttp://www.politicamigratoria.gob.mx/es_mx/SEGOB/Extranjeros_alojados_y_devueltos_2007 https://www.cbp.gov/sites/default/files/assets/documents/2017-Dec/BP%20Total%20Apps%2C%20Mexico%2C%20OTM%20FY2000-FY2017.pdf

Helping Northern Triangle

The US and Mexico enhanced cooperation in response to the 2014 surge of child and family migrants, including work at Mexico’s southern border against smuggling of people & drugs.

In June 2017, the US and Mexico hosted a Conference on Prosperity and Security in Central America in Miami. Commitments include:• U.S. FY 2018 budget request for $460 million for the Northern Triangle (NT).• Create a migration observatory to study and share information on regional migration flows. • Improved cooperation to combat transnational criminal organizations.• $53 million from Mexico for three NT infrastructure projects.

A second conference in Washington took place October 11-12, 2018.

Mexico’s Senate condemned U.S. border migration policies in June and called the government to end security and immigration cooperation.

Addressing Central American Migration

PresenterPresentation Noteshttps://www.state.gov/r/pa/prs/ps/2017/06/271984.htm

Bilateral Cooperation Against Crime

US-Mexico Law Enforcement/Security Cooperation

Mérida Initiative Programs & Agency-to-Agency Cooperation

Defense Dialogues & Cooperation

Security Coordination Group

1. Disrupting the operational capacity of organized crime.

2. Institutionalizing reforms to sustain the rule of law and respect for human rights in Mexico.

3. Creating a “21st Century Border”.4. Building strong and resilient

communities.

$2.9 billion appropriated by the US since 2008.

$1.6 billion already spent on training and equipment via over 100 programs to bolster Mexican capacity.

Mexico has spent over 10 times more.

US-Mexico Mérida Initiative: Evolving

Opioids Change the Game

Urgency: US Drug Overdose Deaths 2000-2017

Fentanyl and Fentanyl Analogues, 29406

Heroin, 15958Prescription Opioids, 14958

Cocaine, 14556

Meth, 10721

Methadone, 3295

0

5000

10000

15000

20000

25000

30000

35000

Source: CDC Wonder Database; CDC Provisional Counts of Drug Overdose Deaths as of 8/6/2017

Sources: The Globalist, The White House, CDC., U.S. Surgeon General Vivek Murthy

U.S. Opioid Crisis

• Opium derivatives use: over 5% of the U.S. population in 2013.• Since 1999, overdose deaths involving opioids have quadrupled.• Economic cost of the opioid crisis is estimated at 2.5% of GDP.• Illegal drug border flows are mostly via legal points of entry;

quadrupling flows through mail and delivery services.• Opium and heroin production in Mexico has grown substantially, as has

transshipment of illicit opioids, e.g., Fentanyl, from China.• In 2016, the U.S. and Mexico launched a working group on drugs and

dismantling criminal networks.

• Partner against criminal organizations – “Unprecedented” cooperation.

• Address the demand for illicit drugs among US citizens.

• Necessary tools: physical barriers, technology, patrolling, eradication, enhanced law enforcement cooperation, anti-addiction programs.

• Go after all elements in the chain: means of production, cross-border distribution networks, flows of profits, weapons procurement.

• AMLO ordered a review of Mexican policies & cooperation with the U.S.

2017 US-Mexico Agreements on Illicit Drugs

Violence up in Mexico

Urgency: Homicides in Mexico

13,849 13,14811,658 11,806

13,155

16,118

20,143

22,40921,459

18,106

15,520

18,650

22,932

29,168

10,000

15,000

20,000

25,000

30,000

35,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Secretaria Ejecutiva de Seguridad Nacional, 2000-2017

PresenterPresentation Noteshttps://ca.reuters.com/article/topNews/idCAKBN1DL2Z6-OCATPhttp://secretariadoejecutivo.gob.mx/docs/pdfs/cifras%20de%20homicidio%20doloso%20secuestro%20etc/HDSECEXTRV_102017.pdfhttp://secretariadoejecutivo.gob.mx/incidencia-delictiva/incidencia-delictiva-fuero-comun.phphttps://elpais.com/economia/2017/04/05/actualidad/1491344064_579913.html

Homicides in Mexico: Criminal Insurgencies?29,168 killings in 2017; the most violent year since 1997.

