Assistant Secretary of Commerce Michael C. CamuÑez
Market Access and Compliance
"Realizing the Value of Our Cross Border Trade With Mexico"
New Democrat Network Event
Thursday, January 26, 2012
As prepared for delivery.
Good afternoon everyone.
Let me start by extending my appreciation to the New Democrat Network (NDN) for hosting this event and giving me the opportunity to speak to you about this important topic. It is a privilege to be here discussing border issues, which are extremely important to me personally and professionally and sharing this panel with Simon Rosenberg, the President of NDN and New Policy Institute (NPI), and D. Rick Van Schoik, Director of the North American Center for Transborder Studies at Arizona State University.
This event and recent release of the report “Realizing the Value of our Cross Border Trade with Mexico” by the North American Center for Transborder Studies and NPI is not only timely, but important as the United States and Mexico strive to move beyond the existing benefits of the North American Free Trade Agreement (NAFTA) and explore additional means of economic cooperation and market integration.
Strengthening our economic ties and facilitating cross-border trade between the United States and Mexico will help deepen our competitiveness and improve our collective position in the challenging global economic environment we face today.
NDN’s 21st Century Border Initiative and events like this highlight the importance and need to continue building upon the existing foundation of our bilateral economic relationship. We share many goals and values with Mexico, and we should build on the strong spirit of cooperation exhibited by our citizens, business communities, and governments throughout the years.
I have big place in my heart for the U.S.-Mexico border region. I was born in Las Cruces, New Mexico and lived there until I was a teenager and have many fond memories of the area from my youth. Members of my family still live in El Paso, so the border region is a place I hold dearly and care greatly about.
Therefore, I’m very glad to be here today to discuss the U.S.-Mexico trade and economic relationship and share the many ways our countries are working together to reduce regulatory barriers, facilitate cross-border trade through infrastructure improvements at ports of entry, and accelerate the flow of goods and people across our shared borders. You will find that much of the border related work the Department of Commerce is engaged in addresses some of the key concerns mentioned in the report being discussed today, such as border master planning, infrastructure improvements, and border wait times.
Let me first begin by providing some background on the role of the Commerce Department under the President’s trade agenda. As the Assistant Secretary of Commerce, I have the responsibility and privilege of working with our trading partners worldwide to advance the goals of the President’s National Export Initiative (or the “NEI” as we call it).
As you hear the President describe in the State of the Union a few nights ago, the NEI is a key component of the President’s economic recovery plan. Through the NEI, we are working hard to open new markets for U.S. goods and services, double our overall exports by 2014, and deepen our strategic trading relations around the world—all with the aim of growing the economy and putting millions of people back to work. My primary responsibilities under the NEI entail working to create the conditions and business climate -- I like to call it the “ecosystem” -- that foster and promote trade and investment as drivers of economic growth and prosperity. This includes working on policy initiatives to develop the legal and regulatory framework necessary to support trade and investment and to promote innovation and competitiveness. A big part of my job is to help business overcome the barriers that keep them from competing effectively and growing their business.
And that’s what has brought me here today: to develop innovative solutions to grow cross-border trade and increase global competitiveness on both sides of the border.
The Promise of the US-Mexico Relationship
As President Obama has repeatedly observed, the U.S.-Mexico relationship is evident every day in the strong bonds between our two societies. This is reflected in 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 a border, but, more importantly, we share fundamental values.
The U.S.-Mexico relationship is an important economic asset for both of our countries and I am personally committed to seeing it flourish.
- The U.S. is Mexico’s largest trading partner and Mexico is the U.S.’s third largest trading partner and our second largest export market.
- Our bilateral trade in goods and services totaled nearly $400 billion in 2010: that’s roughly $1.1 billion per day; and
- Our bilateral trade and investment relationship was a half trillion dollars in 2010.
To put the scope and depth of our relationship in perspective, consider that last year U.S. exports to Mexico exceeded our exports to Brazil, Russia, India and China combined.
Meanwhile, U.S. goods imports from Mexico in 2010 totaled $229.9 billion, accounting for 22 percent of Mexico’s GDP. But what’s most incredible is that those Mexican imports actually drive U.S. exports: 64% of the content of Mexican goods sold in the U.S. are made from U.S. inputs.
As the ASU report also highlights, while the United States accounts for over 90% of Mexico’s export market, every dollar Mexico makes from exporting to the United States, it will in turn spend 50 cents on U.S. products or services.
Likewise, the report states that trade with Mexico sustains six million jobs in the U.S. and twenty-two states count Mexico as their No. 1 or No. 2 export market and the country is a top 5 market for fourteen others.
