The Trump administration announced last week that it would not renew the USMCA in its current form. KC Counts talked about it with Jerry Pacheco, president and CEO of the Border Industrial Association. Here's a transcript of their conversations:
KC Counts:
Can you tell us, at what stage are the negotiations on the USMCA?
Jerry Pacheco:
Well, they've been having preliminary talks since the end of last year, but the US Trade Representative has been meeting primarily with Mexico. It's an interesting thing. Canada seems to be initially shut out of the general talks here, but there's the US trade representative's been issuing communiques that they're meeting with Mexico, the USMCA. And as you probably know, July is the review of that agreement. So it's very important to us here at the border.
KC Counts:
What do you anticipate, or can you anticipate what types of changes we might see, or could it be scrapped altogether?
Jerry Pacheco:
Well, that's a good question. So there's several possible outcomes. Number one is we tweak the USMCA. And I've always said that trade agreements are not static. They don't last forever in their original form, you've got to evolve with the times. So that makes the most sense. Tweak it here, tweak it there, wherever we need to tweak it. The second outcome could be that we just say, no, we're out of this thing and we let it go and we don't renew it for 16 years, which is part of the goals of, let's say, the business community for the United States, is to renew this thing for another 16 years. Or if there's no agreement on any of the talking points, then this thing after 10 years and there's an annual review, there there'll be talks annually but it will be scrapped after 10 years; so we certainly hope that cool heads, you know, prevail and smart heads prevail about how much this agreement means not only to our business community here in New Mexico particularly at the border but to that of the United States Canada and Mexico. The whole premise behind the USMCA's predecessor, NAFTA, was to form a North American trade bloc so we can compete against Asia, so we can compete against Europe. And USMCA has done exactly that.
KC Counts:
I'm glad you brought up NAFTA. It was on my list of things to ask about in terms of for folks to just kind of get a little bit of a historical viewpoint about NAFTA. Can you tell us how the USMCA has been different?
Jerry Pacheco:
Well, it's been different because you have things like digital services, digital sales. So that didn't exist when NAFTA was negotiated. You have a major energy component now, internet trade. And since the NAFTA was put into place on January 1, 1994, industries like the auto industry have just boomed. And North America has attracted a lot of non-North American auto manufacturers to Mexico and the United States. So, all of this was incorporated into the revamping of NAFTA and the USMCA. Different content requirements, for example, for automotive production, different requirements of people who have to earn a certain amount of money working in the auto industry in order for that auto or the components to qualify for reduced or zero tariffs, that's all in the USMCA.
KC Counts:
You mentioned the importance to the border economy. Can you crystallize that for us a little bit?
Jerry Pacheco:
Well, I'll take, I'll give you an example, specifically with Santa Teresa. Now, we say Mexico is the dog and we're the tail. The tail doesn't wag the dog, the dog wags the tail. We wouldn't have this multi-billion dollar industrial base of four major industrial parks here in Santa Teresa, New Mexico, if it wasn't for cross-border trade with Mexico. 98%, 99% of the firms we have in our parks have a relationship with the Mexican company on the other side, either to supply that Mexican company with raw materials or components or to bring up finished product and to a distribution center in Santa Teresa and send them all over the world. That is all based on the advantage of reduced or zero tariffs under previously NAFTA and now the USMCA. So we have 7,000 jobs at stake, billions of dollars of investment. This little corner of New Mexico down on the border is now accounting for about 60% of New Mexico's total exports to the world. That means you can take Albuquerque, you can take every other major city, put their exports together, and they don't equal what we're doing down here. So, the stakes are high. If you remove the USMCA, what advantage is there for firms to come and locate here? If there is a tariff on goods coming from Mexico, there's not an advantage. And we take a pistol, and we shoot ourselves in the foot in terms of competitiveness against other trade blocs and nations of the world if we damage the USMCA.
KC Counts:
Right. Well, one more question. Do you have a timeline? We're reviewing in July. Is there a deadline?
Jerry Pacheco:
Well, just July. I mean, I'm assuming that it's going to be until the end of July. And that gives the three nations, you know, plenty of time to sit down and say, "I don't like this about the agreement. You're unfair in this and unfair in that". But a lot of these talks have been, you know, have been going on with the U.S. Trade Representative, Jamison Greer, for example, and the Mexican Secretary of Economy, Marcelo Ebrard, discussing a lot of these issues. Their teams have been at it for months and months. So, I'm hoping that we go into this review period with the framework in terms of where we want to go with this. And certainly, the trade community and the business community does not want to see the USMCA scrapped or damaged.
KC Counts:
You know, and obviously our interests are here on the board with Mexico. But early on, you mentioned that Canada hasn't even been brought into the mix yet. Any idea what's going on there?
Jerry Pacheco:
I don't, but I'm assuming it's the cantankerous kind of relationship President Trump has with the Canadian leader. They haven't seen eye to eye on a lot of issues. And, you know, Canada has pushed back when the United States calls it its 51st state, which I think is completely insulting and unfair. So it's a snub, and it's intentional, because all three nations should be sitting down. Two of the three signatories to the agreement shouldn't be leaving the other one out.
KC Counts:
All right. Well, Jerry, thank you so much for putting this all in perspective for us. We'll keep an eye on things throughout July and we'll catch up when we know more.
Jerry Pacheco:
Okay. Good luck, KC. Take care.
KC Counts:
Thank you and good luck to you as well.
Jerry Pacheco:
Thank you Bye-bye.