July 2018: most violent month since 1997. Violence up in 2018.

Law enforcement and judicial process overwhelmed.

Cartels fighting, but types of crime expanded & affects more states.

Crime cost up to 17.6% GDP.

U.S. travel warnings for resorts.

Source: Secretaria Ejecutiva de Seguridad Nacional, 2017; Reuters, 2017; El Pais, 2017.

2199

2774

3017

1400

1600

1800

2000

2200

2400

2600

2800

3000

3200

Jan

2016

Feb

Mar

Apr

May Jun

Jul

Aug

Sept

Oct

Nov Dec

Jan

2017

Feb

Mar

Apr

May Jun

Jul

Aug

Sept

Oct

Nov Dec

Jan

2018

Feb

Mar

Apr

May Jun

Jul

PresenterPresentation Noteshttp://secretariadoejecutivo.gob.mx/docs/pdfs/victimas/Victimas2017_122017.pdfhttp://secretariadoejecutivo.gob.mx/docs/pdfs/nueva-metodologia/CNSP-V%C3%ADctimas-2018.pdfhttp://secretariadoejecutivo.gob.mx/docs/pdfs/victimas/Victimas2016_122016.pdf2018 NUMBERS: http://secretariadoejecutivo.gob.mx/docs/pdfs/nueva-metodologia/CNSP-Delitos-2018.pdf

Other crimes: serious but not up like killings

11681910

24163157

4869

6332 6116

4589

72808213

5779 5649

591 505 278733 438

907 11621433 1688 1396 1149

20012002200320042005200620072008200

Extortions KidnappingsSource: Secretaria Ejecutiva de Seguridad Nacional, 2017

Percent of Mexico’s population that feels unsafe

64.8

70.670.3

80.5

68

75.9

60

65

70

75

80

85MenWomenTotal

Source: INEGI, 2017

Perceptions of Bilateral Relations and NAFTA

PresenterPresentation Notes-Maybe revise this section to t

Americans’ and Mexicans’ Perceptions of each other (per cent favorable)

66

30283338434853586368

2011 2012 2013 2014 2015 2017

Americans' views of Mexico Mexicans' views of the US

Source: Gallup, 2017; Pew Research Center, 2017.

• In 2017 polling, 66% of Americans had positive views of Mexico; while only 30% of Mexicans had positive views of the US.

PresenterPresentation NotesMexicans’ Perception of US – 39 favorable

Mexican Opinion of the U.S.

Source: Buendia y Laredo 2018.

26%

25%

5%

13%

31%

0% 10% 20% 30% 40% 50% 60%

Favorable/Very favorable

Unfavorable/Very unfavorable

Don't know/No response

56%

39%

Americans views of FTAs & Tariffs on Steel and Aluminum

Free trade agreements have been a Good/Bad thing for the US

Good Bad

Raising tariffs on steel and aluminum would be a Good/Bad thing for the US

Good Bad

56% 30%

37% 45%

Source: Pew Research, May 2018.

PresenterPresentation NotesMaybe revise

US Opinion: NAFTA is Good for the US Economy?

Source: The Chicago Council on Global Affairs August 2017.

53

63

34

43

71

79

50

62

30

40

50

60

70

80

90

2008 2013 2017 2018

Overall, Is NAFTA Good for the US Economy? (% Good)

Overall Republican Democrat Independent

PresenterPresentation Noteshttps://www.thechicagocouncil.org/publication/pro-trade-views-rise-partisan-divisions-nafta-widen?utm_source=media&utm_campaign=rpt18&utm_medium=article&utm_term=nafta-public-opinion&utm_content=report

Maybe revise

NAFTA/USMCA Negotiations

Main elements of the USMCA• Rules of Origin for Vehicles

- 75% of the value of a vehicle to be produced in the region (up from 62.5%).- 40%-45% percent of auto content produced by workers earning over $16 per hour.

• Dispute Settlement- Keeps NAFTA’s dispute-settlement provision (Chapter 19) for private companies; keeps state to state (Ch. 20).- Limits investor dispute (ISDR) to key sectors and in scope for U.S.-Mexico, eliminates them for U.S.-Canada.

