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Speaker 1: This is a special edition of Wall Street Week devoted

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Speaker 1: to the USMCA. I'm David Weston, bringing you stories of capitalism.

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Speaker 1: The agreement President Trump negotiated among the United States, Mexico,

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Speaker 1: and Canada in his first term is up for renegotiation

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Speaker 1: as much as President Trump might have it otherwise.

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Speaker 2: We don't need anything that Canada has, We don't need

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Speaker 2: anything that Mexico has, but they need everything that we have.

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Speaker 1: Some two trillion dollars of the North American economy depends

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Speaker 1: on trade across borders with the US, Canada, and Mexico.

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Speaker 1: But exactly what's at stake is different depending on the sector.

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Speaker 1: American farmers are hurting badly. They're desperate for any help

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Speaker 1: they can get to expand export markets hurt by other

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Speaker 1: Trump trade policies, particularly with China. The energy industry doesn't

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Speaker 1: need export markets as much as it needs to find

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Speaker 1: power wherever it can for all those AI data centers

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Speaker 1: coming online. Power that right now flows to the United

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Speaker 1: States from Canada and from the United States to Mexico.

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Speaker 1: But we start with the poster child for North American trade,

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Speaker 1: the auto industry. Since the usmca's predecessor, NAFTA, came to

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Speaker 1: effect over thirty years ago. Autos have been at the

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Speaker 1: center of negotiations. The reason is simple. The industry is

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Speaker 1: tightly integrated across northern and southern US borders. Borders like

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Speaker 1: the one between Detroit, Michigan, and Windsor, Ontario. This is

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Speaker 1: the brand new Gordi Howe International Bridge that spans the

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Speaker 1: Detroit River, separating the motor city from Windsor. It was

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Speaker 1: named for the famed hockey player who was born in

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Speaker 1: Canada but crossed the border to lead the Detroit Red

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Speaker 1: Wings to four Stanley Cups. Canada paid for the bridge,

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Speaker 1: but now President Trump has put its opening on hold,

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Speaker 1: which in itself is unlikely to divide the two cities economies.

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Speaker 3: Those are not really separate cities. There just happens to

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Speaker 3: be a borderline through.

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Speaker 1: The economist Paul Krugman won the Nobel Prize for his

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Speaker 1: work on trade.

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Speaker 3: Stuff does go back and forth. There's a tremendous amount

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Speaker 3: of specialization, which is good for everybody, reduces costs, increase efficiency.

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Speaker 1: One of the companies benefiting from that back and forth

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Speaker 1: trade is Linamar, a manufacturer with headquarters outside of Toronto.

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Speaker 1: Jim Jarrell is its CEO.

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Speaker 4: So we're sixty years old. And really, I think when

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Speaker 4: you look at Lenamart where it advanced manufacturing and product

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Speaker 4: design technology company with thirty seven thousand people global eighty

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Speaker 4: seven facilities around the world.

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Speaker 1: When we talk about the auto part of Lenomar's business,

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Speaker 1: how much of your production goes across either the Canadian

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Speaker 1: US border or the US Mexican border, or for that

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Speaker 1: matter of Canada Mexico.

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Speaker 4: I would say a ton. There is so much interconnection

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Speaker 4: integration between it, and I think we've demonstrated this before.

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Speaker 4: We have one part that we do for an OEM

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Speaker 4: customer two OEMs in the US, and the original part

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Speaker 4: that we get is a forging that comes into Mexico,

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Speaker 4: which goes into the US to get some further processing,

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Speaker 4: comes into Canada for further processing, back to the US

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Speaker 4: for further processing, over to Canada where we do the

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Speaker 4: sort of final assembly, and then that gets distributed back

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Speaker 4: into the US as well as Mexico and Canadian auto plants.

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Speaker 4: So again you can see this full integration of this

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Speaker 4: supply chain in the automotive North American area. And one

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Speaker 4: thing we say is you can't unbake the omelet.

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Speaker 5: Right manufacturing has become a regional game.

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Speaker 1: Shannon O'Neill is the Director of Studies at the Council

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Speaker 1: on Foreign Relations, author of the book The Globalization Myth

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Speaker 1: Regions Matter, and a Bloomberg Opinion contributor.

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Speaker 5: The strength, frankly, of the US auto industry is really

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Speaker 5: a North American auto industry. It is that because cars

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Speaker 5: and car parts are produced across Mexico, Canada, and the

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Speaker 5: United States are strong, they are competitive, and they're affordably priced.

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Speaker 5: And it's that connection those supply chains across North America.

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Speaker 5: They're important for autos, they're important for all kinds of manufacturing.

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Speaker 1: Given how the i'll call it North American auto industry

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Speaker 1: has evolved, is it even possible to cut off imports

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Speaker 1: and exports of automobiles and auto parts between the United

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Speaker 1: States and Canada and or Mexico.

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Speaker 5: There's a real question. If we didn't have NAFTA, if

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Speaker 5: we didn't have USMCA, would we have a North American

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Speaker 5: car industry at all? If we didn't have the economies

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Speaker 5: of scale of production that have now developed over North America.

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Speaker 5: Could we bring back just a US produced car. Sure

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Speaker 5: we could, but it would be a much more expensive car,

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Speaker 5: it would likely be a less innovative car in terms

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Speaker 5: of the parts that go into it, and it would

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Speaker 5: be really hard to compete against imports from Japan, South Korea,

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Speaker 5: Europe and other places.

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Speaker 1: The USMCA may have been a win win for auto

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Speaker 1: industry companies like Lynomar and for American consumers, but it

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Speaker 1: hasn't necessarily addressed President Trump's underlying concerns about the balance

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Speaker 1: of trade between the US and either Canada or Mexico.

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Speaker 1: For twenty twenty five, the US trade deficit with Mexico

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Speaker 1: was nearly two hundred billion dollars, with Canada about forty

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Speaker 1: six billion dollars. But O'Neill says, regardless of the trade deficit,

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Speaker 1: President Trump is underestimating the extent to which the US

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Speaker 1: needs trade both ways with both Canada and Mexico.

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Speaker 5: What we see is a big influx of goods coming

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Speaker 5: from Mexico to the United States. Is now the number

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Speaker 5: one export to the United States or US importer. In part,

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Speaker 5: that's replacing Chinese trade. In part that is just the

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Speaker 5: strength of North American supply chains and the back and

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Speaker 5: forth of goods and services that move there. But we

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Speaker 5: also need to remember that Mexico and Canada are the

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Speaker 5: number one export markets for US companies for US products

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Speaker 5: that go out into the world, so we are very

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Speaker 5: dependent on them as they are on us.

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Speaker 1: Another concern often expressed by President Trump when it comes

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Speaker 1: to trade, particularly in the auto industry, is the loss

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Speaker 1: of jobs, something Krookman admits is real but not really

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Speaker 1: the fault of the USMCA. What do you say to

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Speaker 1: people from my home state of Michigan who hear President

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Speaker 1: Trump say, you know, that's such a good idea. We're

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Speaker 1: going to actually have some barriers put up so that

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Speaker 1: we have more of those plants in Michigan, in Ohio,

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Speaker 1: so we have better jobs because we have lost all

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Speaker 1: those jobs.

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Speaker 3: We have lost a lot of jobs, but it's not

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Speaker 3: mostly because of n after right, I still call it nafter. Sorry,

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Speaker 3: it's a lot easier given the Trump Keys changing the name.

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Speaker 3: But anyway, do we have fewer manufacturing jobs in the

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Speaker 3: United We have fewer auto jobs in the United States

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Speaker 3: because of the USMCA. I think that's highly doubtful. The

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Speaker 3: idea that somehow turning our back on the world here

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Speaker 3: is going to add jobs is probably worldwide.

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Speaker 1: And then there's China not part of USMCA negotiations, but

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Speaker 1: always a specter in the room.

