 Welcome back to Global Connections. I'm Jay Fidel. This is Think Tech here on a given Thursday. And Carlos Suarez is at the other end of the line in the University of the Americas in Mexico, near Mexico City. Yes, in Cholula, that's right. Yeah. Thank you for being with us today, Carlos. I think it's an important day because we should talk about, we should try to put some emphasis on USMCA, the United States, Mexico, Canada trade agreement. At first, I thought it was something to do with the Marine Corps, USMC. And then I thought it was in my youth, I remember a song. USMCA, wasn't there a song by that name? Maybe the YMCA. YMCA. Oh, thank you. That's what I was trying to remember. So here we are now with this catchy title. And the president has signed it. And we need to explore it. Why now? What are the provisions? What's the context? What does it mean for the US, for Mexico, and for Canada? So tell us about it, Carlos. Yes, well, thank you, Jay. Always great to connect and share with you some insights and perspective. As you know, I'm coming here from Mexico. So for Mexico, of course, this is the three nation agreement, the trilateral trade agreement between Canada, Mexico, the US. And essentially, the president, when he campaigned, you may recall, one of his mantras again and again was how this NAFTA was one of the worst trade deals in history. It was ripping us off. And so he was going to toss it out or renegotiate. Well, here we are a few years into that. And yes, we are now almost at the tail end of a renegotiated. I still want to call it NAFTA 2.0. Some time ago, we looked at briefly some of the negotiation. But at this point, it's a rare legislative achievement for the president. In other words, he, a couple of days ago, I think signing agreement, it was a little odd because this was a product of, obviously, a bipartisan negotiation with the US Congress. And yet the president and the signing had no Democrats there, obviously no Nancy Pelosi by her side or anybody else. But he did sign it. And I just want to make real clear, it has been renegotiated. It has been ratified and signed into law by the Mexican Congress and president. And now this is the US part. It was ratified by the Senate after some negotiations. So the president has signed it into the law. It does not go into effect just yet. The Canadians are the third piece. And we thought it was going to be a little sooner, maybe by now. But it looks like it could be still a couple more months for their House of Commons and the parliament to finalize it. It is expected to be finalized because, again, they're one of the junior partners, if you will. But here we have the signing. And once Canada does finally approve it in maybe a month or two, there's a brief final fine-tuning of some last-minute things that the three countries do. And then 30 days after that, when they finally, I guess, dot the dots and cross the T's, it actually then goes into effect. Now, short answer, there's not going to be any dramatic change of the economy in this region. It's already deeply integrated. NAFTA, the original trade agreement, began in 1994, negotiated in 92, 93. And it did have a profound impact. It opened up the market. The three economies are now, again, virtually open. There are some exceptions, of course. But what this new negotiation does mostly is it helps to kind of upgrade it and address a lot of areas that maybe weren't there before, things like intellectual property protection, the internet, and investments. There are, and we'll talk a little bit more about some other provisions of it. But let me just say, don't expect any dramatic changes, any big either loss of jobs or gain of jobs. Down the line, it's going to help fine tune a little bit of it. But again, I just want to underscore, these three economies are deeply interconnected. Of course, there's an asymmetry. And by that, I mean, Mexico depends so much exclusively on the US for its major exports, major imports. Mexico is dependent on the US in ways that the other side, I mean, the US, Mexico is one of its major trading partners. I believe number two now after China and Canada is two. But Mexico is more diversified. Obviously has more trade with Europe, with Canada, with Asia than, say, Mexico. So let me stop on that. That's timing. Are the timing, Carlos, the timing? Yes, yes. Because of course, this comes in the middle of an impeachment. There's that square in the middle of an impeachment. If I was being impeached, I'm not sure that I would. Well, if I was being impeached and I was Trump, I would want to look like a real president and sign all this stuff. He could have signed it before, right? Some time ago. Well, it was also a timing within the Senate itself. I'm sure a little bit of winking of the eye that is that the Senate Majority Leader McConnell sort of facilitated making it available right now. Because that agenda in the Senate was kind of pro forma. I could have gone rather quickly. It got stretched out. But it's done. And what you have now is, of course, Trump on one hand, trying to showcase a rare legislative achievement, not sharing it with the Democrats, of course. So when he had the meeting, he shunned the Democrats for the signing of the bill. Those are sort of just, well, sometimes, let's say, the political context is not lost there. And beyond that, I think, well, Trump not known to know the inner details and micro-level analyses of anything like the health care reform. Who knew it was so complicated? Similarly, this NAFTA is extremely