• Intellectual Property Rights, Modernization, Labor- Expanded IPR Protections and internet coverage toward U.S. objectives.- Achieved or exceeded most of modernization goals sought in TPP, including labor rights provisions.

• Sunset Clause:- 16-year lifetime for the agreement, with a review every six years and possible 16 year renewal.

• Dairy - Allows U.S. dairy farmers to export the equivalent of 3.6% of Canada’s dairy market into Canada.- Eliminates Canada’s Class 6 and Class 7 milk categories and associated pricing schedules.

PresenterPresentation NotesUSTR Fact Sheet – Chris Emailhttps://www.reuters.com/article/us-trade-nafta-factbox/factbox-five-key-takeaways-from-trumps-u-s-mexico-trade-deal-idUSKCN1LC27K

Next Steps: United States• Two TPA timelines:

- Requirement to publish the full text of the deal within 30 days of announced agreement- Option to sign USMCA as early as November 29.

• Within 105 days of the agreement being signed, the U.S. International Trade Commission (ITC) must complete a study of the agreement’s economic impact.

• Congress will have to pass legislation to implement the USMCA along with an accompanying Statement of Administrative Action.

• President must provide Congress with the final legal text of the trade agreement and a draft SAA it proposes to take to implement it 30 days before it submits its draft implementing bill to Congress.

• After Congress receives the final bill from the president, it has 90 days of being in session to act under TPA rules.• Implementing legislation is referred to the House Ways & Means and the Senate Finance Committees, the former

may take up to 45 days to consider the bill and report it to House floor.• Once on the floor, the House must vote on it within 15 session days, once it passes TPA provides the Senate

Finance Committee 15 days to vote on it, at which point it is automatically discharged to the Senate floor.• The full Senate then has 15 session days to consider it as well before a vote is required.

PresenterPresentation Noteshttps://www.csis.org/analysis/nafta-usmca-whats-new-and-whats-next

Next Steps: Mexico

• Senate received summary document from Ministry of Economy, won’t wait for presidential signature to begin analyzing the deal.

• 8-member Senate Committee will review.• President Pena Nieto will sign the accord before December 1st (his last day in office).• After being signed, the treaty will go to the Foreign Affairs and North American Foreign

Affairs Committees in the Senate.• The Committees can make recommendations for amendments (no time frame for review).• Once the committees make their decision, it goes to the full Senate for approval.• Once approved by the Senate, the President can ratify the treaty.

PresenterPresentation Noteshttps://adnpolitico.com/congreso/2018/10/01/los-lideres-del-senado-preven-que-el-usmca-pasara-sin-raspones

https://adnpolitico.com/congreso/2018/09/29/esta-es-la-ruta-del-senado-para-aprobar-el-acuerdo-de-renegociacion-del-tlcan

Next Steps: Canada• Step 1: Signing Order (Instrument of Full Powers): designate one or more persons who have the authority to sign

the treaty on behalf of Canada. This is expected to take place in late November 2018.• Step 2: Tabling the Treaty in the Parliament: The signed treaty is tabled in the House of Commons for discussion

(not for a vote). The House of Commons then has 21 sitting days to consider the treaty.• Step 3: Motion in House of Commons: When there is a majority government or sufficient support in the House of

Commons, a motion will be tabled to recommend action, including ratification of the treaty. • Step 4: Order-in-Council (Instrument of Ratification): The ratification process is controlled by Cabinet. There is

no requirement to pass legislation in the Parliament to ratify a signed treaty.• Step 5: Federal Implementing Legislation: An implementing bill is tabled in the House of Commons. The MPs

debate the implementing bill and may suggest changes to the implementing laws. After the implementing bill passes in the House of Commons, the implementing bill is sent to the Canadian Senate. The implementing bill is debated in the Senate. It is possible that the Senate will not pass the implementing bill.

• Step 6: Provincial/Territorial Implementing Legislation: It may be possible that implementing legislation is also required at the provincial level

• Step 7: Regulatory Changes: The passing/changing of regulations is controlled by Cabinet.

PresenterPresentation Noteshttp://www.mondaq.com/canada/x/744952/international+trade+investment/What+Is+Canadas+Process+To+Ratify+And+Implement+USMCA

-Canadian Senate refused to pass the 1988 US-Canada Trade agreement, called for a general election to serve as a de facto referendum-can’t reject the treaty, but can call for election of new government that can scrap the treaty itself

What’s at Stake?