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Speaker 5: China is looming over all of these negotiations, and this

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Speaker 5: real worry about China selling products into the United States

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Speaker 5: using Mexico or Canada as a backdoor in right, getting

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Speaker 5: the benefits of free trade without actually being party to

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Speaker 5: the negotiations and to the agreements. And so what we've

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Speaker 5: seen is Mexico in particular push back against Chinese imports

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Speaker 5: which have grown dramatically over the last five years into Mexico.

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Speaker 5: Some of this are cars and car parts and the like,

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Speaker 5: some are other electronics and the like. So we've seen

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Speaker 5: them push back to really support North America. And as

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Speaker 5: we get into the USMCA negotiations, China and this idea

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Speaker 5: of transhipment of shipping parts in through Mexico to the

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Speaker 5: United States is a big part of the conversation and

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Speaker 5: one can see and I think all parties are open

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Speaker 5: to creating a real North America fortress visa each China

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Speaker 5: visa the other imports from around the world.

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Speaker 3: We're in a world now whereas we've seen, interdependence can

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Speaker 3: be weaponized. We used to think that that was something

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Speaker 3: we did to other countries, but now we find out

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Speaker 3: that other countries do it to us too. So the

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Speaker 3: idea that you need to maintain capacity in your own

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Speaker 3: country or in reliable allies for strategically important stuff is

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Speaker 3: now very very real. I am really reluctant to be

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Speaker 3: where I am right now, but I do think that

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Speaker 3: conditional terrorists on Chinese cars are probably going to be necessary.

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Speaker 3: I don't think that the Europeans can allow their auto

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Speaker 3: industry to be totally hollowed out. Now there's some compromise here.

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Speaker 3: Probably totally trying to shut Chinese cars out of the

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Speaker 3: market is going to be a bad thing, be very

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Speaker 3: costly to consumers. But on the other hand, I've been

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Speaker 3: shocked not only by my own change of mind, but

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Speaker 3: by some of my colleagues, people who are long time

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Speaker 3: advocates of globalization and free trade, who are saying, okay,

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Speaker 3: Europe needs to do some really if you like, it's

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Speaker 3: national security, its market disruption to just allow something as

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Speaker 3: big as the European auto industry to just be overrun,

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Speaker 3: even if consumers would benefit for a while, It's not

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Speaker 3: twenty years ago anymore. We really do need to rethink

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Speaker 3: which is a long way from saying that we should

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Speaker 3: have tariffs on everything, where that the Europeans should have

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Speaker 3: tariffs on everything, but a much more interventionist position has

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Speaker 3: become really hard to avoid.

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Speaker 1: But for all the concern about trade deficits and jobs

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Speaker 1: and putting sand in the gears of the North American

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Speaker 1: auto industry, those most closely involved have one concern above all.

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Speaker 4: I would say, certainty has got to be the prize

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Speaker 4: award that we've got to be chasing here. I just

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Speaker 4: think that is absolutely the critical to have.

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Speaker 1: That.

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Speaker 3: The great virtue of this whole world trade system that

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Speaker 3: the United States basically set up after World War Two

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Speaker 3: was that it provided It wasn't just that their terroriffs

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Speaker 3: were low, though that's important, but even more important, things

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Speaker 3: were predictable. I would almost prefer that Trump put on

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Speaker 3: more tariffs on Canada and Mexico but committed to keep

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Speaker 3: them in place, than have rolling negotiations where every year

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Speaker 3: you don't know what next year will be like.

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Speaker 1: If you were advising President Trump how to win the

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Speaker 1: negotiation with Canada Mexico, what would you advise.

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Speaker 3: It USMCAA is an easy case because this is not

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Speaker 3: there is no trade conflict here except in Trump's mind,

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Speaker 3: all of the things we're talking about are not a

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Speaker 3: problem for the USMCAA. We shouldn't be worried about being

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Speaker 3: dependent on Canadian aluminum. They've got the hydropower, they've got

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Speaker 3: the cheap electricity, they're right next to us, they speak

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Speaker 3: almost the same language. Hey, this is not an issue.

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Speaker 3: We are not really worried about the US auto industry

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Speaker 3: being hollowed out by Mexican auto production because Mexican auto

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Speaker 3: production is part of an integrated system which actually probably

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Speaker 3: makes the US the more competitive. So no, the usmca

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Speaker 3: or maybe just rename it NAFTA and go back to

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Speaker 3: the original purpose, which is this is a case where

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Speaker 3: it really makes sense to have a true free trade area.

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Speaker 3: In fact, if I could, I would say this is

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Speaker 3: a case where we should go beyond free trade to

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Speaker 3: a European Union style customs union with pre movement of

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Speaker 3: goods cross borders, no checks at all, a common external

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Speaker 3: frontier for goods. We have a real problem with China.

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Speaker 3: The problem with Mexico and Canada is just a figment

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Speaker 3: of the president's imagination.

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Speaker 1: Next, we turn from a vibrant auto sector crossing national

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Speaker 1: boundaries to an agriculture sector struggling to keep its head

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Speaker 1: of a water and what American farmers need most from

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Speaker 1: a renegotiated USMCA. This is a story about not making

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Speaker 1: things worse. As the US, Mexico, and Canada negotiate over

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Speaker 1: continuation of their three way trade agreement, US farmers look

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Speaker 1: on with apprehension. They've already been hit hard by troubled

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Speaker 1: export markets elsewhere in the world, particularly to China.

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Speaker 2: Our farmers are true patriots because China and others have

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Speaker 2: targeted China had others, remember this, have targeted our farmers.

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Speaker 1: In rural Iowa, Stu Swanson has just planted his thirty

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Speaker 1: fourth and likely most challenging crop.

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Speaker 6: Unfortunately, the clock is ticking on us. We're at this

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Speaker 6: point where we need to get a plan going forward

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Speaker 6: or the operation may come to an end. And my

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Speaker 6: farming operation, I would do anything I had to keep

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Speaker 6: it alive. I would go find another job. I would

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Speaker 6: downsize or upsize or whatever I need to do. But

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Speaker 6: the heritage of and the sacrifices that my parents and

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Speaker 6: grandparents made, I don't want to be the generation or

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Speaker 6: the person that fails and lets them down is something

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Speaker 6: I think about daily. It's something I think a lot

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Speaker 6: about in the dark and night that keeps me up.

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Speaker 6: We have to find a way going forward, and we've

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Speaker 6: kind of been operating on hope the last few years.

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Speaker 6: That hope is starting to dwindle.

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Speaker 1: Swanson is a corn, soy and pig farmer and on

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Speaker 1: the board of the Iowa Corn Growers Association. We met

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Speaker 1: him a year ago on his farm amid a tough

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Speaker 1: period for the agriculture industry. A lot of farms, I

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Speaker 1: understand are actually cash negative. Are you cash positive?

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Speaker 6: I haven't ran a number to tell you today. Certainly

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Speaker 6: we know that over the last three years we've seen

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Speaker 6: about a thirty percent decline in commodity prices. I think

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Speaker 6: over that same time, we've seen the nine major crops

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Speaker 6: all be underwater, so we are producing at a loss

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Speaker 6: on the nine major crops.

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Speaker 1: In the years since, conditions appear only to have gotten worse,

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Speaker 1: even after a twelve billion dollar aid package from the

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Speaker 1: Trump administration.

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Speaker 6: It's been a tough winter. In spring. We've lost farmers

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Speaker 6: in our neighborhood and across the state that took their

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Speaker 6: lives because of the struggles they've seen. We've seen farmers

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Speaker 6: that weren't able to get financing for the twenty twenty

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Speaker 6: six crop, and so unfortunately, when we have low returns,

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Speaker 6: at some point the financing drives up.

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Speaker 1: If you as trade Paul overall has been rough on farmers.