In 2010, U.S.-Mexico bilateral trade increased 29 percent over the prior year. Since the inception of NAFTA, U.S.-Mexico trade nearly quintupled.
Even so, we are a long way from reaching our potential. We can – and we must do more. The border is one area where important bilateral engagement is happening.
The Importance of a 21st Century Approach to Border Management
I understand there are particular issues that companies face on a daily basis by conducting business so close to the border. I’d like to take just a few minutes to share with you what the administration is doing to address some of these challenges.
The first—and perhaps most important—issue they face is the need for improved infrastructure and clearance procedures at the border.
The report clearly shows the deep interconnection of the U.S. and Mexico supply chains and the importance of expanding and improving ports of entry as well as establishing new ones in order to minimize costly delays at the border.
As close trading partners, the United States and Mexico share not just a border but highly integrated supply chains and co-production. Eighty-five percent of that incredible volume of trade I just described crosses the border each day by truck. Certain manufacturing processes regularly require crossing the border as many as 3 to 4 or more times. This means that delays at the border not only increase transportation costs but also interrupt manufacturing and delivery cycles.
Likewise, border delays hinder manufacturers and maquiladoras’ dependence on reliable logistics of freight distribution.
With today’s just-in-time manufacturing system, unpredictable wait times can act as barrier and deterrent to trade, inhibiting cross-border economic investment.
Border delays impact productivity, industry competitiveness, and result in lost business income and reduction in gross output in both the United States and Mexico.
Long-term costs can also accrue to companies and even industries through relocation pressures, requiring industries to move from their best location and optimum supply chain, and in turn altering investment, prices, and demand.
Part of problem, of course, is inadequate infrastructure capacity, which is failing to keep up with the increase in trade and security requirements.
Many ports of entry (POEs) were built decades ago, while NAFTA trade has dramatically increased truck traffic across the U.S.-Mexico border. For example, the Mariposa POE in Nogales, which was built to handle 300 trucks daily, now handles 1,200.
Recognizing the critical role that cross border trade plays in the economic growth of our two nations, Presidents Obama and Calderon issued a Joint Declaration on 21st Century Border Management during President Calderon’s official state visit to Washington in May of 2010. Our leaders committed our nations to full and renewed cooperation based on the principles of joint border management, co-responsibility for cross-border crime, and a shared commitment to the efficient flow of legal commerce and travel. The report highlights that both our governments have committed to joint border management and the importance of improving lawful trade and travel. I will provide a short overview of the structure and work being done in this area and a few of the infrastructure related accomplishments.
The 21st Century Border Management initiative has three areas of focus that are overseen by a bi-national Executive Steering Committee (ESC), of which my office in the Department of Commerce is a part, and three working groups:
- Border Infrastructure;
- Secure Flows of Goods and People; and
- Corridor Security.
The ESC developed a 12-month action plan for the border region, which seeks 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:
- The San Luis II commercial crossing in San Luis, AZ and the Donna-Rio Bravo Bridge in Donna, TX were completed in late 2010;
- This year saw the completion of the construction for seven new northbound commercial lanes at the Laredo World Trade Bridge and the groundbreaking for the new West Rails Bypass project in Brownsville, Texas;
- And in July of this year, we celebrated the groundbreaking for the new Tornillo-Guadalupe international port of entry in El Paso County (which is slated for completion by summer of 2013). This new six lane border crossing facility will be one of the largest in the nation and capable of serving vehicular, pedestrian and commercial traffic.
The ESC is also currently conducting wait time pilots at seven ports of entry. The end goal is to install the appropriate technology to measure wait times and provide real time information for customs officials, shippers, and travelers in order to inform operations and staffing decisions, as well as the redirection of traffic to other neighboring POEs that are less congested.
Our colleagues in the Customs and Border Protection department have been hard at work. But so have we in the Department of Commerce. Our main objective is to ensure that as we work towards improved border management, we are always careful to solicit, consider and include the voice of industry in the process. Stakeholder involvement is critical to our success, and that’s why we’ve formally reached out to industry with a request for comments concerning industry’s priorities along the border. And here’s what we’ve heard. Industry has called for the expansion or creation of:
- Mutual recognition of trusted trader programs;
- Pre-clearance and pre-inspection away from our borders;
- A single-window data platform for imports and exports; and
- Broad interagency and bilateral coordination at the border on inspections and processes.
We are now working with our colleagues in the US and Mexico to make sure these issues are addressed in our ESC Working Groups.