complex and technical. And obviously, it requires financial experts, trade policy experts to really make sense of it. Let me maybe make a brief summary of some of what the changes are doing, what's in it, what is in the new NAFTA. And basically, in a nutshell, it has some new laws. The law itself is 2,000 pages, so a lot of detail. But it has changes in several key areas, especially incentives to make cars in North America more. And for example, there's a previous NAFTA. If you assembled a car in Mexico or in the US or Canada, something like 67% had to be content from North America. That's being increased to 75, not a drastic change. And mainly, that's meant to limit some of the Asian imports. So a car assembled here in Mexico and exported to the US and may have some electronics from Malaysia, from China, the idea there is to keep it more in-house. OK, well, that benefits everybody. There is more controversy, well, more complexity in involving labor violations here in Mexico. There's a system set up where there's basically is designed to help identify and prevent labor violations. And initially, the US wanted to push for American inspectors could come to Mexican plants and just check on the labor conditions. In the end, they had to settle for a combined, sort of like a trilateral Canadian, Mexican, American teams, but still having that capacity. And again, one of the main provisions is it's requiring a higher percentage of the cars that are assembled in North America must be done by workers who earn $16 an hour or more. Now, for Canadian and American workers, that's not an issue. They make more than that. It's really designed to help increase wages in Mexico. Well, that's easier said than done, because it's going to be up to the Mexican economy and government to do that. But the pressure is on them more to try and address that. Other than that, there's been an effort to open the Canadian markets more to American dairy farmers. Canada had long had a system that more or less protects their farmers in the dairy industry. That's going to open a little more after some tough negotiations. So it's this range of, again, trying to steer car production, some stronger labor rules in Mexico. There's another provision that is less protection for drug companies, which was a concession to the Democrats. The Trump administration has agreed to pair back protections for advanced and very expensive class of drugs. They call them biologics. And so the Democrats were fearing that somehow it was going to limit the ability to get cheaper drugs from Canada or Mexico. So the final agreement removes a provision that had offered the drug's 10 years protection. The Trump administration has been seeking that. And this is designed to hopefully make it easier to get cheaper price drugs from Canada or from Mexico into the US. Other things, protections of intellectual property rights. For example, it extends to 50 years of protection for copyrights in NAFTA from 50 to 70 and criminal penalties for theft of trade secrets. These are things that are more in a developed country like the US and Canada. They're more common. You have capacity to enforce the law about piracy theft, et cetera. In Mexico, that's traditionally weak. So it's trying to tighten that up. And let me understand that, Carlos. Now, this would be a mutual kind of agreement. In other words, the copyright law that exists in the US in terms of the period of years of protection would be the same as the copyright law in Mexico. Would be the same as the copyright law in Canada? Yes, it harmonizes then. Basically, it puts them in sync. And there, the real challenge is bringing Mexico up to speed because it has weaker capacity to enforce those rules. And yes, finally, last thing. I mean, there's some additional access that American farmers have to markets, particularly in Canada, I mentioned already about the dairy industry, but also in some related wines and things. So there's a lot of little micro-technical things which go on. It's one of these things, trade policy. We have to remember, the benefits are always diffused, broad trade benefits the economy as a whole, consumers as a whole, but there are obviously losers. There are always certain sectors that get penalized. Often they're concentrated. Sometimes they're not as well organized, let's say, as the winners. I think what's interesting for understanding this current renegotiation is just seeing how the process played out. And on one hand, it reflected the typical US power, bully, kind of getting most of what it needs or wants. It's got more leverage over both Canada and Mexico. But also, we often describe it, at least in the sort of, let's say the academic literature as a classic interest group liberalism. So you've got labor groups, environmental groups, business groups, all mobilizing to try to do this, to do that. And that's a form of pluralism, which some people see as healthy. Obviously, that same pluralism is also the groups that have more power, more money, have more access, more influence. So it can be seen in a more cynical way. Canada, similar to the US, interest groups, lobby, pressure organized. In Mexico, not quite. I think despite its movement towards democracy here, it is rather pushed through in a very more, you could say authoritarian, but a more streamlined way. And in part because maybe these different interest groups don't operate in the same, let's say degree, as in the US, as influential, as organized. Yeah, yeah, but isn't Mexico the most important player in