Assistant Secretary of Commerce Michael C. CamuÑez
Market Access and Compliance
"Doing Business with Mexico: Opportunities and Obstacles"
Indiana World Trade Club
Tuesday, August 21, 2012
As prepared for delivery.
Thank you very much, Mark, for that kind introduction. Before I begin, I’d like to thank PNC Bank and the World Trade Club of Indiana for hosting this event and for putting a spotlight on the importance of the U.S.-Mexico Trade Relationship. I’d like to recognize Mexican Consul Juan Manuel Solana and today’s other speakers for being a part of this important dialogue. I’d also like to say what a genuine pleasure it is to be here this afternoon to learn about how the Department of Commerce can support Indiana businesses as they explore new markets, grow their profits, and put America back to work.
As Assistant Secretary of Commerce in the International Trade Administration, I have the privilege and responsibility of traveling the globe and working with our international trading partners to deepen our strategic trade and commercial relationships worldwide. Through my work, I see extraordinary economic opportunities on the horizon for our country as literally millions of people in emerging economies around the world are moving from poverty into the middle class and becoming global consumers, demanding goods and services, and creating significant economic opportunities for American businesses. But I also see an increasingly competitive global landscape that presents serious challenges. We are operating in a complex environment that requires us to do all that we can to maximize our natural advantages – one of which is our proximity to and close relationship with our North American neighbors. Strengthening the economic ties and facilitating cross-border trade between the United States, Mexico and Canada will help deepen our competitiveness and improve our collective position in this challenging global economic environment. So I’m pleased to be here today to have the chance to discuss an important element of that platform: the incredible bilateral trade relationship between the United States and Mexico and its implications for Indiana and our country as a whole.
II. The President’s Trade Policy Agenda: Putting America Back to Work
Before I turn specifically to our trade relationship with Mexico and why it’s relevant to Indiana, I’d like to take just a couple of minutes to put that relationship into a broader context and to share with you, if I may, what the Obama Administration has been doing to promote trade and global competitiveness as part of a more comprehensive economic recovery agenda.
From the moment he took office, President Obama faced one of the worst economies and deepest recessions to confront our nation since the Great Depression. Our economy was shedding about 750,000 jobs a month and had lost some eight million jobs since the start of the recession in 2007. Apart from the well known challenges facing the banking and housing sectors, key segments of the country’s automotive industry, which employs hundreds of thousands of Americans—indeed millions if we look at the full supply chain—were facing imminent collapse. In the face of great criticism, the President took immediate action to shore up the bottom line of America’s cities and states to help teachers, policemen, and firefighters keep their jobs and took other important steps to help save critical industries like the auto industry from the kind of ruin that would have spelled economic disaster for the country.
But from the earliest days the President also recognized that an essential element of any strategy to reclaim jobs, rebuild the economy, and put America back to work must include a focus on improving America’s competitive posture and ability to compete in foreign markets. The simple reality is that while the United States still has the largest and most diverse economy in the world, we are witnessing tectonic shifts in the realignment of global economic growth and development. The numbers speak for themselves: 95% of the world’s consumers live outside the border of the United States and, according to World Bank and IMF estimates, close to 90% of world income will be earned offshore. The world’s emerging economies are on the rise, and millions of people are moving from poverty into the consuming and middle class. Beyond the rise of the so-called BRICs, which we hear so much about, we are seeing tremendous growth in other key regions through Southeast Asia, South America, Central and Eastern Europe and Sub-Saharan Africa. In fact, six of the ten fastest growing economies in the world are in Africa today. In short, the days when we could rely on our own internal market and domestic demand to fuel economic growth are behind us. So the President correctly recognized that to sustain, and even surpass, the kind of economic growth we’ve seen in the past, we have no choice but to embrace global markets and engage aggressively in trade and international commerce.
The central component of the President’s vision for our economy is for Americans to make, grow, and provide goods and services that the rest of the world buys. Simply put: we want to build it here and sell it everywhere. Our goal has been and continues to be building a 21st century economy that is built to last and that competes everywhere. In turn, this will foster sustainable job growth at home and will help U.S. businesses to establish footholds in new markets all over the world.
