Washington sees obstacles to U.S. companies in Mexico

05/04/2021

Customs red tape, opaque public procurement, blockage of biotechnology trade, and barriers to investment in energy are some of the obstacles that the White House trade office sees for US companies in Mexico.

The United States Trade Representative (USTR) highlighted a series of costs for US companies derived from barriers to trade and investment in Mexico. In its report Barriers to Foreign Trade 2021, the USTR included measures taken by the Mexican government in various sectors, from energy and telecommunications to agriculture and pharmaceuticals, among others.

In a first instance, since December 2013, Mexico has required importers to obtain a license before certain steel products can be shipped to Mexico. Mexico's stated objectives for the licensing system are to combat customs fraud, improve trade remedy enforcement and improve statistical tracking of steel imports.

"However, administrative delays and cumbersome procedures for the processing of license applications by the Ministry of Economy have caused U.S. steel exporters and their Mexican customers to face disruptions in supply chains and additional shipping or demurrage costs," USTR said.

Mexico also ratified the World Trade Organization (WTO) Trade Facilitation Agreement in July 2016. However, U.S. exporters continue to express concerns about Mexico's customs administrative procedures, including insufficient advance notice of procedural changes, inconsistent interpretation of regulatory requirements at different border posts, and border enforcement of Mexican standards and labeling rules.

"Two recent changes to customs procedures at the border were made with less than 24 hours' notice to traders, resulting in disruptions that left trucks lined up at the border and companies scrambling to comply," USTR added.

On another front, on October 6, 2020, Mexico notified the World Trade Organization (WTO) of its proposal to revise a 1998 technical regulation, NOM019-SCFI-1998 "Security of Data Processing Equipment," which establishes security requirements for certain information and communications technology (ICT) products, including servers, data centers, and network devices.

According to USTR, U.S. stakeholders have expressed concern that Mexico "will no longer exempt many U.S. ICT exports from testing requirements" and that Mexico would no longer recognize that the results of U.S. conformity assessment procedures meet the requirements of the revised technical regulation, PROY-NOM-019 -SE-2020 "Information Technology Equipment and Associated Equipment, and Equipment for Office Use-Safety Requirements."

The industry estimates that this change will cost them $77 million and could negatively impact U.S. jobs. A further case involves the Treasury Department announced on June 28, 2019, that 61.2% of bids for drugs and medical supplies destined for public hospitals either did not receive bids or the Treasury Department deemed the bids invalid.

U.S. companies expressed concerns that the 2020 procurement cycle did not have adequate preparation time and multiple uncoordinated bids were announced. Finally, USTR said the Mexican government has urged energy regulators to restore state control over the energy sector and prevent state-owned energy companies from losing market share to private companies.

Throughout 2020, U.S. energy companies have complained of permitting delays, discriminatory enforcement of regulations, and lack of notification regarding regulatory and policy changes.

Key Trade Office

The USTR is part of the Executive Office of the President of the United States and is the agency responsible for recommending and developing U.S. trade policy. Among its mandates is the execution of bilateral and multilateral trade negotiations, such as the recently developed U.S.-Mexico-Canada Agreement (T-MEC). Another important task is to instruct the conduct of investigations against trade practices of U.S. partners that may unduly displace U.S. producers from the market.

In her Senate confirmation appearance, Katherine Tai, the new head of USTR for President Joe Biden's administration, said that a priority of her administration will be to implement and enforce the terms of the T-MEC to prevent the agreement from being distorted in terms of its benefits to the American people, as it has been in the past.

"Too often in the past Congress and the Executive came together to finalize and approve a trade agreement. But then other pressing issues arose and we all moved on. The U.S.-Mexico-Canada Agreement (USMCA) is a unique bipartisan achievement that should break that trend," she said.

Source: El Economista