Election 2020: What the US presidential election could mean for trade with Mexico

Analysts see changes in trade relations with the United States and Mexico if Democratic challenger Joe Biden wins the presidency.

Noi Mahoney

4 years ago

The outcome of the U.S. presidential election could affect the nation’s trade relations with Mexico for years to come — impacting everything from Mexican produce imports to border infrastructure spending to the cross-border trucking industry.

With less than a week to go, trade analysts and business experts discussed hot-button issues between the U.S. and Mexico, as well as U.S. relations with Canada and China.

“The first thing to take into consideration here is that there are a huge number of complaints from the U.S. private sector right now against Mexico that are sitting at the Department of Commerce and at the Office of the U.S. Trade Representative (USTR),” said Duncan Wood, director of the Wilson Center’s Mexico Institute in Washington. “At some point, a U.S. administration will have to deal with these.”

The Mexico Institute is a think tank focused on research, public discussion and proposing policy options for enhancing U.S.-Mexico relations.

Wood said if President Donald Trump wins reelection, the trade complaints against Mexico will likely be dealt with quickly, “because USTR’s Robert Emmet Lighthizer will take up that cause again after the election is over.”

“If it’s a Joe Biden victory, then we would probably have to wait until there’s a new USTR in place,” Wood said. “It’s going to be a rocky road. I think that we’re in for a very complicated trading relationship between Mexico and the U.S.”

Wood said the United States-Mexico-Canada Agreement (USMCA) established rules and guidelines that Mexico is “violating right now, particularly in terms of consultation with the private sector, such as labor provisions.”

The deal contains rules of origin that require 40-45% of auto content be made by workers in Mexico who earn at least $16 per hour in order to receive USMCA tariff relief.

“A priority both for the Trump administration and for the Biden administration is going to be the labor provisions of USTR. And that is going to be a highly controversial issue in the relationship that will take a long time to sort out,” Wood said.

Ashley Craig, an attorney and co-chairman of Venable LLP’s international trade group in Washington, said Trump has continued to point to his skills as a dealmaker during his reelection campaign.

“A second term of the Trump administration would likely see a continuation of his push for new bilateral deals over multilateral alliances or trade initiatives. India, Brazil, and the European Union (EU) would likely be among the other trade deal partners for a second-term Trump administration,” Craig said.

Alice Gomez, vice president of government affairs for Cornerstone Government Affairs, said some of the key trade differences between Trump and Biden are how they handle tariffs and building alliances.

“Biden effectively has already been in the White House, having been vice president, and that was at a time of a more traditionalist trade policy approach in the sense that the U.S. was engaging in multilateral trading systems, like the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) pact,” Gomez said.

Washington D.C.-based Cornerstone Government Affairs is a bipartisan public affairs firm specializing in government relations and lobbying.

The CPTPP is a free trade agreement that aims to reduce tariffs and trade barriers among its member countries: Mexico, Canada, Australia, Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam. Japan and the United Kingdom recently applied to join the CPTPP.

The CPTPP was formed in March 2018 after Trump pulled the U.S. out of the Trans-Pacific Partnership (TPP) in January 2017.

“There’s a question if Biden will lead us back into more of these multilateral negotiations, where we’re looking at negotiating with multiple parties at one time, and the CPTPP is a prime example,” Gomez said.

Craig said if Biden wins, pursuing trade deals could take a back seat to focusing on the domestic economy, such as re-shoring supply chains to benefit U.S. workers.

“Biden has also signaled a desire to make trade deals and foster much closer trade relations with geopolitical allies – which may mean more of a focus on securing deals with the EU and Japan and potentially joining the CPTPP.”

Gomez said another key issue could be what happens to promises made by the Trump administration to farmers in the U.S. Southeast.

“When we’re looking at the elections from a [Mexico] produce/farming angle, one of the hot-button topics for the U.S. industry right now is what’s going to happen on the 201 investigation from the U.S. International Trade Commission,” Gomez said.

The Trump administration directed the International Trade Commission (USITC) to investigate the impact that blueberry imports from Mexico have on U.S. production in early September.

The USITC initiated a section 201 investigation of the Trade Act of 1974 on the extent to which the increase in imports of Mexican blueberries has caused serious harm to U.S. blueberry producers. Trade groups representing growers in Florida and Georgia lobbied for the 201 investigation.

Mexico is one of the leading suppliers of blueberries to the U.S., accounting for $219 million worth of imports in 2019. Peru was the top supplier of blueberries to the U.S. in 2019, accounting for $485 million.

“On the table during the USMCA discussions, particularly with Mexico, was this issue of some sort of a seasonal remedy for growers in the Southeast U.S.,” Gomez said. “If Biden is back in the White House, this could be something that Biden doesn’t choose to carry on.”

It’s also unclear what could happen to the USITC’s investigation of the Mexican trucking industry that was announced in August. The Owner-Operator Independent Drivers Association (OOIDA) and the International Brotherhood of Teamsters requested USITC investigate if “the U.S. long-haul trucking industry is materially harmed by an increase in cross-border trucking services provided by Mexican suppliers.”

Gomez said another topic to watch after the election is border infrastructure spending, including funding for agricultural inspectors at the border.

Funding for agricultural inspectors at the border falls under the U.S. Department of Agriculture’s (USDA) Animal and Plant Health Inspection Service (APHIS). The APHIS budget is about $600 million annually.

“Sometimes what’s not top of mind when we talk about the free flow of product is the funding that goes behind that inspection process,” Gomez said. “If that funding dries up, not only will there be a delay in inspections because there’s fewer agricultural specialists that are working for U.S. Customs and Border Protection (CBP) available to inspect those products, there’s also increased risk for pests and diseases entering into the U.S.”

Dante L. Galeazzi, president and CEO of the Texas International Produce Association (TIPA), said it’s unclear what changes could occur for border inspection policies and border spending after the election.

“TIPA actually worked alongside other groups and our Texas elected officials to see the Protecting American Agriculture Act bills get passed in both the U.S. Senate and House,” Galeazzi said.

The Protecting American Agriculture Act is the U.S. House of Representatives’ companion bill to the Senate’s Protecting America’s Food & Agriculture Act of 2019, which was signed into law by President Trump in March. That bill authorized the hiring of agricultural specialists to fill a shortage of inspectors at borders and ports of entry.

The Protecting American Agriculture Act would have mandated funding for CBP to hire about 700 more agriculture specialists, ag technicians and canine detection teams needed at U.S. ports of entry, Galeazzi said

“Unfortunately, it was the pandemic and the preceding economic slowdown that resulted in the hiatus of the [Protecting American Agriculture Act] bill,” Galeazzi said. “We will definitely continue to monitor the progress of the election and suggested future policies focused on cross-border trade.”

Galeazzi added, “Hopefully, regardless of the next president’s political affiliation, the administration will understand the importance of the importation of fresh fruits and vegetables to feed Americans.”

Lewis Black, CEO of Toronto-based Almonty Industries Inc., said regardless of who wins the U.S. presidential election, Mexico is still an attractive country for foreign investment opportunities, especially from Asia.

Almonty Industries is a mining company that processes and ships tungsten concentrate from mines in Spain and South Korea.

“Southeast Asian countries, especially countries like Japan, which have no natural resources of their own, they’re always looking for access in Mexico, because Mexico obviously has some pretty good resources,” Black said. “Mexico also has a president [Manuel Lopez Obrador] who is more of a kindred spirit with the Chinese government than, say, Trump would be. It doesn’t surprise me at all that you’re seeing Asian countries start to target Mexico.”