this? I mean, Trump attacked Mexico as soon as he was elected. He closed the border. He'd made demands on Mexico to stop central American people, migrants from coming through Mexico. He'd been beating up Mexico his entire time in office. For reasons to me that are not clear, but they're dark. So isn't, but isn't Mexico the real target of this deal as far as the United States is concerned? Because our relationship with Canada is way different, at least under the Trump administration, than our relationship with Mexico. It's really spotty. So how has this changed things from NAFTA till now? Well, I think it's more of the same. It's again, more of the asymmetry is what we describe the Mexico-US relationship. Mexico has much less capacity to influence and the Americans have tremendous power. Trump took it to another level, sort of a hyper power level, threatening to use a trade war, like he's done with Canada, I'm sorry, with China, with the Europeans. Last summer, he was threatening Mexico to increase tariffs on all of their goods. If they didn't cooperate on a separate issue, the movement of migrants from Central America, the so-called caravans. But here again, yeah, I mean, some of it is driven by that. Obviously it was a popular part of his appeal, his campaign, and it remains it. Build the wall, Mexico's ripping us off, all the jobs went south. The debates have been going on since before and after began about whether the US would lose jobs. And yes, critics will see in point to thousands of jobs that have been lost, obviously factories that have been closed. And Mexico by extension has gained it. There's a tremendous industrial production of, particularly the automobile sector, more than any other. But for the US, you can't just measure that single number of jobs. Obviously for the person losing the job, it's very real, but there are other areas of the economy that have boomed, that have expanded. The US today is exporting more to Mexico than ever. You can buy more American products here. There's Costco's filled with all kinds of American goodies. And so overall, I think the quick answer is that all three countries have had substantial increase in trade. Overall, the economies have benefited, but clearly there have been losers, yes. There have been sectors that have lost, even in Mexico today, the small farmer who grows his corn suddenly cannot compete with the farmers from Iowa and Nebraska, Illinois. And that's been a real concern here because corn is not just something you eat in a tortilla, it's integral to the culture, to the way of life of the small, poor, indigenous farmer. And today that way of life is suddenly, and so the economists might say, well, that farmer should be moving into some other type of work. Well, I heard you say that this is favors American agriculture, is sell American agricultural products to Canada and to Mexico. And my immediate reaction to that, Carlos, is well, Trump through his tariffs with China has lost part of the export market because of the tariffs he's imposed on, you know, and the Chinese in return. And the farmers in Indiana, for example, have been troubled by the fact that they can't sell as much agricultural products in China. So is he trying to restore support among the agricultural community in Hawaii here? I'm sorry, in the United States here, in order to, you know, build their export market through this US-1CA? I don't see that as a central part of it. The agriculture sector is important. In fact, it's much probably more the other way that is Mexico supplying today all those avocados and winter vegetables and fruits so that today you can buy an avocado 12 months of the year. Before and after, there was a very tight restriction on this single product such that, you know, well, it has boomed, let's say. But yes, Mexico does import today more goods from Mexico, including, you know, processed foods, but also grains. But not on the scale, I want to say of China. China, of course, imports, you know, whether it's pork or soybeans or other feeds and grains on a massive, massive scale, even more than Mexico. I think NAFTA and particularly the three economies are probably more dominated by the industrial production, especially automobiles and some other even aerospace here in Mexico has grown as a result of that. But, you know, other than that, I guess I would say this, that the president here, it's interesting, Amlo, he's a left-wing populist leader now starting his second year. He's a big critic of neoliberalism and maybe, you know, all of this sort of free trade oriented stuff. But interestingly, he was not able to be a very significant voice in this debate. In some ways, the negotiation happened just before he came into office. He sort of accepted it already as a done deal. His interests are domestic focused, so he doesn't, and he's very careful not to antagonize Trump and take him on. Well, you alluded to the players in the field here. There are players in the United States who have interests in, you know, changing trade rules. There are players in Mexico, maybe not that you're president, but maybe other substantial companies that are involved in trade with the United States and, of course, in Canada. And I have the vision from what you were saying, is that there's an awful lot of lobbying going on for a trade deal like this, lobbying in Mexico, lobbying in Canada, lobbying in the United States. So how does that work? It sounds like there's an awful lot of people, all lobbying, and how does it settle down? How do they