That’s precisely why the President launched the National Export Initiative (or the “NEI” as we call it) during his State of the Union address in 2010. The NEI has several goals, but chief among them is to double U.S. exports by 2014. To achieve this, the President has asked us to redouble efforts to open new markets for U.S. goods and services, substantially expand our trade promotion efforts, increase access to financing for those companies doing business overseas, and, importantly, to aggressively enforce our trade laws and hold our trading partners accountable for their commitments at the World Trade Organization and through existing trade agreements in order to ensure that U.S. companies can compete on a level playing field. The President mobilized the entire government to support this effort through the Export Promotion Cabinet, and he also engaged captains of industry and other private sector leaders to help advise and support the effort through the President’s Export Council.
Expanding access to new markets for Indiana and U.S. companies has been a major priority of the President’s National Export Initiative and a major focus of my team’s efforts at the Commerce Department.
Last year, for example, the Obama Administration concluded negotiations and Congress passed three new trade agreements with Korea, Colombia and Panama. These agreements will contribute significantly to the creation of thousands of new jobs here at home while positioning us well in critical regional economies.
After more than fifteen years of negotiation, we also successfully concluded negotiations earlier this year that will bring the Russian Federation into the World Trade Organization later this month. Until now, Russia was the largest economy in the world not yet a part of the WTO and was thus not subject to important global norms and rules that create substantial protections for U.S. companies seeking to do business there. Candidly, important work remains to be done here in the U.S. to establish normalized permanent trade relations between the U.S. and Russia, including the repeal of the Cold War era Jackson-Vanick Amendment, to ensure that U.S. companies can take full advantage of the new market access and WTO obligations that Russia will be operating under. The Obama Administration will continue to urge Congress to take up this important legislation when it returns from recess in September.
Finally, under President Obama’s leadership, the United States is leading the way in negotiating a new, high-standard regional trade agreement known as the Trans-Pacific Partnership that reflects the growing importance of trade between Asia Pacific nations. When completed, the TPP will provide U.S. companies, including those here in Indiana, with new opportunities and enhanced protections in what is collectively the fourth largest goods and services export market of the United States. With the addition of Mexico and Canada, the TPP countries will be by far the largest export market for the United States. U.S. goods exports to the broader Asia-Pacific region totaled $895 billion in 2011, representing 60 percent of total U.S. goods exports. So this agreement clearly represents significant opportunities for American industry.
Of course our work to grow and expand U.S. market share is not limited to these examples alone. We are literally working world wide to knock down barriers, increase trade and investment, and open new markets and sectors to American companies. And these efforts range from initiatives in the most advanced economies, like the European Union, with whom we are assessing the feasibility of a comprehensive Free Trade Agreement, to efforts in advanced developing markets like Turkey, China, India and Brazil, to work we’re doing in the “emerging emerging economies” like those in Sub-Saharan Africa, where, for example, we are negotiating a new Trade and Investment Partnership Agreement with the five member nations of the East African Community. In all of these cases, our overarching goal is the same: to grow U.S. exports and drive economic growth at home, putting more Americans to work, and creating new opportunities in new markets for U.S. companies and their employees.
And I’m pleased to report that our efforts are paying off. U.S. exports are at all-time record levels. In fact, U.S. exports are on track to exceed a record $2 trillion for the second year in a row. Department of Commerce data show that export growth has played a major role in the country’s ongoing economic recovery. For example, exports accounted for more than half of the country’s GDP growth in 2010 alone. In 2011, exports surged to a record $2.1 trillion, a 33 percent increase over 2009, and supported 9.7 million jobs. The jump in exports since 2009 has helped the private sector create 4.5 million new jobs over the past 29 months, and in 2011—the last year for which we have data—jobs supported by exports increased 1.2 million over 2009. Preliminary data for the first half of 2012 show this pattern continuing, although it’s clear our economy is facing strong headwinds from a slowing global market. Nevertheless, 34 states, including Indiana, reached record highs for merchandise exports in the first half of this year. Indiana alone increased its exports by more than $1 billion from June 2011 to June 2012.
