The Trading Room is a Mexican Economic Newsletter prepared by Vázquez Tercero & Zepeda (VTZ) that specializes in international trade, customs, and tax law.
Yesterday, Ms. Katherine Tai appeared before the Senate Finance Committee for her confirmation as the US Trade Representative. On Wednesday, Ms. Tai’s opening statements were released (available here), and we highlight the following three remarks:
As for Mexico-US trade relations, it is clear that Ms. Tai, as a future USTR, will seek to use the available legal tools provided in the USMCA. This was repeated in her hearing (Youtube video). In VTZ, we consider that USTR will be more receptive to labor complaints that may trigger a facility-specific rapid response mechanism. From her opening statements, it also appears that the US will have closer cooperation with WTO and that the US will continue to have a strong policy against China, and with the support of allies.
For more information on Labor and Trade:
Yesterday, US President, Joe Biden, signed an executive order that seeks “to address the vulnerabilities in our supply chains across additional critical sectors.” In the speech, the expression “building resilience” was mentioned frequently, and what is meant is “increasing our production of certain types of elements here at [US].” In the words of the US President, the order does two things.
What recommendations may arise as a result of the review? Besides possible statutory or regulatory changes that may impact supply chains, and that “federal incentives and any amendments to Federal procurement regulations that may be necessary to attract and retain investments in critical goods and materials and other essential goods and materials[…]”
The Director of the Roosevelt Institute, Todd N. Tucker, made an interesting thread in Twitter:
In addition, diplomatic actions to seek the support of allies to strengthen supply chains jointly. With the tensions rising on US energy investments in Mexico, we wonder whether Mexico will be invited to support this policy?
As a final note, international news outlets have reported that Canada is considering a Carbon “Tariff” (and possibly the US), which would take the form of a “border tax adjustment” per the GATT. We understand that Canada has a domestic “carbon” tax, which can put in a competitive disadvantage some Canadian industries against imported products. Although it is still a project, the Canadian government is studying the possibility of a “Carbon Tariff” (in the form of a border tax adjustment) on the imports from countries that do not have strong “green policies.”
Meanwhile in the USA, it has been reported that a carbon tax bill is being drafted in Congress and that a carbon “tariff” (in the form of a border tax adjustment) may also be considered. The European Union is also discussing similar measures as part of its green deal since last year.
One thing is clear, at least for us, Canada and the US will push for “green” policies together, as perceived in the recent Biden-Trudeau meeting. In turn, imports from polluting countries in Canada, the USA, and the EU may be affected in the mid or long term with a carbon “tariff”, and Mexican industries shall pay close attention to how this matter develops.
More information: Macleans, Politico, BBC, SPGlobal, and Bloomberg.
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Carbon tariff, green policies, Katherine Tai, US Executive Order on Supply Chains, USTR
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