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Speaker 1: The one bright spot has been the USMCA, which has

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Speaker 1: shifted exports from declining Chinese business to growing business with

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Speaker 1: Canada and Mexico. Since twenty twenty three, China has slipped

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Speaker 1: from the top export market for US agriculture to third,

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Speaker 1: with Mexico now top and Canada second.

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Speaker 7: Since NAFTA to today, since it was inception to today, US

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Speaker 7: exports to Mexico and Canada have grown about six hundred percent.

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Speaker 1: Tom Halverson is the CEO of Cobank, which operates as

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Speaker 1: a farm credit bank.

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Speaker 7: The most important thing I can say about that is,

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Speaker 7: you know, this has been a massive trade liberalization success

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Speaker 7: in the agricultural sector. I'm not going to speak to

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Speaker 7: autos or other industries and so forth, but from an

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Speaker 7: agricultural perspective, it's been a frem mend to success. Does

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Speaker 7: that mean every single agricultural producer and every nook and

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Speaker 7: cranty of the United States has benefited from it. No,

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Speaker 7: that's not the way economics works, right. You have winners,

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Speaker 7: you have losers, But the biggest number of winners, the

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Speaker 7: biggest incremental value creation, has come from the liberalization of

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Speaker 7: these markets. To me, moving backward would be to reverse

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Speaker 7: that trend. Increase tariffs, increase market barriers, drive our closest

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Speaker 7: neighbors and colleagues in Canada or Mexico to retaliate against

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Speaker 7: US in a way that would harm our access to

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Speaker 7: those markets. Just remember, these are the two largest markets

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Speaker 7: for American agricultural exports.

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Speaker 8: In the world.

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Speaker 7: They happen to be our closest neighbors and where we

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Speaker 7: have the greatest ability to incrementally.

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Speaker 8: Grow our volume.

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Speaker 7: The more successful and the more prosperous Canada and Mexico,

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Speaker 7: the more prosperous and successful as the United States in general,

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Speaker 7: but particularly American agricultural producers.

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Speaker 1: It's why both Halverson and Swanson value stability over all else.

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Speaker 1: As the USMCA comes up for review, they favor a

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Speaker 1: sixteen year renewal instead of pential annual reviews. From the

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Speaker 1: point of view an American farmer taking a look at

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Speaker 1: this renegotiation of USMTA, what's the best they might hope for,

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Speaker 1: and what's the worst they might fear coming out of that.

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Speaker 7: I think the best fit that we can hope for

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Speaker 7: here is we keep all the benefits that we have

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Speaker 7: of the liberalization we've accomplished over the last thirty years,

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Speaker 7: and then we add a little bit to it, right

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Speaker 7: so that over the next sixteen years, if we get

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Speaker 7: a push out for sixteen years of a renewal, that

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Speaker 7: would provide a great deal of stability and confidence for

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Speaker 7: our agricultural producers to say, hey, this is a framework

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Speaker 7: of trade that's going to last and be stable, and

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Speaker 7: I'm not going to have any unexpected negative consequences for

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Speaker 7: quite some time. Therefore, I can have some confidence in

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Speaker 7: making long term investment decisions right because one of the

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Speaker 7: things we're having difficulties and challenges with in certain sectors

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Speaker 7: right now because of trade uncertainty is people don't know

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Speaker 7: they're delaying making investment decisions because they don't know if

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Speaker 7: that investment decision is going to be wise or not

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Speaker 7: if tariffs and the changes in their costs and ability

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Speaker 7: to sell their product are going to be meaningfully affected.

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Speaker 1: That suggests perhaps almost as important as the terms is

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Speaker 1: the duration yes because you need that certainty if you're

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Speaker 1: a farmer.

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Speaker 7: I think it's fair to say that if we got

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Speaker 7: the if we got a continuation with a little bit

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Speaker 7: of a little bit of small l liberalization somewhere, some

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Speaker 7: benefits in dairy or some other place, but it was

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Speaker 7: only for a year, and we were all told, well,

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Speaker 7: we're going to do this year after year after year

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Speaker 7: and definitely into the future, that would not eliminate or

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Speaker 7: mitigate the problem that we have of long term uncertainty,

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Speaker 7: because we're not building power plants with a forty or

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Speaker 7: fifty year life here. We are making lots of long

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Speaker 7: term investments, and that is oftentimes very significantly impacted by

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Speaker 7: the trade regime. Right now, about twenty percent of our

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Speaker 7: agricultural product in total has to be exported. We have

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Speaker 7: no population growth in the United States right now, so

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Speaker 7: the more agricultural productivity and output we have, it's not

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Speaker 7: hard to recognize that it's got to go someplace, right

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Speaker 7: and we're not going to consume it here in the

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Speaker 7: United States. So the long term future for US agriculture

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Speaker 7: can be defined as exports, exports, and more exports in corn.

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Speaker 1: One of the destinations for those exports increasingly is Mexico.

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Speaker 1: It is the largest export market for US corn. According

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Speaker 1: to USDA data, the US exported almost four million tons

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Speaker 1: of corn to Mexico in the first two months of

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Speaker 1: the year, an increase of around eleven percent from the

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Speaker 1: same period last year.

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Speaker 6: It's like six point five percent of the total production

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Speaker 6: goes to Mexico alone, the two countries combined. When you

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Speaker 6: look at corn and corn products, it's about one point

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Speaker 6: eight billion bushels of corn, which is the entire production

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Speaker 6: of the state of Minnesota. Or again that carryout that

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Speaker 6: we have. So if we don't have this relationship of

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Speaker 6: the three countries, we're looking at doubling our carryouts and

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Speaker 6: then finding a situation where we just simply won't be

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Speaker 6: able to dig ourselves out of that kind of a hole.

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Speaker 6: So it's a really, really big deal. It's the gold

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Speaker 6: standard in my mind, it's something that we could replicate

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Speaker 6: across the world.

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Speaker 1: But despite it being the gold standard for US farmers,

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Speaker 1: America does run a trade deficit in agriculture with both

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Speaker 1: Mexico and Canada, which could have the potential to be

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Speaker 1: a sticking point for the Trump administration.

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Speaker 7: Which we've had for three or four years now. It's

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Speaker 7: the natural aggregation of the market forces and decisions of

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Speaker 7: American consumers. You probably do like I do, and most

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Speaker 7: people we know want to have fruits and vegetables we

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Speaker 7: used to not get in the winter time. Now we

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Speaker 7: want them three or sixty five days a year. That

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Speaker 7: means we have to buy them and import them from

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Speaker 7: other places. And the result of that is, even though

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Speaker 7: we're exporting more and more agricultural volume, we're also importing more.

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Speaker 7: That has resulted in our agricultural balance of trade going negative.

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Speaker 1: Has long talked up his support from and for farmers,

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Speaker 1: and earlier this month, he traveled to Wisconsin to meet

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Speaker 1: with them.

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Speaker 2: As president, I fought for the American farmer like no

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Speaker 2: one has ever fought before.

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Speaker 6: Nobody's like I'm up here today. I don't need this.

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Speaker 2: I got elected, I don't have What the hell do

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Speaker 2: I have to be here for.

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Speaker 7: My personal judgment what I do and what I encourage

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Speaker 7: customers and people I talk to. To do with all politicians,

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Speaker 7: quite frankly, is you know, listen carefully to what people say,

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Speaker 7: but watch what they do, Watch what the results of

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Speaker 7: the policies are, try and understand what the intended results are,

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Speaker 7: and then always watch extremely carefully and closely for what

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Speaker 7: always happens, which is the unintended consequences, because it's often

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Speaker 7: the unintended consequences that are the most consequential and come

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Speaker 7: at you from an unexpected perspective. And I think you know,

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Speaker 7: one of the places to look always for unintended consequences

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Speaker 7: is you know, when you think you have a very

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Speaker 7: strong negotiating position, when you put tariffs on somebody and

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Speaker 7: don't expect them to retaliate, and then they do. Right,

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Speaker 7: the unattended consequence of that as well, they did, and

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Speaker 7: now that's costing our producers or our industry.

