Biden Administration Nominations

President-elect Biden has made several nominations that will affect trade policy in the new Administration. These include Katherine Tai as United States Trade Representative (USTR) and Ambassador Susan Rice as Director of the Domestic Policy Council.

Currently, Katherine Tai serves as the chief lawyer on trade to the Chairman and Democratic Members of the Committee on Ways and Means on matters of international trade as Chief Trade Counsel. In this role, she has secured key victories for workers in US trade policy and has been praised by lawmakers and lawyers for her work. Prior to the Committee, Tai served in the USTR’s Office of the General Counsel, first as Associate General Counsel from 2007 to 2011 and then as Chief Counsel for China Trade Enforcement with responsibility for the development and litigation of US disputes against China at the World Trade Organization (WTO). She would replace outgoing USTR Bob Lighthizer, who led the team negotiating the USMCA, and would be the first Asian American and first woman of color to serve as US Trade Representative.

Ambassador Susan Rice served as National Security Advisor from 2013-2017, where she directed and implemented the Obama-Biden Administration’s national security policy in all areas, including global health, climate policy, international trade, development and economic issues, relationships with allies, competition and cooperation with China and Russia, and managing US foreign relations with all regions of the world. Previously, Rice served President Bill Clinton as US Assistant Secretary of State for African Affairs, Special Assistant to the President and Senior Director for African Affairs, and Director for International Organizations and Peacekeeping at the National Security Council from 1993-2001. The selection for Secretary of Commerce is yet to be announced.

US-Mexico Trade

On the US-Mexico trade side, China replaced Mexico as our number one trading partner in October. China’s total trade with the US rose 25% in October compared to the same month a year ago, with imports from China increasing 14% and US exports to China increasing 51%. Mexico fell to No. 2, as its total trade with the US rose a moderate 0.57% to $53.66 billion in October compared to the same period in 2019. Canada was third, with $48 billion in total trade with the US in October.

US imports from Mexico rose 7% during October compared to the same period in 2019. US exports to Mexico declined almost 10% during October. In the auto sector, US imports of passenger vehicles from Mexico fell 27% during October to $23.34 billion. Imports of commercial vehicles fell 16% to $18 billion, and imports of auto parts declined 16% to $18 billion.

The latest economic reports on Mexico from Monarch Global Strategies and Business Development Partners begin with a view of what relations between our two countries will be like with the election of Joe Biden and go on to discuss the energy sectors, the new budget – and politics. Business Development Partners does report a number of new investments in a variety of sectors. However, COVID remains a major issue going forward. Five major states including Mexico City are registering an upward trend in the number of cases and are perilously close to returning to the red or highest level on the national epidemiological traffic light system. A return to red would signify closure of all but essential businesses and other strict restrictions on movement and economic activity.

Also on the Mexican economic front, the government just approved a general minimum wage increase of 15% on December 16, an amount that was proposed by President Lopez Obrador. The increase will take effect on January 1, 2021, and consists of two factors:

The annual minimum wage increase, which is equivalent to 6%, and
The cost-of-living adjustment (known as the “MIR” by its initials in Spanish), which is equivalent to the fixed amount of Mex$15.75 for the Northern Border Zone and Mex$10.46 for the rest of Mexico.

The foregoing results in a real increase to the minimum wage from Mex$185.56 to Mex$213.39 for the Northern Border Zone, and from Mex$123.22 to Mex$141.70 for the rest of Mexico. Despite the new level, President Lopez Obrador said “workers are going to get an increase that is still, on the world scale, shameful.”