Source: NBC News, “Auto Industry Declares War on Trump Over NAFTA”; US Chamber of Commerce, “The Facts on NAFTA”; IDFA, “Food and Agriculture Letter on Importance of North American Market”; Services Coalition, “Risks of NAFTA Withdrawal for US services and Digital trade”.

$88 billion in U.S. services exports & $31.5 billion services trade surplus

46,000 U.S. trucking jobs supported by cross-border trade; $137 billion in annual vehicle and

parts exports to neighbors and the world.

$ 1.3 trillion of North American Trade

Nearly 14 million U.S. jobs & millions more in Mexico and Canada

$43 billion worth of food and ag goods exported to Mexico

and Canada

$452 billion U.S. investment in NAFTA partners & their $388

billion in the U.S.

NAFTA Countries are richer each year due to “extra” trade growth

$127

$170

$50

$0

$50

$100

$150

$200

US Mexico Canada

Bill

ions

USD

Source: NAFTA 20 Years Later. Petersen Institute for International Economics, 2014

The pure economic payoff for the U.S. is $400 per person

Questions about the new Rules of Origin

1. Will measuring wage rates and content in the supply chain be workable? How costly and accurate will it be? Who will enforce it?

2. How much will the new rules raise the prices of North American vehicles for U.S. consumers and for export?

3. Will manufactures move production out of North America?

4. Will some manufacturers forgo the NAFTA benefit and pay a tariff instead?

5. Will the U.S. auto industry be less competitive?

6. Will the new rules create or destroy jobs?

Source: Anthony Wayne, 2018.

Costs of Withdrawing from NAFTA

Strategic dangers: reduced cooperation against drug trafficking and on migration; move back to "distant neighbors” with revived anti-Americanism.

Hard hit sectors: agriculture/livestock/food; motor vehicles; machinery; other manufactured;

services; transportation and logistics; textiles.3

From 256,000 low skilled jobs lost up to

1.2 million jobs lost (3-5 years).1

95,000 workers would have to relocate to other sectors (3-5

years).1

Investors see U.S. growth slowed and harm

to specific sectors and equity markets.2

GDP decline up to 0.64% ($120 billion).1

Sources: 1) Impact Econ; 2) Trade Leadership Council Survey; 3) ImpactEcon, Trade Leadership Council Survey, Food and Agricultural Letter, Atlantic Council, MEMA/BCG.

Benefits of Enhancing Economic Integration across the US-Mexico Border

STUDY IMPACT ON EMPLOYMENT & GDP

The Perryman Group

2018 Study

US Border StatesEmployment: +702, 421 to +1.4 million jobsGDP: +$69 billion to +$140 billionLargest impact in California

Mexico Border States Employment: +95, 948 to +193, 526 jobsGDP: +$4.8 billion to +$9.7 billionLargest impact in Nuevo Leon

Steel and Aluminum Tariffs

Still in place

Steel and Aluminum Tariffs

June 1 The U.S. imposed 25% tariff on imported steel and 10% tariff on imported aluminum from Mexico, Canada and the European Union.

June 6 Mexico imposed 15%-25% tariffs on $3 billion worth of U.S. products (e.g. pork, steel and cheese).

June 22The European Union imposed 25% tariffs on $3.4 billion worth of U.S.goods (motorcycles, cranberry juice, cigarettes, denim and peanut butter).

July 1Canada imposed 25% tariff on U.S. steel imports and 10% tariff on aluminum and other U.S. goods. Tariffs cover up to $12.6 billion worth of U.S. goods.

PresenterPresentation Noteshttps://www.wsj.com/articles/u-s-slaps-steel-aluminum-tariffs-on-canada-mexico-european-union-1527774283https://www.cnbc.com/2018/05/31/canada-announces-retaliatory-tariffs.htmlhttp://money.cnn.com/2018/05/31/news/economy/united-states-steel-aluminum-tariffs/index.htmlhttps://eeas.europa.eu/delegations/united-states-america/46934/eu-adopts-rebalancing-measures-reaction-us-steel-and-aluminium-tariffs_en 

Costs of Steel and Aluminum Tariffs

Costs to U.S. Consumers: $7.5 billion a year, before retaliation from the European Union, Mexico and Canada2