As we work hard to grow exports and support jobs at home, we’re also focused intently on enforcing our trade laws and holding our trading partners accountable to ensure that American companies can compete fairly on a level playing field in overseas markets. After all, we work very hard to negotiate market opening agreements, from Free Trade Agreements to WTO accession packages and other agreements, but those efforts will not amount to much if we don’t enforce our rights and our partners’ obligations. That’s why earlier this year President Obama signed a new Executive Order establishing the first ever Interagency Trade Enforcement Center (“ITEC”), which is co-led by the United States Trade Representative and the Secretary of Commerce. The ITEC will bring a “whole of government” approach to addressing unfair trade practices and significantly enhance our trade enforcement efforts globally. The ITEC will build on our already robust trade enforcement agenda, which has included our initiation of 10 WTO dispute settlement cases against China, India, the Philippines and others. The Department of Commerce is also enforcing our trade remedies laws, taking decisive action when our trading partners unfairly dump products in the stream of U.S. commerce or otherwise unfairly subsidize foreign industry. In short, our trade policy includes a balanced and measured approach that ensures we aggressively enforce our rights even as we work to grow U.S. market share abroad.
I want to be clear that these trade policy and enforcement efforts are relevant to Indiana business. This state has 6,279 companies that are exporting from it—5,400 of which are SMEs—and nearly one-quarter of all manufacturing jobs in Indiana are dependent on exports. Clearly, exports are a major driver of economic growth for the state.
III. The U.S./Mexico Relationship: A Dynamic Economic Partnership
I wanted to begin by framing our trade policy agenda, because in truth our engagement with Mexico exemplifies one of the most productive and fruitful trade relationships in the world. As our neighbor and ally, Mexico occupies a place of particular significance among our key partners.
Not only is the Mexican market vital to the U.S. economy, but as President Obama has repeatedly observed, there is a uniquely strong bond between our two societies. This is reflected in the millions of Americans of Mexican ancestry who live in the U.S., as well as the tens of thousands of students, teachers, and researchers participating in exchanges between our schools and universities, and the one million people who cross our shared border every day. We are friends and partners who share more than a border--we share deep bonds and fundamental values.
Let me try to put the scope and depth of this relationship in perspective.
Last year, U.S. exports to Mexico, the country’s second largest export market, exceeded our exports to Brazil, Russia, India and China combined. The U.S. maintained a $461 billion economic relationship with Mexico—that’s roughly $1.3 billion each day—and U.S. exports to Mexico totaled approximately $200 billion in 2011, which is roughly 13% of all U.S. exports.
Also in 2011, U.S.-Mexico bilateral goods trade increased 17 percent over the prior year, and we experienced a 29 percent increase between 2009 and 2010. In fact, since the inception of NAFTA in 1994, U.S.-Mexico trade has more than quintupled.
Moreover, as impressive as these numbers are, they actually fail to capture the totality of Mexico’s contribution to the U.S. economy. Imports to the U.S. from Mexico, for example, often contain U.S. input. The U.S. imported a total of $263 billion worth of goods from Mexico in 2011—22 percent of Mexico’s GDP. And when you really dig into the data, a remarkable fact emerges: our imports from Mexico actually drive our exports to Mexico—64% of all those Mexican goods sold in the U.S. are made from U.S. inputs. Let me put this a little differently: for every dollar that we spend importing products from Mexico, Mexican businesses spend approximately 50 cents in the United States buying the products or services that are required to complete those products. In addition, Mexico's 13.6 million annual visitors to the U.S., which is second only to Canada, spend millions of dollars on U.S. goods and services every single day.
When taken together, these recent trends, our geographic proximity, societal bonds, strong projections of future GDP growth, and a growing population further strengthen the argument that the already important Mexican market holds increasing potential for U.S. companies and our commercial interests.
Indiana is an integral part of this dynamic trade relationship with Mexico. The state conducts $6.9 billion dollars in two-way trade with Mexico annually. The transportation sector and machinery manufacturing make up a significant component of Indiana’s overall trade with Mexico. Indiana is among the top 10 states in exports to Mexico, and since the passage of NAFTA, Indiana’s exports have increased over 750%! So this dynamic trade relationship with Mexico is critical not just to the U.S. as a whole, but very clearly to Indiana specifically.