express themselves? What leverage do they have? Well, many stakeholders, many interests, as you made very clear, and of course, that's why it's really, it's already taken two, three years now for this to get through. They, you know, the form of influence in lobby is, obviously it's done directly to the legislature, the Congress, but also to the executive. And so these same groups will be pressuring the president. Now, in general, the support is bipartisan and broad. Of course, there were critics, and there were a handful of senators who actually did not vote for the revocation. I think it went like 89 to 11. So it was overwhelming, but a small number of them, I'm thinking, I think one was Kirsten Gillibrand, Bernie Sanders, a few others, basically arguing that it didn't do enough for either labor rights or climate change issues. Now, even from day one when NAFTA was the first sign in the early 90s, mid-94, it came into force, it did not address very adequately or sufficiently environmental questions or labor standards and rights. They were very delicate, sensitive, and it ended up, they just had to sort of put them off. Because Mexico is at such a different level of development, there's a big contrast. And so they kind of put them off the back burner. The result is that NAFTA has always been a very more narrowly focused trade agreement, just reducing barriers and opening the economies. By contrast, the European Union, a deeper level of integration, more standardization of policies in many areas, social policy, environmental policy, criminal law. NAFTA is not- Equal balance of power. Negotiating power is equal to Europe. Absolutely. And you have a few heavyweights, the Germany, France, and the world, and they do have more power, but the others have more protected interests. In this trilateral relationship, unfortunately, Mexico is the weakest and smallest partner. Sometimes it actually does partner with Canada. And in a way, NAFTA has given Mexico a little bit of leverage. They have what are known as dispute settlement mechanisms, like a court in which you can take your case, that you're arguing that maybe the other side is dumping or otherwise cheating or not abiding by violations. In the renegotiation, though those have existed for some time now, and they've developed sort of this tradition now, norms of trying to settle the dispute. Initially, the Trump administration wanted to remove those and basically use the more bilateral approach to resolve differences. Mexico pushed back a bit, and obviously coordinating with Canada, said, no, no, no, let's make sure to keep the ability of this dispute mechanism. And so I guess I would say there that- So it really is trilateral. It really is trilateral. And for example, it governs not only trade between the US and Mexico, but trade between the US and Canada, and trade, and this is the operative question, trade between Mexico and Canada. So are the provisions the same or are there variations between the way those three trading points work? Now, the broad overall framework is the same for all, but there are a few areas where it is exclusive to, let's say this question of the dairy market, the access for American farmers. Those are technical aspects that were worked out just between the US and Canada. There are a few similar things with Mexico dealing directly with the US. So it's a little bit of both. It is a broad framework and it applies to all three, but a few areas have been kind of more fine tuned. Carlos, one thing I'm not clear on is this. You want to achieve some kind of control of trade or maybe relax the control of trade on a given kind of product, a given kind of transaction. How do you do that? What's the mechanism? Is that we know that you can do that with tariffs, but for example, the copyright law, how does that work? Does it mean that as part of the trade agreement, Mexico must do legislation to harmonize its trade? You know, it's copyright law and the same thing in Canada. So it's not just tariffs. It's a lot of other kinds of things. Yeah, yeah, it is. And this is where it gets very technical and micro level. And even, for example, I was reading an interesting letter from another reporter here that I'm just gonna glance at here. The American cheese and wine sectors are gaining more access to both Canada and Mexico. And just as an example, here in Mexico, they sell a lot of Mexican made cheese, manufactured here nationally, and it'll have a name. It'll say blue cheese or it'll say camembert or cheddar. And, you know, there was a dispute from the US side. You can't call it cheddar because it's, you know, we got the ownership in Wisconsin. Well, now they've basically issued a statement that they've agreed that Mexico can now sell all these wherever they're from in the same name and very micro level. These are the specific names, you know, and then, and, you know, cottage cheese, Colby cheese, cheddar cheese, camembert. Again, little micro level details, but it's designed to harmonize and put them in sync. But yes, a lot of what is now, and let's say this revision, it's gonna be ongoing changes in the legislature, labor reform laws in Mexico that have to address some of those questions. The copyright and infringement, you know, again, Mexico has to continue to tighten its capacity in the rules. When you say the word Mexico to most Americans, at least in this administration, they think of what the Trump administration has done to Mexico and how it's beat Mexico up on so many issues, including the migrants, which