EL PASO, Texas (Border Report) — A new continental trade agreement kicks in on Wednesday, and border industry leaders are ready to take advantage of it.
The U.S.-Mexico-Canada Agreement (USMCA) increases native content in the auto industry, incorporates rules for e-commerce and pharmaceuticals, opens Mexico’s energy sector and updates labor protections in the 1994 North American Free Trade Agreement, or NAFTA.
Border cities cashed in on NAFTA as U.S.-run manufacturing plants multiplied, exports increased and logistics and transportation companies seldom lacked work, business leaders said. Regional trade increased from $290 billion in 1993 to $1.1 trillion in 2016, according to the Congressional Research Service.
“This accord will improve our region’s competitiveness, build on our strengths and move us forward into a new era or economic development and prosperity,” said Jon Barela, CEO of the El Paso-based Borderplex Alliance.
He said international trade has been a “powerful tool” for economic growth, as evidenced by the $108 billion in trade passing through the region’s ports of entry last year. One in four jobs in El Paso is tied to cross-border trade, while 300,000 people across the border in Juarez work in U.S.-run maquiladoras that assemble automotive components, electronics
The USMCA isn’t radically different from NAFTA, but its implementation comes as a relief to industry leaders weary of the political wrangling that preceded its approval.
“I’m glad this got negotiated because the real challenge was getting through the vitriol leading to a new agreement. We treated Canada and Mexico as if they were enemies rather than good neighbors and partners,” said Jerry Pacheco, president
In fact, some potential investors got “spooked” by talk of just doing away with NAFTA and not having a new agreement in place that protected U.S. companies wanting to do business in Mexico, he said.
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Mexico is also looking forward to the business opportunities created by the USMCA. A coalition of nine Mexican governors that met last week identified two priority targets.
One is to create a platform called DigiMex for Mexican entrepreneurs to market e-commerce service. The other is to replace Chinese companies with Mexican companies as providers or manufacturers for some U.S. companies.
“We need to take advantage of a post-COVID realignment to substitute China in the supplier market to the United States. Our geographical location, infrastructure and experience gives us a great degree of competitiveness in this regard,” Chihuahua Gov. Javier Corral said.
The governor said his staff would be identifying possible new North American partners and leveraging his border state’s experienced labor force to get them to come.
The U.S. government also says it’s ready for the new trade treaty.
U.S. Customs and Border Protection in March launched the USMCA Center, which has information and trained staff to answer questions from the trade community.
The agency also has issued compliance guidance, fact sheets, informational videos and put on webinars. The agency has also briefed trade associations and various groups on how it will enforce the rules.