16 U.S. jobs lost for every 1 gained1

Over 400,000 U.S. jobs lost1

Decline of 2% in all imports and 1% in all exports1

GDP decline of 0.2% ($36 billion)1

Sources: 1)Peterson Institute for International Economics & Trade Partnership Worldwide, 2018; 2) American Action Forum, 2018

PresenterPresentation Noteshttps://www.americanactionforum.org/research/the-cost-of-steel-and-aluminum-tariffs-on-canada-mexico-and-the-european-union/http://tradepartnership.com/wp-content/uploads/2018/06/232RetaliationPolicyBriefJune5.pdf

Mexico’s 2018 Presidential Election

Presidential Results

Source: Instituto Nacional Electoral; Consulta Mitofsky, 2018

Voter turnout: 63.5%

Over 60% of the Mexican population is satisfied with the election’s results.

Over 65% of the Mexican population believe the security, economic and political situation will improve in the short-term under AMLO’s Presidency.

16%

22%

53%

Meade

Anaya

LopezObrador

Mexican’s views of AMLO

33.4

20.316.6

25.220.3

26.5

37.945

11.9

43.5

31.7 29.536.9

20.1

0

10

20

30

40

50 Good Bad

Source: Consulta Mitofsky, 2018

Chamber of Deputies – November 2018

Source: Wilson Center’s Mexico Institute, 2018

61%26%

13% Morena

PAN

PRI

No party

307 seats

128 seats

63 seats

2 seats

Senate – November 2018

Source: Wilson Center’s Mexico Institute, 2018

55%30%

15% Morena

PAN

PRI

70 seats

38 seats

20 seats

Issues that Mexicans care about & influenced their votes

Violence and SecurityCorruption

Poverty and Low WagesUnemployment

Public HealthInflation

Source: Edelman, 2018; GEA/ISA poll, 2018

PresenterPresentation NotesCSIS Richard Miles GEA / ISA Poll Edelman 2018

AMLO’s Policy ProposalsPoverty:• Increase minimum wage. • Launch new youth jobs programs.

• Subsidize inputs for small farmers.• Guarantee free universal health coverage.

Corruption:• Better supervision of public spending. • Cut public-officials salaries, perks and reduce staff.• Name new independent Anti-Corruption prosecutor. Absolute autonomy of the General Attorney’s office.• Legal reforms to increase penalties for officials who use public money for personal gain.Trade:• Conclude the trade negotiation with U.S. Focus on expanding trade with others.Economic Policy:• Focus on developing Mexico’s internal market• Infrastructure projects (for example, railway line)

• Redirect government spending to social programs; won’t raise taxes or increase debt

• Lower taxes in border cities with the US

Education:• Eliminate teacher's evaluation. • Launch new youth scholarships, universities.

PresenterPresentation Noteshttps://mexicoelectionsblog.weebly.com/education.htmlhttps://lopezobrador.org.mx/2018/07/15/50-lineamientos-generales-para-el-combate-a-la-corrupcion-y-la-aplicacion-de-una-politica-de-austeridad-republicana/

AMLO’S PROGRAM “YOUTH BUILDING THE FUTURE”GENERAL OBJECTIVEs

• Increase job and training opportunities for 2.6 million 18-29 year old Mexicans.• Goals: • Reduce numbers of young people that are not employed, in education programs or

being trained (NEETs).• Reduce unemployment rates.• Reduce youth involvement in criminal activity & non-productive activities.• Build linkages between communities.• Increase Mexico’s productivity levels and economic growth.

AMLO’S PROGRAM “YOUTH BUILDING THE FUTURE” ELEMENTS

Scholarships for training• Award 2.3 million scholarships of

$3.6 thousand pesos monthly• Certify youth enrolled• Award participating companies as

social responsible organizations• Coordinated by the Department

of Labor (STPS)

Scholarships for college• Award 300 thousand annual

scholarships of $2.6 thousand pesos monthly

• Coordinated by the Department of Public Education (SEP)