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Speaker 1: Be it a trade dispute with China putting a halt

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Speaker 1: of soybean orders, or the war in Iran driving up

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Speaker 1: fertilizer costs. Farmers have felt the brunt of those unintended consequences.

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Speaker 6: I'm excited that President Trump has initiated lots of trade talks.

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Speaker 6: I would like to see more details, and I would

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Speaker 6: like to see the boats loaded and product moving. Unfortunately,

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Speaker 6: it's not moving as fast as I would like. I

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Speaker 6: think all farmers when we hear about a trade deal,

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Speaker 6: we expect that tomorrow we'll see the price go up

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Speaker 6: and we'll see the products moving in our carry out

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Speaker 6: going down. But we haven't seen that yet now because

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Speaker 6: I think we're at a crossroads where we might need

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Speaker 6: to look at farm policy a lot different than we

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Speaker 6: have in the past, and this might be the time

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Speaker 6: where we change direction on some of these including subsidies

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Speaker 6: and payments. If we can utilize the benefits of the

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Speaker 6: government in terms of trade investment into new domestic uses

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Speaker 6: to help find new markets for US, I think that's

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Speaker 6: the way we have long term success. This is the

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Speaker 6: end of the line here pretty quick. I think we've

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Speaker 6: seen the start of the loss of farmers permanently one

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Speaker 6: way or another. I think that we could increase the

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Speaker 6: speed of the change of agriculture.

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Speaker 1: For corn farmers like Stu Swanson, the change needed may

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Speaker 1: not be in the USMCA at all. They've seen their

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Speaker 1: exports rise to both Canada and Mexico. What they need

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Speaker 1: are trade deals with the rest of the world to

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Speaker 1: restore export markets that they've lost coming up from cars

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Speaker 1: to farms to new technology. What the energy business needs

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Speaker 1: in North America to generate all that power AI is

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Speaker 1: looking to consume. This is a story about parallel play.

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Speaker 1: If North American trade in autos goes back and forth

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Speaker 1: among the three countries, and trade in agriculture is largeer

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Speaker 1: US exports. When it comes to energy, one size definitely

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Speaker 1: does not fit all. The US generally imports oil from

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Speaker 1: Canada and exports natural gas to Mexico. The USMCA may

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Speaker 1: aspire to be multilateral, but in practice it looks more

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Speaker 1: like two bilateral arrangements. David Gurrow brings us the story.

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Speaker 9: Howard Energy Partners has a natural gas pipeline that runs

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Speaker 9: from South Texas to Monterey in Mexico. It applies part

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Speaker 9: of the six point four billion cubic feet of natural

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Speaker 9: gas Mexico imports from the US each day.

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Speaker 10: We're the only one that actually crosses the border on

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Speaker 10: both sides of the border with the same ownership. There

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Speaker 10: are other pipelines that end at the border of Mexico

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Speaker 10: and Texas but then gets picked up by another company

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Speaker 10: in Mexico and continues on. We're the only one that

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Speaker 10: actually crosses the border, but there's probably on the order

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Speaker 10: of ten pipelines that cross into Mexico from the US.

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Speaker 9: CEO Mike Howard sees Mexico's reliance on the US.

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Speaker 10: Firsthand, all business starts with energy, and the energy business

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Speaker 10: is the business that powers every other business. So whether

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Speaker 10: they produce their own energy or not, they need the energy.

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Speaker 10: And so if a US company is not invited to

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Speaker 10: own infrastructure in Mexico, somebody needs to build it. So

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00:25:35,760 --> 00:25:37,880
Speaker 10: if they want to build it, that's fine. I think

440
00:25:38,000 --> 00:25:42,119
Speaker 10: America has the most affordable, most reliable forms of energy

441
00:25:42,160 --> 00:25:42,760
Speaker 10: to give to them.

442
00:25:43,280 --> 00:25:47,080
Speaker 9: Energy trade standards between the US, Mexico, and Canada were

443
00:25:47,080 --> 00:25:50,760
Speaker 9: first established by NAFTA, which included zero tear offf treatment

444
00:25:50,920 --> 00:25:54,600
Speaker 9: for oil, natural gas, and refined petroleum products. The flow

445
00:25:54,600 --> 00:25:58,040
Speaker 9: of energy exports had been integrated across all three countries,

446
00:25:58,440 --> 00:26:00,760
Speaker 9: but in the intervening years that's changed.

447
00:26:00,960 --> 00:26:01,200
Speaker 6: Well.

448
00:26:01,840 --> 00:26:04,320
Speaker 11: The thing about North America is that most of the

449
00:26:04,359 --> 00:26:08,040
Speaker 11: times it works as two very big bilateral relationships, the

450
00:26:08,119 --> 00:26:10,800
Speaker 11: US and Mexico. One side, the US and Canada and

451
00:26:10,840 --> 00:26:11,440
Speaker 11: on the other.

452
00:26:11,880 --> 00:26:14,760
Speaker 9: The Eego Marroquin bitar Is at CSIS.

453
00:26:15,080 --> 00:26:17,119
Speaker 11: We have to keep in mind that we have a

454
00:26:17,280 --> 00:26:21,160
Speaker 11: North American energy machine that it turns. It has turned

455
00:26:21,160 --> 00:26:23,440
Speaker 11: for over one hundred years, not just the past thirty

456
00:26:23,520 --> 00:26:26,119
Speaker 11: years since NAFTA. I think the main difference now is

457
00:26:26,119 --> 00:26:30,440
Speaker 11: that as years go by, the US market becomes increasingly dependent,

458
00:26:30,520 --> 00:26:35,119
Speaker 11: increasingly interconnected to the Mexican market and to the Canadian market.

459
00:26:35,440 --> 00:26:39,360
Speaker 11: You can see it clearly. For example, on oil, sixty

460
00:26:39,400 --> 00:26:43,800
Speaker 11: percent of US oil imports come from Canada. The refineries

461
00:26:44,040 --> 00:26:48,120
Speaker 11: in the US are adapted in order to refine that's

462
00:26:48,119 --> 00:26:50,720
Speaker 11: our could oil from Canada. In the case of Mexico,

463
00:26:51,280 --> 00:26:54,760
Speaker 11: seventy percent of the natural gas that Mexico imports yearly

464
00:26:54,800 --> 00:26:58,320
Speaker 11: comes from the US. Sixty percent of the electricity generated

465
00:26:58,440 --> 00:27:02,600
Speaker 11: Mexico comes from now natural gas. So the US is

466
00:27:02,720 --> 00:27:07,000
Speaker 11: using Canada and Mexico's export markets, and then those two

467
00:27:07,040 --> 00:27:09,639
Speaker 11: other countries are using that cheaper energy in order to

468
00:27:09,720 --> 00:27:12,919
Speaker 11: make competitive products. So again, the longer these goes for it,

469
00:27:12,960 --> 00:27:16,159
Speaker 11: the more integrated we are, and the more disruptive trade

470
00:27:16,240 --> 00:27:17,639
Speaker 11: and investment obstacles become.

471
00:27:18,000 --> 00:27:21,760
Speaker 9: Mexico has long recognized its reliance on the US for energy,

472
00:27:22,040 --> 00:27:24,800
Speaker 9: and one way it's tried to reduce that dependence is

473
00:27:24,840 --> 00:27:29,240
Speaker 9: by strengthening its own energy sector, but progress has been limited.

474
00:27:29,440 --> 00:27:33,960
Speaker 11: Mexico's perspective has changed over the years. We had basically

475
00:27:34,000 --> 00:27:38,240
Speaker 11: a state monopoly on energy production for over seventy years.