Mexico Labor Reform

The implementation of the USMCA created an independent body that will monitor the labor portions of the agreement. The purpose of the very detailed Interim Report of the Independent Mexico Labor Expert Board, released last week, was to assess the efforts of Mexico to implement Mexico’s labor reform and the manner and extent to which labor laws are generally enforced in Mexico. It would also seek to determine whether Mexico is in compliance with its labor obligations. The results were that

“Mexico has made significant progress in the implementation of the May 1, 2019, labor law reform, especially taking into account the impact of the Covid-19 pandemic. The efforts of the López Obrador administration, and especially the leadership of the Secretariat of Labor and Social Welfare and the Federal Center for Conciliation and Contract Registration, deserve recognition. At the same time, it must be acknowledged that many of the changes promised to improve the lives of workers, in terms of union democracy, freedom of association and collective bargaining, remain to be implemented. Most unionized workers are not yet able to democratically elect their leaders or ratify their collective bargaining agreements.”

Global Macroeconomic Activity

We have added another report on global macroeconomic activity, this one from Fitch Solutions. The report provides the latest information on COVID-19 in Europe and the US and indicates that the global growth momentum following the deep drop in April-June may be difficult to sustain in the fourth quarter.

China Policy

Our friends, the Albright Stonebridge Group, released an analysis on “What to Expect from a Biden Administration on China Policy.” The key takeaways from the analysis were:

Competition and tension with China will remain heightened in 2021, but we expect both sides will work to manage the current level of toxicity in the relationship
The Biden administration will view Beijing as a rival, competitor, and in some contexts an adversary, but will likely seek to engage Beijing on issues including future pandemic control and preparedness, global economic revitalization, nonproliferation, and climate change
As President, Biden’s approach to China will be more predictable, transparent, and coordinated than President Trump’s but the change will not lead to a wholesale reset.

Also on China, on November 15, fifteen countries — members of the Association of Southeast Asian Nations (ASEAN) and five regional partners — signed the Regional Comprehensive Economic Partnership (RCEP), possibly the largest free trade agreement in history. RCEP will connect about 30% of the world’s people and output and, in the right political context, will generate significant gains. RCEP could add $209 billion annually to world incomes, and $500 billion to world trade by 2030. India and the United States were to be members of RCEP and the CPTPP, respectively, but withdrew under the Modi and Trump governments. Details on the agreement and the impacts it will have on trade, especially in the region, are provided by Baker McKenzie and the Peterson Institute.

Brexit Deal

Lastly, the everlasting Brexit Bunny can stop running! A historic Brexit deal on the UK’s future trading and security relationship with the European Union was struck on Christmas Eve, a week before the end of the transition period. The announcement followed a final call between Boris Johnson in Downing Street and the European Commission president, Ursula von der Leyen, in her headquarters in Brussels – at least the fifth such telephone conversation over the last 24 hours. The trade agreement – running to 2,000 pages – is unprecedented in scope, containing provisions on subjects varying from civil nuclear cooperation and energy interconnections to fishing and aviation.

The last stumbling block was fisheries. In the final days, it had been future EU access and quotas in British fishing waters, an issue of small economic impact but high political salience for both sides, that was the difference between a deal and a breakdown in talks. The EU had offered a six-year transition period for phasing in a 25% reduction in the catch by value taken by European fleets in British waters, with access guaranteed to a 6- to 12-nautical-mile zone from the British coastline. The UK Downing had tabled a counter-proposal of a three-year transition period with a 60% reduction – and no access to the nautical zone. The compromise involves a transition period of five and a half years to phase in the changes, according to sources, with the UK accepting a 25% repatriation of quotas.

Following the announcement of a deal, the European Commission sent the draft treaty to the member states. Should the 27 capitals be content with the deal, ministers on the council of the EU will agree on provisional application of the agreement on January 1, 2021.

On a sad note, Martha Barcena, the Mexican Ambassador to the US – and a very good friend of the Chamber – announced her resignation on December 14. She will be replaced within the next few months.

We hope you are well and staying safe. We wish you a happy holiday season wherever you are!

Ralph Biedermann
Executive Director
U.S.-Mexico Chamber of Commerce, Mid-America Chapter

(224) 578-5310 Mobile
ralph.b@usmcoc.org
www.usmcocma.org