Yet with all of this progress, we are still a long way from fulfilling the commercial potential of this bilateral relationship. And improving cross border trade is a critical element of reaching that potential.
a. The Significance of Our Shared Border
It goes without saying that our border with Mexico, for all of its challenges, is vital to our shared commercial success. The region is the staging point for the vast majority of U.S. commercial activity with Mexico – approximately 80 percent of U.S. exports pass through or originate in that region alone. We share with Mexico not just a border but a highly integrated economy with linked supply chains and high levels of industrial co-production, which means large volumes of trade criss-cross the border each day by truck. Before a product is finished, goods or components have crossed the border 3 to 4 times.
Yet border regulations and current infrastructure capacity are generally ill-suited to dealing with this reality. Customs paperwork and documentation requirements are complicated, and the infrastructure capacity is failing to keep up with the increase in trade and related security requirements.
Many ports of entry (POEs) were built decades ago and have not been updated or maintained to keep up with the dramatic growth in trade that has resulted from NAFTA’s success. For example, the Mariposa POE in Nogales, Arizona was built to handle 300 trucks daily—today it handles 1,200 trucks each day.
Likewise, border delays hinder manufacturers’ dependence on reliable logistics for freight distribution. With today’s just-in-time supply chains, unpredictable wait times can act as a barrier to trade and a deterrent to cross-border investment. Border delays impact productivity, industrial competitiveness, and result in lost business income and reduction in gross output in both countries.
Let me share with you an example that illustrates this point. I visited a local Indiana company earlier today, Hoosier Gasket Corporation (HGC), that is one of America's top producers of sealing systems and solutions. HGC supplies gaskets and seals to customers all over the world, including Mexico and South America.
Company executives shared a story with us about an experience they had transporting gaskets across the border with Mexico. As all of you know, the summer months along the border can be brutally hot—but commerce can’t stop when it’s hot. Well, on one occasion HGC was transporting gaskets to meet an important order in Mexico and, during a particularly long delay at a border crossing, some of the gaskets in their shipment melted under the extreme temperatures. They were literally sitting at the U.S.-Mexico border crossing in the back of a truck. I was told that the temperature outside was over 100 degrees, and that the temperature inside the container rose to over 160 degrees. Many of the gaskets were melted and deformed as a result.
This is just one example from a local company. The reality is that border wait times and inefficiencies in border crossings affect a wide range of businesses on both sides of the border. These inefficiencies can impose significant costs on our businesses and our competitiveness. The good news is that these are problems that we can fix, and doing so is one of the keys to unlocking the true potential of the U.S.-Mexico relationship.
b. An Issue for Indiana’s Businesses
Now it may be tempting to think of the challenges of cross border trade as someone else’s problem, and to discount the HGC example I gave as a one-off problem for Indiana. But that would be a mistake. And that’s why I’ve come here today to talk about the U.S.-Mexico trade relationship. The fact is, our nation’s trade with Mexico sustains six million jobs in the U.S. And twenty-one states, including Indiana, count Mexico as their No. 1 or No. 2 export market. And Mexico is a top 5 export market for fifteen additional U.S. states.
As many of you know, Mexico is Indiana’s second largest export market after Canada. In fact, Indiana exports $3.28 billion worth of goods to Mexico—let me say that again: $3.28 billion worth of exports—and more than 64,000 Indiana jobs are dependent on trade with Mexico.
So it’s pretty clear, I think, that our national strategy for improving trade flows with Mexico, and increasing the efficiency of cross border trade, not only benefits border states like Texas, New Mexico, Arizona and California, but it will benefit Indiana and the entire nation.
c. A 21st Century Approach to Border Management
Given the importance of the border to our national economy, the Obama Administration has engaged with our partners in the Mexican government to launch a 21st Century Border Management Initiative, which I’d like to tell you about. In addition, the International Trade Administration has initiated a Border Export Strategy to showcase and deepen this important relationship. Both strategies have important benefits for Indiana exporters.
The 21st Century Border Management Initiative was launched in May 2010 on the occasion of President Calderon’s official state visit to Washington. Our leaders committed our nations to full and renewed cooperation based on the principles of joint border management, co-responsibility for cross-border security, and a shared commitment to increasing the flow of legal commerce and travel. Both governments are committed to joint border management and the importance of improving lawful trade and travel.