476
00:27:39,280 --> 00:27:43,480
Speaker 11: That change in twenty fourteen when the then President Yanieto

477
00:27:43,480 --> 00:27:46,720
Speaker 11: administration liberalized the energy market. That quickly went away when

478
00:27:46,720 --> 00:27:50,119
Speaker 11: President Lobsarga elected in twenty eighteen and he rebursed the

479
00:27:50,240 --> 00:27:54,560
Speaker 11: liberalizing market reforms. So what he basically did was changing

480
00:27:54,600 --> 00:27:58,720
Speaker 11: the state owned firms from Mexico CFF for electricity, Pemex

481
00:27:58,800 --> 00:28:02,800
Speaker 11: for all production, and instead of being productive entits, they

482
00:28:02,800 --> 00:28:06,520
Speaker 11: became public entits. And what that did was it created

483
00:28:07,760 --> 00:28:12,720
Speaker 11: a threshold for electricity production in Mexico that needs to

484
00:28:12,760 --> 00:28:14,160
Speaker 11: come from Pemex and CFE.

485
00:28:14,680 --> 00:28:17,800
Speaker 9: Those state owned firms are the biggest causes of friction

486
00:28:18,040 --> 00:28:20,280
Speaker 9: between the US and Mexico when it comes to the

487
00:28:20,280 --> 00:28:21,840
Speaker 9: cross border energy trade.

488
00:28:22,119 --> 00:28:26,600
Speaker 11: So the main complaints are number one, PEMES and cf

489
00:28:26,800 --> 00:28:31,440
Speaker 11: Mexico state owned firms getting priority, getting more lineent treatment

490
00:28:31,840 --> 00:28:36,159
Speaker 11: compared to US firms investing in Mexico. One of the

491
00:28:36,200 --> 00:28:38,720
Speaker 11: core commitments of USMCA is you have to treat everyone

492
00:28:38,800 --> 00:28:41,400
Speaker 11: the same, regardless of where the capital is coming from.

493
00:28:41,520 --> 00:28:45,600
Speaker 11: And this constitutional amendments that the President Shinbaum implemented that

494
00:28:45,640 --> 00:28:49,560
Speaker 11: President Lopos or Aldo also was pushing for. They are

495
00:28:49,640 --> 00:28:56,120
Speaker 11: giving PEMES in CFE a predominant position in Mexico's energy market,

496
00:28:56,200 --> 00:28:58,560
Speaker 11: and that's what's one of the biggest obstacles that we

497
00:28:58,640 --> 00:28:59,920
Speaker 11: have for the usmcrey.

498
00:29:00,840 --> 00:29:03,040
Speaker 9: It may seem like the US has an upper hand

499
00:29:03,080 --> 00:29:05,920
Speaker 9: in the ongoing trade talks, but that's less clear when

500
00:29:05,960 --> 00:29:09,040
Speaker 9: the US has something to sell that it needs Mexico

501
00:29:09,120 --> 00:29:12,080
Speaker 9: to buy. When you look at how your company is growing,

502
00:29:12,520 --> 00:29:14,080
Speaker 9: how big a role is Mexico going to play.

503
00:29:14,360 --> 00:29:17,760
Speaker 10: You know, geographically it's a big deal. Economically, it's less

504
00:29:17,760 --> 00:29:20,000
Speaker 10: than ten percent of the business we have, but we

505
00:29:20,160 --> 00:29:24,040
Speaker 10: just completed a new presidential permit to lay another pipeline

506
00:29:24,080 --> 00:29:27,680
Speaker 10: into Mexico. One of the pipelines we didn't mention is

507
00:29:27,760 --> 00:29:32,400
Speaker 10: over near Ego Pass del Rio. It actually delivers natural

508
00:29:32,440 --> 00:29:34,800
Speaker 10: gas to the world's largest brewery. So if you drink

509
00:29:34,840 --> 00:29:38,160
Speaker 10: Modello beer, our natural gas actually boils the water that

510
00:29:38,280 --> 00:29:40,280
Speaker 10: makes the beer. And I think it's very important for

511
00:29:40,320 --> 00:29:45,400
Speaker 10: the border of Mexico and also for the continuing growth

512
00:29:45,400 --> 00:29:48,160
Speaker 10: of their economy, is to continue to support any kind

513
00:29:48,200 --> 00:29:51,800
Speaker 10: of electricity demand or energy that they may need to

514
00:29:51,800 --> 00:29:54,160
Speaker 10: help their economy. So it's very important to our business.

515
00:29:54,160 --> 00:29:57,200
Speaker 10: It's not an economic driver necessarily in a majority way,

516
00:29:57,240 --> 00:29:58,200
Speaker 10: but it's very important to.

517
00:29:58,200 --> 00:30:02,000
Speaker 9: US about fifteen hundred miles north of the US Mexico border.

518
00:30:02,160 --> 00:30:06,560
Speaker 9: It's a very different story, but it wasn't always that way.

519
00:30:07,560 --> 00:30:10,560
Speaker 9: Detain the Silva with CEO of the Canada Energy Regulator

520
00:30:10,680 --> 00:30:13,840
Speaker 9: from twenty twenty to twenty twenty three. How would you

521
00:30:13,920 --> 00:30:18,000
Speaker 9: characterize the energy relationship between Canada and the US today?

522
00:30:18,400 --> 00:30:21,720
Speaker 12: I think it's mutually beneficial. I mean, it's the Americans

523
00:30:21,720 --> 00:30:24,120
Speaker 12: are very fortunate to be sitting beside a country that

524
00:30:24,160 --> 00:30:26,840
Speaker 12: has such a vast land mass and so few people,

525
00:30:27,280 --> 00:30:30,440
Speaker 12: that is blessed with pretty much every energy resource there is,

526
00:30:30,480 --> 00:30:33,800
Speaker 12: not just oil and gas, but uranium as well, and

527
00:30:33,840 --> 00:30:36,600
Speaker 12: so I think it's very fortunate for the United States

528
00:30:36,600 --> 00:30:39,960
Speaker 12: that we have this agreement that has encouraged the integration.

529
00:30:40,120 --> 00:30:43,360
Speaker 12: For Canada, of course, or versus true having such vast

530
00:30:43,440 --> 00:30:46,640
Speaker 12: quantities of commodities and being a middle power and a tradingation,

531
00:30:46,840 --> 00:30:50,200
Speaker 12: to be sitting beside the world's argest economy is obviously

532
00:30:50,280 --> 00:30:53,160
Speaker 12: a great advantage, and so we're hopeful that any renewed

533
00:30:53,520 --> 00:30:56,360
Speaker 12: trade agreement will continue to allow that energy to flow

534
00:30:56,440 --> 00:30:57,640
Speaker 12: freely across the border.

535
00:30:57,760 --> 00:31:00,480
Speaker 9: Do you think that Americans appreciate that that it is

536
00:31:00,800 --> 00:31:02,320
Speaker 9: such a beneficial relationship.

537
00:31:02,440 --> 00:31:04,920
Speaker 12: My experience, most Americans are completely shocked when they find

538
00:31:04,920 --> 00:31:07,480
Speaker 12: out that Canada is their largest supplier of energy. They

539
00:31:07,480 --> 00:31:10,320
Speaker 12: think it's Saudi Arabia or a country in the Middle East,

540
00:31:10,360 --> 00:31:12,320
Speaker 12: and so they're often quite surprised to find out that

541
00:31:12,400 --> 00:31:15,200
Speaker 12: sixty percent of their oil exports come from north of

542
00:31:15,240 --> 00:31:18,000
Speaker 12: the border. You know, in my experience, Americans just don't

543
00:31:18,000 --> 00:31:19,960
Speaker 12: think about Canada the way Canadians do.

