USMCA review: How Mexico should prepare to compete

The review of the United States-Mexico-Canada Agreement (USMCA) will force the country to rethink the way it competes in global value chains, according to Juan Pablo Murra Lascurain, Rector of Tec de Monterrey.

“We’re going to have to play the game differently,” he said as he concluded the forum A review of the USMCA: How might it affect Mexico’s opportunities in global value chains?

This event was organized by the BBVA-Tec Center for Trade Policy and Global Value Chains for North America (CEPCAN) at Grupo Reforma.

Representatives of the federal government, international trade experts, and private sector leaders were present to discuss the USMCA review process.

During the forum, they addressed topics such as the agreement’s validity, the development of domestic suppliers, workforce training, rules of origin, and North American productive integration.

Global value chains are changing

During the opening ceremony of this forum, David Garza, Executive President of the Tecnológico de Monterrey Education Group, noted that international trade is undergoing a period of transformation.

“Global value chains are changing, and trade policy has taken on even greater strategic importance.” 

He also noted that Mexico has become the United States’ leading trading partner since the USMCA took effect and emphasized the role of universities in driving economic development.

“Universities are drivers of human development, economic growth, and social progress.”

“The USMCA remains fully in effect”

During the keynote address, Luis Rosendo Gutiérrez, Undersecretary of Foreign Trade at the Secretariat of Economy, explained that the review process provided for in the agreement does not imply its cancelation.

“The USMCA remains fully in effect. It hasn’t expired and, in fact, hasn’t been suspended.”

According to the official, the United States now has a different trade policy than it did a few years ago, and Mexico must understand this paradigm shift in order to capitalize on the advantages it still holds over other competitors.

He also explained that currently between 82 and 85 percent of Mexican exports continue to enter the U.S. marketduty-free, which gives Mexico an advantage over other international competitors.

The undersecretary explained that the review is part of the agreement’s design and noted that the goal of the negotiations is to reduce uncertainty for companies and investors, while strengthening economic integration in North America.

“What we’re seeing today at the negotiating table is moving toward strengthening the agreement, not toward ending it. It’s moving toward greater economic integration.”

What are rules of origin, and why do they matter?

Rules of origin specify the percentage of regional content a product must contain to qualify for USMCA tariff benefits.

During the forum, experts noted that these provisions will become increasingly important as the agreement review progresses and efforts are made to strengthen North American productive integration.

Ernesto Stein, Director of the BBVA-Tec Center for Trade Policy and Global Value Chains for North America (CEPCAN), explained that one of the challenges will be to gradually increase the domestic content of exports through these rules of origin.

According to Stein, strengthening the participation of Mexican companies in these supply chains will help reduce dependence on inputs from Asia without affecting competitiveness.

Turning a commercial advantage into development

For Alejandro Cárdenas, BBVA’s General Director of Corporate and Institutional Banking, maintaining preferential access to the U.S. market is no longer enough.

“The real challenge is to turn that trade advantage into a development advantage.”

During his remarks, he explained that the next phase will depend on: 

• Developing domestic suppliers.
• Strengthening the infrastructure.
• Developing talent.
• Incorporating a greater number of small and medium-sized enterprises into global value chains.

In his remarks, Stein noted that the international context presents a new opportunity for Mexico.

“Mexico remains in a very good position to take advantage of this new trade policy landscape in North America, which presents many challenges but also enormous opportunities.”

The agreement calls for public policies, businesses, and universities

During the panel discussion, Jaime Zabludovsky, Vice President of IQOM Inteligencia Comercial and one of the negotiators of the North American Free Trade Agreement, noted that the trade agreement alone will not solve the challenges facing the region. 

“The agreement isn’t a panacea, and taking full advantage of it must be accompanied not only by public policies but also by initiatives that identify opportunities and develop technological, training, and financial mechanisms.”

Beatriz Leycegui, former Undersecretary of Foreign Trade, stated that the goal should be to translate trade integration into greater productive development.

“What matters is how we spur greater productive development in Mexico and how that leads to greater inclusivity so that more companies can participate in productive processes.”

According to Beatriz, achieving that goal requires greater coordination among the government, academia, the private sector, and civil society to identify opportunities and strengthen North American supply chains.

“We’re going to have to play differently”

To conclude the forum, Rector Murra noted that the new business environment requires a rethinking of how companies, institutions, and universities participate.

“We’re going to have to play differently.”

As an example, he shared the case of a business owner in the biomedical devices sector who stopped viewing his company solely as a manufacturing firm and began to see it as a company focused on design, innovation, development, and value chain integration.

The rector acknowledged that while the agreement review process may create uncertainty for businesses and institutions, he noted that the country must prepare to compete in a different environment.

“I hope that, as a country, we can minimize both the complexity and the uncertainty. But if not, we’ll have to find the mechanisms and tools to take advantage of this and do it better than other regions of the world.”

According to the rector, universities have a responsibility to prepare professionals who will navigate that environment and to promote research, innovation, and opportunities for dialogue that contribute to the country’s development.

“The USMCA opens up opportunities. To take advantage of these opportunities, we must build the personal, business, and institutional capacities needed to make the most of these moments.”
 

What is the USMCA?

The United States-Mexico-Canada Agreement (USMCA) is the trade agreement that governs the exchange of goods and services among the three North American countries. 

It took effect on July 1, 2020, and replaced the North American Free Trade Agreement (NAFTA), which had been in force since 1994.

According to the Secretariat of Economy, the agreement aims to strengthen economic integration in the region, facilitate trade, provide legal certainty to businesses and investors, and boost competitiveness in North America. 

It also includes chapters on digital trade, the environment, labor rights, small and medium-sized enterprises, and rules of origin.

The agreement stipulates that six years after it enters into force, the three countries will conduct a joint review, scheduled for 2026, to evaluate its implementation and determine the next steps for its continuation.

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