The 21st Century Border Management initiative is overseen by a bi-national Executive Steering Committee (ESC), of which my office in the Department of Commerce is a part, and is working to enhance economic competitiveness by supporting a bilateral border master plan process for infrastructure projects in order to increase capacity; expand trusted traveler and shipper programs; and explore opportunities for pre-clearance, pre-inspection, and pre-screening processes for commercial goods and travelers.
I’m pleased to report that we are already seeing positive results from our efforts for infrastructure related projects. We’ve seen new commercial crossings open in Arizona and Texas; expansions of existing facilities like the Laredo World Trade Bridge—one of the busiest commercial crossings in the nation—and, importantly, the groundbreaking for one of the first new cross border rail projects in more than a century at the West Rails Bypass Project in Brownsville, Texas.
We are also making significant progress on facilitating the secure flow of goods and people. For example:
The Mexican government launched a new supply chain security and trusted shipper program called New Plan for Certified Businesses (Nuevo Esquema de Empresas Certificadas – NEEC). This program’s security standards and validation process align with the U.S. Customs-Trade Partnership Against Terrorism (C-TPAT) program, allowing for mutual recognition.
The U.S. Customs and Border Protection (CBP) expanded the Global Entry trusted traveler program to Mexican citizens. The launch of Global Entry with Mexico effectively established a common vetting standard for trusted travelers between our two countries.
Last July, CBP and its Mexican counterpart, Aduana, signed a Declaration of Principles to launch pre-screening and pre-inspection pilots in a few proposed locations: Laredo, Santa Teresa, and Otay Mesa.
As these important programs are initiated, we’re also keeping a close eye on other trade facilitation initiatives, including conducting important border wait time studies at critical border crossings to better understand how to increase efficiencies in cross border trade.
d. Conclusion: “Changing the Narrative” About the U.S.-Mexico Border
Let me conclude today by sharing one more important dimension of this Administration’s commitment to growing trade and commerce with Mexico. And that’s our Border Export Strategy, which has as its principal goal helping to change the narrative about the border and what it means for the country. As I think many of you know, to the extent the national media and, as a result, our national discourse focus attention on Mexico, they tend to focus on the worst and most sensational stereotypes and stories about gun running, cartel violence and illegal immigration. No doubt, security along the border is critically important, but lost in translation is the reality of the powerful economic engine that the border region represents. We speak of building walls and keeping undesirable elements out, rather than focusing on what a truly extraordinary asset our economic partnership represents. A recent report issued by the Center for Transborder Studies at Arizona State University characterized the border region as a critical national asset that is “hidden in plain sight,” and I couldn’t agree more.
That’s why I have made the promotion of cross-border trade a top priority during my tenure in office. I’ve taken numerous trips to Mexico and the border region, carrying this message and focusing a positive spotlight on this important asset. Through our Border Export Strategy, we are promoting trade, deepening our commercial ties, and working hard to change the narrative about what the border represents—not just for border communities, but for the nation as a whole.
We’ve led trade missions to Mexico, we’ve partnered with economic development institutions along the border, and this past June, I even led a first ever border trade promotion trip that criss-crossed the border, from San Diego/Tijuana all the way down to Laredo and Monterrey, Mexico. We’ve committed to traveling to other parts of America, to states like Indiana that have critical trade relationships with Mexico, to carry the message and to promote this important trade relationship. In just a few days, I will be addressing the U.S.-Mexico Border Mayors Conference in San Diego, and next month, in Arizona, we’ll host together with Arizona State a unique two day conference that will bring together academia, leaders from across the country, and of course the private sector to strategize how we can build on existing efforts and strengthen cross border trade, share best practices for economic development, and build a stronger economic foundation that will drive commerce and create jobs on both sides of the border.
You are all invited to join us in this effort. Indiana has an important stake in this relationship, and as we strengthen cross border trade and grow our economic ties with Mexico, Indiana will continue to benefit. And this isn’t abstract: this means real jobs and real economic growth for the people of Indiana.
So thank you all for your interest in this important relationship; thank you, again, to the World Trade Club for putting the U.S.-Mexico trade relationship on your agenda; and thank you for the opportunity to share what this administration is doing to advance our trade agenda and put Americans and Indianans back to work. The Department of Commerce and the Obama Administration stand ready to work with you in this effort, and I look forward to the rest of our visit here in Indianapolis.
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