544
00:31:20,520 --> 00:31:23,200
Speaker 9: Even though the energy relationship between the US and Canada

545
00:31:23,280 --> 00:31:26,760
Speaker 9: is a productive one. Energy is the main reason the

546
00:31:26,840 --> 00:31:30,040
Speaker 9: US is trade deficit with Canada reached about forty six

547
00:31:30,160 --> 00:31:32,320
Speaker 9: billion dollars in twenty twenty five.

548
00:31:33,120 --> 00:31:37,280
Speaker 12: NAFTA had an energy chapter, or the proportionality clause. Because

549
00:31:37,320 --> 00:31:40,000
Speaker 12: the NAFTA was signed and negotiated not that long after

550
00:31:40,040 --> 00:31:43,080
Speaker 12: the last global energy crisis, so one of the American

551
00:31:43,600 --> 00:31:47,240
Speaker 12: priorities in that negotiation was to ensure access to Canada's

552
00:31:47,320 --> 00:31:50,560
Speaker 12: vast energy resources, and so a provision was put in

553
00:31:50,560 --> 00:31:53,320
Speaker 12: the NAFTA that required Canada to sell as much energy

554
00:31:53,360 --> 00:31:55,400
Speaker 12: to the United States on a good day is on

555
00:31:55,480 --> 00:31:58,160
Speaker 12: a bad day. As a result of that, Canada built

556
00:31:58,200 --> 00:32:02,680
Speaker 12: its energy infrastructure south and not east west or west east,

557
00:32:02,680 --> 00:32:04,600
Speaker 12: so if you look at a map of pipelines in

558
00:32:04,640 --> 00:32:08,160
Speaker 12: North America, the overwhelming majority from Canada go south into

559
00:32:08,160 --> 00:32:10,000
Speaker 12: the United States, even if they go south around the

560
00:32:10,040 --> 00:32:12,920
Speaker 12: Great Lakes and back up into Canada. And so when

561
00:32:12,960 --> 00:32:16,720
Speaker 12: the USMCA came around, given the fact that that infrastructure

562
00:32:16,760 --> 00:32:20,920
Speaker 12: already existed, that basically ensured the proportionality. That and the

563
00:32:20,960 --> 00:32:23,840
Speaker 12: fact that the US had undergone a share revolution meant

564
00:32:23,840 --> 00:32:26,440
Speaker 12: that the USMC does not have an energy chapter, no

565
00:32:26,600 --> 00:32:29,760
Speaker 12: proportionality clause. And so I think the question for many

566
00:32:29,800 --> 00:32:33,320
Speaker 12: people going forward, given the state of the global energy situation,

567
00:32:33,640 --> 00:32:35,960
Speaker 12: is will the US be looking to return to some

568
00:32:36,040 --> 00:32:38,680
Speaker 12: type of energy clause in or renewed USMCA.

569
00:32:38,800 --> 00:32:41,400
Speaker 9: Do you think the Canada is utilizing that leverage appropriately

570
00:32:41,920 --> 00:32:44,520
Speaker 9: in these negotiations or could it be doing more? Could

571
00:32:44,640 --> 00:32:46,880
Speaker 9: kind of wield influence as these talks get underway.

572
00:32:47,080 --> 00:32:49,600
Speaker 12: I think there was a great debate in Canada initially

573
00:32:49,760 --> 00:32:53,200
Speaker 12: when we went all elbows up in terms of the

574
00:32:53,240 --> 00:32:56,959
Speaker 12: President's threats towards Canada and the imposition of tariffs. You know,

575
00:32:57,000 --> 00:32:59,400
Speaker 12: what do we have that the United States sceeds that

576
00:32:59,400 --> 00:33:02,360
Speaker 12: we could easily withhold and that would cause grief in

577
00:33:02,400 --> 00:33:04,920
Speaker 12: the American economy and hopefully get things back on track.

578
00:33:05,320 --> 00:33:08,160
Speaker 12: I think now though, Canadians realize that the better approach

579
00:33:08,440 --> 00:33:12,080
Speaker 12: is demonstrating to the US administration that we have the

580
00:33:12,080 --> 00:33:14,880
Speaker 12: best product out there that is helping to make America

581
00:33:14,880 --> 00:33:17,320
Speaker 12: grade again. And you've seen this shift and tone from

582
00:33:17,360 --> 00:33:19,200
Speaker 12: our Prime minister as well. He was recently in the

583
00:33:19,280 --> 00:33:22,280
Speaker 12: United States and he indicated that strong Canada is what

584
00:33:22,320 --> 00:33:25,000
Speaker 12: will help to make America grade again. And so just

585
00:33:25,080 --> 00:33:29,360
Speaker 12: this understanding that there is a high degree of commonality,

586
00:33:29,400 --> 00:33:31,960
Speaker 12: that there's lots of things that are mutually beneficial in

587
00:33:32,000 --> 00:33:34,120
Speaker 12: this agreement, and I think for Canada, it's looking at

588
00:33:34,160 --> 00:33:35,240
Speaker 12: that longer term play.

589
00:33:35,520 --> 00:33:41,000
Speaker 9: How does Canada balance its eagerness to diversify find more

590
00:33:41,040 --> 00:33:44,240
Speaker 9: audiences for exports with the fact that the US is

591
00:33:44,240 --> 00:33:46,440
Speaker 9: so critical, so important to it.

592
00:33:46,960 --> 00:33:49,600
Speaker 12: Canada's engaged in a game of three ds. I mean,

593
00:33:49,600 --> 00:33:52,520
Speaker 12: the reality is that the US is a hugely important

594
00:33:52,520 --> 00:33:54,440
Speaker 12: market for US and more than seventy percent of our

595
00:33:54,440 --> 00:33:56,640
Speaker 12: exports still go to the United States, more than ninety

596
00:33:56,640 --> 00:34:00,480
Speaker 12: percent of our energy exports. We cannot replace that market overnight.

597
00:34:00,520 --> 00:34:02,800
Speaker 12: And also we know it is never smart to just

598
00:34:02,880 --> 00:34:06,200
Speaker 12: have one customer, so we need to diverse fiur economy,

599
00:34:06,240 --> 00:34:09,719
Speaker 12: and certainly that has taken greater priority in light of

600
00:34:09,800 --> 00:34:12,520
Speaker 12: the tone and approach of the current administrations. It is

601
00:34:12,560 --> 00:34:13,680
Speaker 12: a very fine balance.

602
00:34:14,040 --> 00:34:17,800
Speaker 9: I'm curious what the energy relationship is like between Canada

603
00:34:18,040 --> 00:34:20,719
Speaker 9: and Mexico. Is there one to speak of?

604
00:34:20,960 --> 00:34:24,520
Speaker 12: There is certainly a relationship. You know, as Mexico was

605
00:34:24,560 --> 00:34:26,640
Speaker 12: looking to build out its energy sector, it looked to

606
00:34:26,719 --> 00:34:30,840
Speaker 12: Canadians regulations to do that. They looked to Canada's national

607
00:34:30,960 --> 00:34:34,080
Speaker 12: Energy regulator as well as to some provincial energy regulators

608
00:34:34,120 --> 00:34:36,560
Speaker 12: to figure out how they wanted to set up their systems.

609
00:34:37,000 --> 00:34:40,120
Speaker 12: We did also see, you know, in the late nineties,

610
00:34:40,160 --> 00:34:43,520
Speaker 12: early two thousands, actually we saw the major pipeline companies

611
00:34:43,560 --> 00:34:46,919
Speaker 12: here in Canada, and Bridge and TC Energy actually made

612
00:34:46,920 --> 00:34:50,239
Speaker 12: big purchases. They bought pipeline networks all the way through

613
00:34:50,320 --> 00:34:53,640
Speaker 12: North America. And then with the changing government in Mexico

614
00:34:53,920 --> 00:34:56,600
Speaker 12: and the approach to nationalizing their energy sector, some of

615
00:34:56,640 --> 00:34:59,120
Speaker 12: them pulled out. But you know, there is a lot

616
00:34:59,160 --> 00:35:02,880
Speaker 12: of aid in services and expertise that happens between Canada,

617
00:35:02,960 --> 00:35:04,080
Speaker 12: Mexico and the energy sector.

