USMCA: A Path to North America’s Prosperity

By Martha Bárcena, Ambassador of Mexico to the USA

The U.S.-Mexico relationship is at a crossroads and the decisions we take from now on will impact the direction of both our countries and the lives of millions of people.

In these testing times, the approval of NAFTA’s successor, the United States-Mexico-Canada Agreement (USMCA) holds the key to our economic growth in North America and the ongoing creation of opportunities in both of our countries.

Our joint commitment toward free trade, materialized through the North American Free Trade Agreement (NAFTA), reshaped the North American economies with far-reaching implications for our companies, our consumers and our societies.

Since the treaty came into effect in 1994, United States trade with Mexico (and Canada) has more than tripled, growing more rapidly than American trade with the rest of the world. Presently, the North American trade is worth almost $1.3 trillion.

Mexico is now the United States’ second largest export market and its largest trading partner.

Our bilateral trade exceeded $611 billion in 2018 which means that we trade more than 1 million dollars per minute.
Moreover, according to the U.S. Chamber of Commerce, the jobs of five million American workers depend on U.S.-Mexico trade. To put the magnitude of our commercial partnership in perspective, U.S. sales to Mexico are larger than all U.S. exports to Russia, India and China combined. They are also larger than all combined sales to the United Kingdom, France, Belgium and the Netherlands.

Mexico is also the first or second most important export market for 26 U.S. states, including the four border states whose economies are strongly linked to trade with Mexico.

The fact that the U.S. pays literally nothing on most goods that cross the border back and forth every single day allowed us to create a North American Supply Chain that is highly integrated.

For the rest of the world, the U.S. is a market —that’s true when you look at China, or South Korea, for example.
In the case of Mexico, Canada and the United States, we trade in order to manufacture things together.

Just look at the automotive sector in North America: one piece of a car can cross the border up to eight times based on a “just in time” (JIT) model before the car is finally assembled. The result has been that North America is the second largest auto parts production region in the world.

We should acknowledge this as a testament to the way our economies have become inexorably integrated. Production and supply chains in North America are now deeply connected. Consequently, we have to recognize what this represents in terms of our future economic and political cooperation.

It is true that NAFTA had its failings and, as it got older, it became obvious that it needed to be modernized to meet the necessities of 21st century economy.

This is why the new USMCA raises rules of origin across manufacture to attract more investment and create more employment in the U.S. and the region.

The USMCA sets out to fight corruption and creates space to support small producers —a key component missing in NAFTA. USMCA expands our digital commerce, facilitates trade in financial services and protects the environment.
The treaty also includes a key chapter on labor that requires parties to adopt and maintain fundamental labor rights. On this particular aspect, Mexico has been fully committed to carry on specific legislative actions to provide the effective recognition of the right to collective bargaining and comply with USMCA obligations.

The Mexican Congress approved a comprehensive labor reform aimed at ensuring workers can freely vote for their union representation and contracts. In fact, a democratic and effective labor rights agenda was always one of the top priorities of Mexican President Andres Manuel Lopez Obrador, so for the incoming, government this was a win-win scenario. Democrats in Congress could not find a better ally on this issue.

This is an historical reform and a definite “game-changer” that will effectively transform the labor system in Mexico.

Among other things, independent courts will replace the current labor board to resolve disputes and register contracts. We are confident that these institutions will be strong enough to ensure enforcement.

The Mexican Congress ratified the treaty with the sole intention of providing certainty and stability to our trade which is the motor of our shared prosperity. Mexico has done and will continue to do everything in its power to ensure that USMCA becomes a reality.

The USMCA is not perfect but we’re confident it will have a long-term positive impact on our economies and it will allow us to remain globally competitive.

The alternative of a region without USMCA and, possibly, without NAFTA, would have dire consequences for the three countries involved. The fate of the USMCA will directly impact the fate of millions of ordinary Americans whose prosperity is directly linked to free trade with Mexico.

We should not let politics stand in the way of a free trade that has yielded enormous benefits for both our countries.

NAFTA transformed our economies but it also changed the way our two countries interact.

The adoption of USMCA will allow us to remain one of the most competitive regions in the world, and continue building trust and stability between our countries.

Ambassador Martha Bárcena