Source: “Jovenes Construyendo Futuro” Website, 2018

PresenterPresentation Noteshttp://www.jovenesconstruyendoelfuturo.mx/

AMLO’s Policy ProposalsEnergy:• Review of contracts since the Energy Reform. Postpone new auctions (for at least 2 years).• Strengthen the role of PEMEX with a preferred role for exploration and choosing partnerships.• Limit gasoline price increases.• Build new refineries to supply gasoline ($100 billion pesos); aim to reduce/eliminate crude exports.• $75 billion pesos of next year’s budget will be allocated to oil extraction.Security:• Create an independent Secretariat of Public Security.• Centralize command of police forces (mando único).• put civilian intelligence agency CISEN under Public Security Secretary.• Return of the military to the barracks in a 3-year framework.• Police reform and professionalization: better trained and better paid police• Social investment: more job and educational opportunities.• Review security cooperation with the U.S.• Amnesty for lower-level offenders; support for victims, use redistributive justice approaches.• De-criminalize marihuana and, possibly, growing opium poppy.

PresenterPresentation Noteshttps://www.vox.com/2018/8/15/17690420/mexico-president-amlo-drug-war-cartels-violence-legalizationhttps://www.wsj.com/articles/mexicos-lopez-obrador-to-halt-oil-auctions-two-yearssources-1534972665?shareToken=ste90fe56ccde04da8914eb77c545ff867&ref=article_email_share

https://www.eleconomista.com.mx/politica/Plan-de-seguridad-de-AMLO-dividira-al-pais-en-265-regiones-con-un-coordinador-20181017-0056.html

AMLO’s Proposals to Trump – July 12 Letter

Source: Wilson Center’s Mexico Institute, lopezobrador.org.mx, Político.mx

TRADE Resume NAFTA renegotiation talks; AMLO's team will work with EPN's team.

Relocate Mexican customs 20-30 km inland from the border.

Establish a free trade zone on the northern border of Mexico: decrease the VAT rate, the income tax rate &energy prices, and increase the minimum wage.

SECURITY Establish development plans between the U.S., Mexico, and Central America to finance economic development. Allocate 25% of investments to security and border control.

Each government will control its borders and combat trafficking of drugs and weapons.

AMLO’s Proposals to Trump – July 12 Letter

Source: Wilson Center’s Mexico Institute, lopezobrador.org.mx, Político.mx

MIGRATION Improve economic opportunities to keep Mexicans in Mexico.

Migration cooperation based on the respect for human rights.

Development plan between the U.S., Mexico, and Central American countries to mitigate poverty and retain the migration.

DEVELOPMENT Encourage tourism with high-speed train from Cancun to Palenque.

Creation of an economic and commercial corridor in the Isthmus of Tehuantepec.

Reactivate Mexico’s agricultural sector.

Urban development plan in border cities.

Critics concerns about an AMLO Presidency

Backward-looking agenda: bigger economic role for the State?Fiscal Responsibility vs new Social Programs e.g. increase public investments, social programs and subsidies without tax and debt increases?Slow the Education Reform? Weaken Energy Reform? Corruption: no effective plan? Public Security: strategy not sufficient to reverse violence?US-Mexico Bilateral relationship. NAFTA? Clashes over migration, border anti-drug policy? Non-interventionist foreign policy?Will he listen to his cabinet/others? Will he become more authoritarian?

PresenterPresentation Noteshttp://www.eleconomista.es/nacional-eAm-mx/noticias/9152666/05/18/La-mejor-politica-exterior-es-la-interior-AMLO.html

Jefferies LatAm Strat: Mexico – Elections Email

AMLO’s Challenges

Lack of experience governing

Carrying out promised reforms (salary + personal cuts and decentralization)Having enough resources and income without increasing taxes

Developing specific policies & effective implementation(e.g. security & corruption)Meeting high popular expectations

Maintaining a Partnership with Mexico?

U.S.-Mexico Relations: Early Months Set Tone Trade:

• Complete USMCA negotiations and ratification; end metal tariffs; begin cooperative implementation.• Enhance facilitation of trade and travel with focus on border.

Bilateral Security Cooperation:• Avoid further deterioration in cooperation. Collaborative review of all programs.• Better manage together migration; integrated AMLO development ideas. • Deepen coordinated support for Central America to address root causes of migration.• Review cooperation to better fight organized crime ( attacking production, distribution, logistics, finance networks,

arms smuggling, and addiction/demand) and support Mexico’s efforts to reduce crime and violence.• Continue close cooperation against terrorism.

