Three Mexican business organizations—the CCE, Index, and Concamin—have asked the USTR not to impose Section 301 tariffs on Mexican products. This request was made in response to a new ongoing investigation.
These organizations warned that additional import taxes resulting from Section 301 would also affect the United States.
CCE, Index, and Concamin
From the perspective of these business groups, the Section 301 investigation would raise costs and dampen investment. As a result, the benefits of the USMCA would be undermined. They argued that Mexico should be exempt, as it does not implement overcapacity policies. Furthermore, they highlighted the high level of bilateral manufacturing integration and its impact on employment and supply chains.
Mexico’s economic relationship with the United States has evolved from the exchange of finished goods to a model of regional co-production. This model has significantly improved North America’s competitiveness.
A substantial portion of Mexican imports from the United States (62%) and U.S. imports from Mexico (59%) consist of industrial inputs that are further processed to produce components or final goods.
Furthermore, 25% of bilateral trade between the United States and Mexico occurs between related parties engaged in cross-border manufacturing processes.
These points were outlined in a letter to Jamieson Greer, the U.S. Trade Representative (USTR). In the letter, the business organizations highlighted uncertainties regarding exports, investment, and logistics.
Structural Overcapacity
The CCE, the Index, and Concamin argued that the Mexican government does not intervene to suppress domestic demand. Nor does it intervene to decouple business decisions from market incentives.
Taking into account all factors in the Section 301 investigation, these business organizations concluded that there are no policies designed to create structural overcapacity.
For example, the CCE, Index, and Concamin argued that Mexican state-owned enterprises do not subsidize their products to boost the competitiveness of domestic private companies. In other countries, this sometimes occurs.
“Mexico has a nearly balanced trade balance. If the Mexican government had implemented deliberate policies to suppress consumption or permanently increase the surplus, Mexico would have a significant trade surplus,” argued the three private-sector representatives.
As is to be expected in any open economy with relatively low tariffs, Mexico has trade surpluses with some countries and deficits with others, depending on its comparative advantage.