Deepening Trade With Mexico Through Enhanced Regulatory Cooperation and Export Promotion
An efficient and secure border is essential to our ability to grow our economies and create more jobs in both the United States and Mexico, but it’s not enough. That’s why we’re also working on other important initiatives that are important to advancing our overall trade relationship with Mexico.
High Level Regulatory Cooperation
One of the most important initiatives is our commitment to cooperate in the ways in which we adopt regulations that affect business activity. There’s no need for me to tell you how regulations – done poorly – can impact business. As the President affirmed again in the State of the Union, this administration is committed to streamlining our approach to regulation, making sure that we do not unnecessarily burden companies—especially small and mid-size businesses—with excessive regulations. Of course, there is a proper role for regulation, and we are committed to protecting the environment, public health, and public safety. But too often our governments take divergent and unnecessarily different approaches to regulation that only result in added burdens and increased transactions costs that get in the way of productivity, growth and job creation.
This is why, last May, President Obama signed an Executive Order directing all federal agencies to work to harmonize, simplify and coordinate rules to reduce the cost of regulations. So far, more than 500 reforms worth billions of dollars in savings have already been identified. The Calderon administration in Mexico has undertaken a similar review and has made excellent progress in eliminating excessive regulations throughout the Mexican federal government.
But we can’t stop with considering the regulations that are already on the books. We have to ensure that our governments work closely together to ensure that we take more consistent approaches in the adoption of future regulations, especially those in emerging sectors that are highly innovative and can lead to economic growth and job creation. Given the highly integrated nature of our economies, regulatory divergence often achieves little substantive outcomes but can impose significant transactions costs on firms doing business on both sides of the border. If we can achieve better cooperation in our approach to developing regulations, including technical regulations that incorporate sometimes competing industry standards, we can go a long way to growing our trade relationship.
That’s why we have launched a bilateral High Level Regulatory Cooperation Council (“HLRCC”) with Mexico. The HLRCC has a mandate to ensure that our governments’ overall approach to regulation balances the need to promote economic growth, job creation, and benefits to our consumers and businesses as we endeavor to ensure the safety of our products, our people and our environment. The HLRCC will focus especially on cooperating on “up stream” regulations—working together to develop common, consistent approaches to developing new regulations in emerging sectors that don’t yet exist. This will ensure that our companies on both sides of the border will face fewer difficulties trying to get the same product to conform to two different regulatory schemes that are designed to achieve the very same thing. It will, we hope, save time and money without compromising public safety or health.
This HLRC is led on the United States side by the White House’s Office of Management and Budget. Our role in the Department of Commerce is to ensure that the business community and key stakeholders have an opportunity to participate fully in the process and to ensure that the impact of regulations on trade is fully considered. We have solicited feedback through a formal Request for Comment that was published in the Federal Register. The results from that solicitation pointed strongly to the need for greater cooperation on customs facilitation at the border, but also identified several sectors where enhanced regulatory cooperation and convergence could increase trade.
Mexico has undertaken a similar effort to solicit feedback from its industry, and now senior officials from the United States and Mexico are in the process of developing an action plan taking into account the input received in both countries.
A Renewed Focus on the Economic Benefits of the Border
As the Center for Transborder Studies makes clear, the tremendous value of the US-Mexico border is “hidden in plain sight.” So much of the national media is focused on provocative stories about illegal border crossings, drug and cartel violence, and other stereotypes that reinforce only a negative image of the border. But we all know this belies the truth of what’s really happening. And this is why we are committed to calling attention to the important economic contribution that the region makes to our national wellbeing. At the International Trade Administration, we have launched a Border Export Strategy, hired a senior director for border trade who is based in El Paso but has border-wide responsibilities, and I have devoted significant personal attention to the region.
Last October, I was in El Paso with the Director General of Mexico’s Secretariat of Economy to discuss with border stakeholders how infrastructure investments and improvements in customs procedures can facilitate increased trade in the region. Together, we met with many of the principal exporters on both sides of the border—maquiladora executives representing the Mexican private sector and U.S. small and medium sized business owners who comprise the maquiladoras’ supply chain. We had excellent discussions with both groups and received useful feedback, which we will incorporate into our respective government’s efforts to grow trade along our southern border.
We also visited one of the busiest ports of entry on the U.S.-Mexico border where we were briefed by senior U.S. Customs and Border Protection officials regarding the challenges of advancing our dual interests: security and commerce. We communicated industry concerns and gained useful information that will inform our efforts on behalf of our respective private sectors.