Improve Competitiveness:• Identify and revive a bilateral and North American agenda to enhance economic competitiveness.• Invest in programs, including workforce development and education, to further develop the complimentary nature of

the two economies, to create jobs for the Fourth Industrial Revolution, and to outperform global competitors.Rebuilding Confidence:

• Take steps to rebuild deteriorating trust or risk becoming “Distant Neighbors” again.

Building Partnership with Mexico

E. Anthony WayneCareer Ambassador (ret.)

Public Policy Fellow at the Wilson Center

wayneea@gmail.com

@EAnthonyWayne

Convergencias, 10/18

Building Partnership �with MexicoBuilding a Partnership with MexicoA Massive Relationship US-Mexico TradeUS-Mexico TradeUS-Mexico Border CrossingsSlide Number 7Serious Challenges to AddressEconomic SecurityNorth American Trade in Goods and ServicesNorth American TradeU.S. Trade with Mexico has multiplied by 6 since 1993 Rank Order: Top US States’ Trade with Mexico 2017 US Trade in Goods Deficit but Service SurplusUS Trade in Goods and Services 2017More U.S. Content in Imports from Mexico and CanadaLeading Mexican Products Exported to the US Manufactured Goods Dominate 2015Leading U.S. Products Exported to Mexico 2017 Where have the manufacturing jobs gone?U.S. Manufacturing Employment and Output Slide Number 21U.S.-Mexico and North American InvestmentU.S. Jobs Created by Mexican Investment2016Reforms and PartnershipMexico’s Major Reforms(2013-2018)Energy and the EnvironmentEnergy and the EnvironmentU.S. Energy Trade Surplus with MexicoInvestment and Cooperation in the Energy SectorBorder Management Licit and Illicit FlowsMoving toward Co-Management of the Border2008-2016 from blame to “shared responsibilities”Trucks Crossing the US-Mexico BorderAmericans’ Views towards Border WallBorder: Migrant FlowsMigrant FlowsNumber of Unauthorized Immigrants in the U.S. Net Migration from MexicoRecent ApprehensionsUSBP Southwest Border Monthly ApprehensionsU.S. Southwest Border Apprehensions from countries other than Mexico & �Mexican Apprehensions from Latin America and the Caribbean Helping Northern TriangleAddressing Central American Migration Bilateral Cooperation Against CrimeUS-Mexico Law Enforcement/Security CooperationUS-Mexico Mérida Initiative: EvolvingOpioids Change the GameUrgency: US Drug Overdose Deaths 2000-2017U.S. Opioid Crisis2017 US-Mexico Agreements on Illicit DrugsViolence up in MexicoUrgency: Homicides in MexicoHomicides in Mexico: Criminal Insurgencies?Other crimes: serious but not up like killingsPercent of Mexico’s population that feels unsafePerceptions of Bilateral Relations and NAFTAAmericans’ and Mexicans’ Perceptions of each other (per cent favorable)Mexican Opinion of the U.S.Americans views of FTAs & Tariffs on Steel and AluminumUS Opinion: NAFTA is Good for the US Economy? NAFTA/USMCA NegotiationsMain elements of the USMCANext Steps: United StatesNext Steps: MexicoNext Steps: CanadaWhat’s at Stake?NAFTA Countries are richer each year due to “extra” trade growthQuestions about the new Rules of Origin Costs of Withdrawing from NAFTABenefits of Enhancing Economic Integration �across the US-Mexico Border Steel and �Aluminum Tariffs�Still in placeSteel and Aluminum TariffsCosts of Steel and Aluminum TariffsMexico’s 2018 Presidential ElectionPresidential ResultsMexican’s views of AMLO Chamber of Deputies – November 2018Senate – November 2018Issues that Mexicans care about & influenced their votesAMLO’s Policy ProposalsAMLO’S PROGRAM “YOUTH BUILDING THE FUTURE”�GENERAL OBJECTIVEsAMLO’S PROGRAM “YOUTH BUILDING THE FUTURE” ELEMENTSAMLO’s Policy ProposalsAMLO’s Proposals to Trump – July 12 LetterAMLO’s Proposals to Trump – July 12 LetterCritics concerns about an AMLO PresidencyAMLO’s ChallengesMaintaining a Partnership �with Mexico?U.S.-Mexico Relations: Early Months Set Tone Building Partnership �with Mexico