(Download our newsletter in PDF: Trading Room -20190823)
In an interview, the Underminister of North American Affairs of the Ministry of Foreign Affairs, Jesus Seade, commented on China and its “trade war” with the USA.
According to the news outlet, Mr. Seade commented that Mexico has to become more attractive for Chinese investment and that Mexico must address its trade deficit with China.
Also, we note that Chinese investment in Mexico is insignificant in comparison to foreign direct investment from other countries, e.g. the US, Japan, Korea, etc. However, Mr. Seade stressed that such situation must change and Mexico has “… to be [China’s] privileged partner in the western hemisphere, America, and Mexico has to do everything so that this can occur.”
This Wednesday, the US Department of Commerce announced a new draft agreement with Mexican tomato producers/exporters. The agreement will suspend the anti-dumping investigation and, therefore, it would avoid final antidumping duties on Mexican tomato.
Interested parties may comment on the draft suspension agreement during the next 30 days. In essence, Mexican tomato producers/exporters agreed to respect reference prices and, according to the Washington Post, 66% of tomato imports will be subject to an inspection to verify the quality of the product.
Once the suspension agreement enters into force, the US will eliminate the provisional anti-dumping duty, imposed on May 7th, 2019, and the duties paid would be returned or refunded to the Mexican tomato producers/exporters.
(Download our newsletter in PDF: Trading Room -20190412)
This Tuesday a letter directed to the USTR was issued by US Congress representative Richard Neal Chairman of the House Ways and Means Committee, mentioning that members are concerned with USMCA, calling for strong labor and environment standards that can be enforceable.
Kenneth Smith former Mexican USMCA chief negotiator responded that USMCA now includes labor and environment chapters that are subject to a dispute settlement, hence, they have “teeth”; plus there is an annex that sets specific obligations to Mexico regarding collective bargaining rights and freedom of association.
And this week Mexico took an important step to overcome these “political” obstacles regarding USMCA ratification, since the Mexican Chamber of deputies “approved” the amendments to the Mexican Labor Law this Thursday that will overhaul the labor justice system and aim to be compatible with recently ratified ILO’s 98 Convention (on freedom of association and collective bargaining) and Mexico’s commitments under USMCA. Now it is the turn for Senate to discuss the labor reform.
The Ministry of Economy held a press conference to address the issue concerning the termination of the suspension agreement next May 7th, 2019. Graciela Marquéz, the Minister of Economy, informed that Mexico is not a party to the suspension agreement, but that the government will “assist” Mexican tomato producers in this situation, noting the importance of the Mexican tomato; for instance, exports to the USA represent about 3 billion USD. The suspension agreement avoided the imposition of an antidumping duty of about 17.5% back in 1996, duties that may be imposed as of May 7th; in order to avoid again this situation, the Mexican industry submitted last week a suspension agreement that apparently is not being considered by Department according to statements made in the press conference.
Last Monday the President, AMLO, held an event in Veracruz, an agricultural producing state. The President held that the government is going to review “the agreements made regarding the sale of sugar overseas and the permits that were given to use syrups from abroad” and concluded saying that “we want free trade and we will respect the agreements, but we will defend the domestic producer. Mexico first, the foreigner comes later.”
We believe that the President is referring to the agreement between the Ministry of Economy and the US Department of Commerce regarding the agreement suspending the countervailing duty investigation on Mexican sugar. Per the agreement, Mexico established a Mexican sugar export quota to the US, the US may increase the limit if it deems necessary. This suspension agreement may be “reviewed” pursuant American law, however, there are possible scenarios if a review is triggered, like the elimination of the agreement but with the establishment of CVD.
As for the syrups, like High Corn Fructose Syrups, import permits or licenses do not exist. These goods are subject to a 75% import MFN duty unless they are imported, for instance, from the US with a duty-free import quota pursuant NAFTA. Under Chapter 3 and Annex 3-B of the USMCA, Mexico will be able to continue to provide duty free quotas, while the adoption of a restriction (like a permit or licensing) to import syrups may be contrary to USMCA.
This Thursday the US Department of Commerce (DOC) announced its intent to withdraw from the suspension agreement that suspended the antidumping investigation against Mexican tomato, agreement that has been in force since 1996. The Mexican exporters agreed to a price reference for its sales to the US; however, the American producers (mainly from Florida) consider that the suspension agreement has not been sufficient to avoid the “unfair trading practices”.
The suspension agreement requires a party to notify with 90 days in advance its intent to withdraw, term that started on January 6 and will end on May 7. If under these 90 days the parties do not reach a new agreement, the US will formally withdraw and DOC will continue with its dumping investigation. If a final determination of dumping is found, the International Trade Commission will analyze the injury. Hence, there is a possibility that the US might impose antidumping duties against Mexican tomato.
This is not the first time that the US threatens to withdraw from this agreement, and now it is within the context of USMCA’s ratification.