septiembre 1, 2023

International Trade News in Mexico

This month, there were several international trade developments in Mexico. On the one hand, the Mexican government increased tariffs on steel, textile, and rubber products. In addition, the Ministry of Economy declared that it will initiate on its own new antidumping investigations for the textile sector. On the other hand, the U.S. Government requested the establishment of a Panel under the United States-Mexico-Canada Agreement (USMCA) on the issue of genetically modified corn. In addition, the United States requested for the first time the establishment of a panel under the Rapid Response Labor Mechanism.

The President increases tariffs on steel, textiles, and other products.

To begin with, the Mexican government decided to increase import tariffs on 392 tariff items. Virtually, all products in these tariff items are now subject to a 25% tariff, except for certain textiles that will have a 15% tariff. The main products that will be impacted are steel, aluminum, bamboo, rubber, chemical products, oils, soap, paper, cardboard, ceramic products, glass, electrical material, musical instruments, and furniture. The increase will be in effect for two years.

#TradeAlert: Mexico increases MFN tariffs.https://t.co/y4t7ihJpRF pic.twitter.com/X3OuMiSOsH
— VazquezTercero&Zepeda (@vtzlaw) August 16, 2023

This increase is designed to protect certain sectors of the domestic industry and may have various effects on the national economy. Particularly, this tariff increase has the potential to significantly impact the flow and price of foreign goods in the country. However, countries with a Free Trade Agreement (FTA) with Mexico will not be affected. At VTZ we wrote an article with all the details on this increase, which was referenced by U.S. Inside Trade magazine.

The Ministry of Economy will initiate new antidumping investigations.

As part of its strategy to protect certain sectors of the domestic industry, Raquel Buenrostro, head of the Ministry of Economy, stated a few days ago that she will focus on combating unfair trade. The Minister stated that imports from Asian markets have had an unfavorable effect on the domestic industry due to their low prices. In particular, Raquel Buenrostro indicated that imports from Asia have caused numerous textile and apparel companies to disappear in Mexico.

Entrevista a Raquel Buenrostro, secretaria de @SE_mx: “No buscamos ser proteccionistas, simplemente queremos evitar el comercio desleal"

✒️ @Isabella_CS https://t.co/Wl5JMIbvDH
— EL PAÍS México (@elpaismexico) August 22, 2023

Consequently, she announced that the Ministry of Economy will initiate new antidumping investigations on its own accord on Asian products in this sector. Raquel Buenrostro mentioned that it is not her intention to adopt a protectionist stance. Rather, the Ministry of Economy seeks to «avoid unfair trade.»

The United States and Canada requested a Panel on Genetically Modified Corn

As a result of Mexico’s decree banning the use of GM corn, the United States announced that it will request the formation of a panel to resolve the dispute. Mexico and the United States were unable to reach an agreement after 75 days of consultations. Accordingly, the United States Trade Representative (USTR) will let a panel solve the dispute. The USTR alleges that Mexico is placing restrictions on its market without any scientific basis.

In addition, Canada announced that it will also intervene as an interested party in the procedure initiated by the United States. Canada is a major exporter of GM crops to Mexico, including products such as canola. In fact, in 2021, Mexico imported more than $901 million dollars of canola from Canada, demonstrating the importance of Canadian exports to Mexico. Consequently, Canada maintains that sanitary and phytosanitary measures should not be excessively and unjustifiably trade restrictive. And this dispute may set a relevant precedent.

Rapid Response Labor Mechanism

San Martín Mine (Grupo México)

On June 19, 2023, the United States issued a letter requesting Mexico to review labor conditions at the San Martin Mine, Zacatecas (owned by Grupo Mexico) under USMCA rules. This case has a history relating to a strike that occurred in 2007 and decisions by labour authorities.

Interestingly, Mexico stated that the case falls outside the scope of the Rapid Response Labour Mechanism (RRCS). Accordingly, the United States requested the formation of the first labor panel under the RRCS. While this dispute reaches a solution, Katherine Tai, the US trade representative, ordered the suspension of the final settlement of customs accounts related to the entry of goods from the San Martin Mine.

Mas Air

In addition, on August 30, 2023, the USTR activated the Rapid Response Labor Mechanism to request Mexico to review the situation of the pilots of Aerotransportes Mas de Carga (Mas Air). This request was made after the Trade Union Association of Aviator Pilots of Mexico (ASPA) reported intimidation, interference and reprisals related to the legitimization of the Collective Bargaining Agreement (CCT) of Mas Air. This request is the 13th time the United States has activated the RRCS and the 8th so far in 2023.

Asiaway

Finally, we emphasize that there is a new possible request from the Government of States regarding Asiaway, a Chinese company in San Luis Potosí, Mexico, in the automotive sector. It will be a matter of weeks to know if the USTR asks Mexico to review the denial of labor rights at that facility.

Conclusions

The international trade landscape in Mexico was shaken by all these events. On the one hand, the Mexican policies to protect certain sectors of the domestic industry resulted in a substantial increase in tariffs and the possible initiation of new antidumping investigations in relation to Asian products. On the other hand, the Mexican Government faces a complicated situation in having to prepare for the Panel because of its policy against transgenic corn and for the Panel on the labor situation at the San Martin Mine. Undoubtedly, the effects of the tariff increase will begin to be felt soon, and we will have to keep an eye on what happens with the USMCA panels.

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