A few weeks later, in November, I participated in the Second Annual North American Competitiveness Conference, which highlighted an array of panel topics, exploring the opportunities and obstacles for deeper supply chain integration among United States, Mexican and Canadian businesses in several key sectors such as aerospace and defense, clean technologies, emerging technologies (electronic, automotive, digital), medical devices and biotechnology, and access to financing. While in San Diego I also had the opportunity to tour the Otay Mesa port of entry and speak with U.S. customs officials about the trade and security issues they are facing there in that region of the border.
Next week I will be leading a trade mission to Mexico, which will include a stop in Monterrey and the State of Nuevo Leon, which is just one of seven trade missions that the DOC will have led in the last two years. Our message to the business community is simple: Mexico is open for business. And it is a terrific place to do business that complements and reinforces many strengths in the American economy. Our efforts on the border will continue this year, as we look to partner with key public and private sector partners to deepen our trade with our vital partner.
Let me just conclude by touching on a few other areas of opportunity for increased trade with Mexico. Perhaps the best example is renewable energy and energy efficiency, where we are exploring how to eliminate market access barriers to trade in these innovative products and services. The President has committed the United States to a clean energy future, and this has important implications for our trade efforts. Because as we develop and grow the technology and expertise to convert our own economy to a great reliance on clean and renewable energy, that skill, know how, and technology gives us a competitive advantage and an opportunity to export to key markets like Mexico. And this has great relevance for the border as well.
Last October, I spoke at the U.S.-Mexico Border Energy Forum Plenary Session, where I offered insight into Commerce’s efforts to develop the untapped potential of the border region, particularly that of the renewable energy sector in Mexico. Mexico’s demand for electricity will double in just a few years. Currently, it draws under 5% from renewable, so it’s a significant market.
Consequently, last September, the Commerce Department’s Under Secretary for International Trade was in Mexico City along with 19 U.S. clean energy companies for two days of meetings with senior Mexican officials on renewable energy and energy efficiency policy development.
While in Mexico City, Under Secretary Sanchez and the delegation met with the Mayor of Mexico City, three commissioners from Mexico’s energy regulator (CRE); the President of CFE – the state-owned utility company; and the Secretariat of Energy. The delegation also participated in the first U.S.-Mexico Renewable Energy and Energy Efficiency Policy Roundtable.
The meetings made clear that there is significant potential in Mexico for renewable energy development and that the Mexican Government is willing to work closely with U.S. companies.
The policy visit allowed for an informative and productive exchange between the U.S. companies and Mexican government officials on key topics such as: 1) the pricing of renewable energy, 2) transmission and grid access issues, 3) electricity subsidies, 4) tendering procedures, and 5) performance requirements and standards.
It allowed the Mexican government to highlight their renewable energy goals as well as their targets for promoting the deployment of renewable energy technologies, which will no doubt create business and job opportunities in both the United States and Mexico.
This renewable energy policy mission is a good example of Commerce’s commitment to exploring how to deepen cross-border trade in emerging sectors of the economy that hold the most promise for growth and job creation and how to eliminate market access barriers to trade in these innovative products and services.
In addition to these efforts, Commerce is interested in working more closely with Mexico on specific sectors which demonstrate high levels of growth potential and support export growth for small- and medium-sized enterprises such as automotive parts and medical technology, which non-coincidentally are not sectors of focus for this conference.
Let me close with this: The fact that Mexico is our second largest export market and third largest trading partner, accounts for 13 percent of all U.S. exports, and that every day some one million people cross our border for business, pleasure, and to maintain family ties, speaks to the success of our bilateral relationship.
The imperative before us – even in a post-9/11 world in which our nations are working more closely than ever to improve security – is to enhance the legitimate flow of people, goods and services across our borders. Doing this means expanding our country’s and our region’s economic competitiveness in an increasingly competitive world.
More than ever, countries around the world are looking for anything that will give them a competitive edge. That’s why it’s critical that the United States and Mexico take full advantage of the edge we already have: our shared border and our shared values and priorities.
Anything less means letting down our people – folks counting on us to ensure that they have a shot at the very opportunity that calls people to our shores.
I want to thank the New Democratic Network and Simon Rosenberg again for the opportunity to discuss the U.S.-Mexico trade relationship, its importance for our shared border communities, and the need for continued regional collaboration in promoting new trade opportunities for businesses on both sides of the border.
Please know that the International Trade Administration and the Department of Commerce is eager to be a partner with you in strengthening the U.S.-Mexico commercial relationship and improving the quality of life for all citizens in the region.
I appreciate your time in allowing me to share with you the robust agenda we are pursuing to deepen our trade relationship along the borderThank you.
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