618
00:35:04,080 --> 00:35:08,680
Speaker 9: Even today with energy as a multilateral issue, where all

619
00:35:08,719 --> 00:35:11,600
Speaker 9: the parties involved seem to benefit. Many of the industry's

620
00:35:11,680 --> 00:35:15,560
Speaker 9: players agree on one thing, that the best outcome might

621
00:35:15,640 --> 00:35:16,839
Speaker 9: be the status quo.

622
00:35:17,719 --> 00:35:19,480
Speaker 10: We probably want to make sure that energy stays out

623
00:35:19,520 --> 00:35:21,920
Speaker 10: of the conversation because right now, the free flow of

624
00:35:22,000 --> 00:35:25,120
Speaker 10: energy that's going on right now is helping the economy grow.

625
00:35:25,200 --> 00:35:28,839
Speaker 10: If their economy grows, it helps the US and vice versa.

626
00:35:28,960 --> 00:35:32,040
Speaker 10: So I am interested to make sure that energy doesn't

627
00:35:32,080 --> 00:35:35,359
Speaker 10: become part of the conversation. But other than that, I'm

628
00:35:35,360 --> 00:35:38,560
Speaker 10: more interested to understand that there's any other economic impacts

629
00:35:38,560 --> 00:35:41,080
Speaker 10: that will slow the energy use or slow the energy

630
00:35:41,080 --> 00:35:42,440
Speaker 10: growth of Mexico.

631
00:35:42,120 --> 00:35:45,799
Speaker 1: Down Next, the best we can hope for and the

632
00:35:45,840 --> 00:35:49,759
Speaker 1: worst we might fear from the USMCA negotiations. We talk

633
00:35:49,800 --> 00:35:53,120
Speaker 1: with former trade negotiators from the three countries at the table.

634
00:36:07,320 --> 00:36:11,240
Speaker 1: Negotiations over the USMCR are about the sectors most directly involved,

635
00:36:11,480 --> 00:36:15,440
Speaker 1: like autos and agriculture and energy, but ultimately they are

636
00:36:15,440 --> 00:36:19,000
Speaker 1: about three countries, what they hope to achieve from any

637
00:36:19,040 --> 00:36:21,920
Speaker 1: revisions to the trade agreement, and what they need to protect.

638
00:36:22,400 --> 00:36:26,439
Speaker 1: For these three perspectives, we welcome now Kristin Hillman. She's

639
00:36:26,520 --> 00:36:30,359
Speaker 1: former Canadian Ambassadors to the United States. Keranimo Guteras Fernandez,

640
00:36:30,440 --> 00:36:33,560
Speaker 1: former Mexican Ambassador of the US, and Kelly an Shaw,

641
00:36:33,960 --> 00:36:37,319
Speaker 1: former USTR General Counsel now with the Aiken Group here

642
00:36:37,440 --> 00:36:40,279
Speaker 1: in Washington. I'll start with you, Kirsten, because you were

643
00:36:40,320 --> 00:36:43,600
Speaker 1: involved in the USMC organization. Let me ask the really

644
00:36:43,640 --> 00:36:45,560
Speaker 1: scary question, what is the chance we end up with

645
00:36:45,640 --> 00:36:46,120
Speaker 1: no deal?

646
00:36:47,040 --> 00:36:47,320
Speaker 8: Yeah?

647
00:36:47,400 --> 00:36:49,640
Speaker 13: Well, I think the first thing, and there's a lot

648
00:36:49,640 --> 00:36:51,920
Speaker 13: of complicated process around what's going on right now. I

649
00:36:51,920 --> 00:36:55,319
Speaker 13: think one thing that's important for people to understand is

650
00:36:55,440 --> 00:36:58,120
Speaker 13: that there is a deal, and even if on July first,

651
00:36:58,160 --> 00:37:02,000
Speaker 13: the parties don't agree to Reno knew it, it stays

652
00:37:02,000 --> 00:37:04,839
Speaker 13: in place and we work to find ways to come

653
00:37:04,840 --> 00:37:07,759
Speaker 13: to an agreement on modifications. But while we're working on that,

654
00:37:08,080 --> 00:37:11,360
Speaker 13: the agreement stays in place. So I think the chances

655
00:37:11,360 --> 00:37:15,719
Speaker 13: of the deal staying place are very high. Then arrangements

656
00:37:15,760 --> 00:37:18,560
Speaker 13: around the modifications. I also think we have a very

657
00:37:18,560 --> 00:37:21,440
Speaker 13: good chance. There's a lot of things in particular that

658
00:37:21,719 --> 00:37:24,200
Speaker 13: USDR said they're looking for that I think both Canada

659
00:37:24,200 --> 00:37:26,239
Speaker 13: and Mexico can work with.

660
00:37:26,560 --> 00:37:28,880
Speaker 1: Let's ask a different kind of risk because I've also

661
00:37:28,960 --> 00:37:32,399
Speaker 1: seen some people say there's a possibility that the US

662
00:37:32,440 --> 00:37:35,640
Speaker 1: would do a deal with Mexico and leave Canada out

663
00:37:35,880 --> 00:37:37,839
Speaker 1: given some of what the Prime Minister of Canada has

664
00:37:37,840 --> 00:37:40,440
Speaker 1: been saying, is there any prospect for that? Arona?

665
00:37:40,440 --> 00:37:44,200
Speaker 14: I think we saw it during the first USMCA negotiation.

666
00:37:44,320 --> 00:37:47,920
Speaker 14: We saw a similar environment, and I think the fact

667
00:37:47,920 --> 00:37:51,880
Speaker 14: that we ended up with the Tri Ladder agreement reflects

668
00:37:51,880 --> 00:37:55,440
Speaker 14: the fact that it is extremely important for North Americas regions. So,

669
00:37:56,480 --> 00:38:00,840
Speaker 14: you know, negotiat trade negotiations are never easyen even less

670
00:38:00,880 --> 00:38:03,600
Speaker 14: so nowadays, even less.

671
00:38:03,320 --> 00:38:05,759
Speaker 8: So when you have sort of.

672
00:38:05,760 --> 00:38:11,239
Speaker 14: A contaminated agenda, you know, very complex geopolitical agenda and

673
00:38:11,320 --> 00:38:14,879
Speaker 14: security agenda at the same time going on. But I

674
00:38:14,960 --> 00:38:19,120
Speaker 14: you know, in my view, there has never been a

675
00:38:19,160 --> 00:38:25,280
Speaker 14: time I think which makes more sense to continue building

676
00:38:25,360 --> 00:38:30,720
Speaker 14: up our North American economic region, and if we add

677
00:38:30,760 --> 00:38:34,839
Speaker 14: security to that given the geopolitical context, to me, makes

678
00:38:34,840 --> 00:38:35,919
Speaker 14: all the sense in the world.

679
00:38:37,960 --> 00:38:40,680
Speaker 8: Nevertheless, to be also objective, we have.

680
00:38:40,760 --> 00:38:44,799
Speaker 14: Never been, I think, in the past thirty years, as

681
00:38:45,000 --> 00:38:49,319
Speaker 14: close as losing that opportunity, and that's in a sense

682
00:38:49,360 --> 00:38:49,959
Speaker 14: that's a shame.

683
00:38:50,760 --> 00:38:53,160
Speaker 1: Aroanimo says, there's never been a time when it's more

684
00:38:53,160 --> 00:38:56,319
Speaker 1: important to have this. Does President Trump agree with that?