I, you know, I mean, we haven't seen it as headlines. There are so many other things that have, you know, dominated the news cycle in recent months. But the fact is that the administration has not relaxed its policies on migrants from Mexico and Central America. And the question I put to you is, what, if anything, does the USMCA agreement have to do now in terms of effecting immigration policy? Or is it, you know, although immigration was used as a lever in the negotiations, is it so that immigration is not really in the agreement at all? What happened? Yeah, no, it's not in the agreement at all, and it's not clear that this will either facilitate. Now, in theory, because they've reached this agreement and the three countries are now, you know, ready to make it implemented, I suppose in theory that means that there's cooperation. We did something, we worked it out. Maybe now we can address, you know, these other, the tensions are still gonna be there. And as it happens now, the immigration or the migration, the Central American caravans are not in the headlines, partly because Mexico is doing the dirty work for the US as a result of tremendous pressure and leverage that the US put last summer on Mexico, they are beefing up security at the southern border. Many here are describing it, well, Trump got his wall after all, it's the Mexican National Guard down at the southern border sealing off the, you know, the access to Central American. So Mexico is taking a harder line on that, in large part being coerced by the US. Mexico and this current president, they see the whole Central America issue as human rights, as social development, as you know, addressing the root causes and more of a human human rights and humanitarian issue for the US, for Trump, it's all security, it's the bad hombres, it's the, you know, the al-Qaeda coming across the Rio Grande day. And so it sensationalizes it, but this trade agreement again, nothing to do with migration. I mean, I suppose again, here in theory, if Mexico prosperous does better, fewer Mexicans will go and that's already happened and NAFTA in some ways has stimulated more growth in the Mexican economy so that more Mexicans today are earning, you know, again, a sector. The reality for Mexico remains that half of the population really is still very poor, part of the informal economy, not quite integrated into this global NAFTA. But the other part, and especially it's also regional, the border regions, Central and Northern Mexico are very much integrated, part of the industrial North American free market. I have so many questions for you. Let me ask you one. Okay, we're in an impeachment proceeding and there is, I mean, probably he's gonna be acquitted, but as it goes forward, he may lose his power or he may lose the election in November. And if he does, you know, there'll be a lot of Democrats, maybe in Congress or maybe even a Democratic president who will want to take a look at this, you know, how do you see that unfolding? If Bernie Sanders, for example, or Biden, you know, if they are elected, are they likely to try to change this? Can they change this? Is the United States bound for a period of time? How changeable is it? And how do you see it evolving into change? Well, you know, good thinking out loud real quick. I don't see it being revisited. They've done a lot of negotiating over the last few years. This is the noon after the 2.0 revision. There's always room to kind of fine tune things along the way. But even let's say the critics on the left, whether it's Bernie Sanders and others who've been critical that it doesn't go far enough, doesn't protect workers' rights, doesn't address the environment, those are gonna be things that will continue to be part of the bilateral agenda and they'll deal with it through NAFTA, they'll deal with it just individually. I don't see the, you know, again, if there's a scenario where, you know, Trump is replaced by a Democrat, let's say, I don't see them revisiting it. And interestingly, I would say NAFTA illustrates in this new USMCA, this trade agreement, it does have fairly broad support. Again, it's not like everybody's excited because nobody gets everything they want, but there's something in there for everybody. The business interests obviously have seen it boom. There's opportunities here now. There's even, you know, well, just a lot of flow both ways. And other than that, I guess there's no groundswell designed to want to stop it. You know, Trump, in part of his negotiation, I mean, he did a few things. One time he threatened to close the border. I don't know if you remember that, just shut it all down. And it's like people were saying, no, you can't do that. You know, how many billions of dollars flow across and, you know, it's gonna mess up everything. And so powerful pushback, especially from, you know, even business-oriented Republicans, anybody who works in all the government border states know that there's just too much at stake. The economy's, well, it just has a momentum. But you know, it remains to be seen, Carlos, because with this president and in his way of looking at things and his evaluation of his own powers, he might have some further thoughts about Mexico after he is acquitted and before the end of his term. Anyway, Carlos, I always enjoy this. We never really finish, but I'll open a couple of weeks, we can resume. And I hope when you're here in the near term, we can have a personal show rather than remote. Thank you so much. Carlos Suarez. Thank you, Jay. Aloha.