685
00:38:56,480 --> 00:38:58,600
Speaker 1: If you listen to his trade rivers, and it doesn't

686
00:38:58,600 --> 00:38:59,480
Speaker 1: always sound that way.

687
00:39:00,400 --> 00:39:03,200
Speaker 15: Well, look, I think the North American trading relationship is

688
00:39:03,320 --> 00:39:07,120
Speaker 15: the biggest trading relationship on the planet. It is incredibly important.

689
00:39:07,160 --> 00:39:10,719
Speaker 15: The real question is does President Trump value USMCA, this

690
00:39:10,760 --> 00:39:14,880
Speaker 15: particular trade agreement. He's always been skeptical of it. I

691
00:39:14,960 --> 00:39:17,680
Speaker 15: was in the first Trump administration. I was there when

692
00:39:17,680 --> 00:39:21,319
Speaker 15: this agreement concluded. When it passed through Congress, he thought

693
00:39:21,360 --> 00:39:24,600
Speaker 15: it was an improvement on NAFTA, but insisted on this

694
00:39:24,760 --> 00:39:27,839
Speaker 15: sunset provision, which we're dealing with right now, the six

695
00:39:27,920 --> 00:39:30,799
Speaker 15: year review, so that it wouldn't be like NAFTA or

696
00:39:30,800 --> 00:39:32,719
Speaker 15: we're stuck with it for twenty five years and can't

697
00:39:32,719 --> 00:39:33,680
Speaker 15: do anything about it.

698
00:39:33,960 --> 00:39:35,200
Speaker 5: But I think at the end of the day.

699
00:39:35,120 --> 00:39:39,080
Speaker 15: Everybody appreciates how important this economy and this North American

700
00:39:39,120 --> 00:39:39,960
Speaker 15: trading system is.

701
00:39:40,200 --> 00:39:41,960
Speaker 13: David, could I just add one thing to that I

702
00:39:41,960 --> 00:39:44,080
Speaker 13: think is important to recognize. There's a lot of discussion

703
00:39:44,080 --> 00:39:46,239
Speaker 13: around tariffs, right. Tariffs are a big part of the

704
00:39:46,239 --> 00:39:49,920
Speaker 13: discussion that we've had since President Trump has come back

705
00:39:49,960 --> 00:39:53,360
Speaker 13: into office. But the USMCA contains all the rules on

706
00:39:53,400 --> 00:39:56,440
Speaker 13: intellectual property protection, all the rules on agriculture, all the

707
00:39:56,520 --> 00:39:59,520
Speaker 13: rules on services trade, all the rules that deal with

708
00:39:59,600 --> 00:40:02,880
Speaker 13: how we have our customs procedures sort of coordinated between

709
00:40:02,920 --> 00:40:06,839
Speaker 13: the three countries. So the agreement is the foundation of

710
00:40:06,880 --> 00:40:10,840
Speaker 13: the integrated nature of our relationship. If it goes away,

711
00:40:11,320 --> 00:40:13,239
Speaker 13: none of us are bound by those rules anymore. That's

712
00:40:13,239 --> 00:40:17,040
Speaker 13: why the implications of the agreement going away are enormous.

713
00:40:17,840 --> 00:40:22,319
Speaker 14: I think that when USMCA came into effect enter into

714
00:40:22,360 --> 00:40:26,880
Speaker 14: fourteen twenty, it was actually seen as the future model

715
00:40:26,920 --> 00:40:29,880
Speaker 14: agreement by the United States. I think the fact that

716
00:40:29,920 --> 00:40:33,360
Speaker 14: it includes a provision that we did not have in

717
00:40:33,400 --> 00:40:36,439
Speaker 14: the North American Free Trade Agreement, which is the possibility

718
00:40:36,480 --> 00:40:39,600
Speaker 14: of reviewing, makes all the sense in the world because

719
00:40:39,920 --> 00:40:44,480
Speaker 14: in NAFTA it was sort of you know, all or nothing. Again,

720
00:40:44,520 --> 00:40:48,480
Speaker 14: I would emphasize that in the end it makes USMCA

721
00:40:48,719 --> 00:40:51,560
Speaker 14: is not perfect, but it works.

722
00:40:52,120 --> 00:40:55,279
Speaker 8: And I think the past six years.

723
00:40:55,000 --> 00:40:58,719
Speaker 14: We have seen that our intra regional trade, you know,

724
00:40:59,600 --> 00:41:03,759
Speaker 14: has a favorably. I think that if you ask a

725
00:41:03,800 --> 00:41:07,960
Speaker 14: lot of the industries that are relevant for North America

726
00:41:08,080 --> 00:41:11,480
Speaker 14: that they will tell you that USMCA is a fundamental

727
00:41:12,080 --> 00:41:16,839
Speaker 14: tool for them in producing together in North America and

728
00:41:17,080 --> 00:41:19,080
Speaker 14: exporting to other regions.

729
00:41:18,719 --> 00:41:22,359
Speaker 1: Kelly, and you raised, automotive is a really important factor here,

730
00:41:22,560 --> 00:41:27,080
Speaker 1: always has been among these three countries. But I think

731
00:41:27,120 --> 00:41:30,880
Speaker 1: you can't right now discuss automotive, even more so than

732
00:41:30,920 --> 00:41:33,200
Speaker 1: six years ago, without talking about a fourth country, which

733
00:41:33,239 --> 00:41:40,040
Speaker 1: is China, and the looming prospect of Chinese exports of

734
00:41:40,040 --> 00:41:43,319
Speaker 1: automobiles into Canada as well as ultimately perhaps the United States.

735
00:41:43,360 --> 00:41:46,680
Speaker 1: Certainly we're seeing in Europe. So to what extent might

736
00:41:46,719 --> 00:41:51,040
Speaker 1: the Trump administration see this renegotiation review of USMCA be

737
00:41:51,120 --> 00:41:53,560
Speaker 1: a way of creating I think some of their Canadian

738
00:41:53,600 --> 00:41:55,759
Speaker 1: friends called it Fortress North America.

739
00:41:55,960 --> 00:41:58,319
Speaker 15: President Trump was describing it as a zero sum gang.

740
00:41:58,560 --> 00:42:01,319
Speaker 15: He wants the auto industry, want the auto industry, only

741
00:42:01,360 --> 00:42:03,839
Speaker 15: one of us is going to have it. Now, it's

742
00:42:03,880 --> 00:42:06,440
Speaker 15: a negotiation, so we'll see where this lands. But I

743
00:42:06,480 --> 00:42:10,920
Speaker 15: do think that the administration wants a very aggressive change

744
00:42:10,960 --> 00:42:13,840
Speaker 15: to the rules of origin, which would actually also have

745
00:42:13,920 --> 00:42:17,319
Speaker 15: a domestic content requirement, meaning some of that car is

746
00:42:17,360 --> 00:42:19,120
Speaker 15: going to have to be made in the United States

747
00:42:19,120 --> 00:42:22,440
Speaker 15: to qualify for USMCA, and almost none of that car

748
00:42:22,600 --> 00:42:25,680
Speaker 15: should be made by any components from China. And that's

749
00:42:25,719 --> 00:42:27,960
Speaker 15: a way not only to bolster the domestic industry, but

750
00:42:28,040 --> 00:42:31,200
Speaker 15: also to protect the North American industry from Chinese inputs.

751
00:42:31,600 --> 00:42:34,200
Speaker 14: In the case of Mexico, I think going back to

752
00:42:34,239 --> 00:42:38,279
Speaker 14: the deficit, I think it's important to note again that

753
00:42:38,760 --> 00:42:44,040
Speaker 14: which is, you know, around forty percent on every dollar

754
00:42:44,160 --> 00:42:47,359
Speaker 14: that is exported from Mexico to the United States, it's

755
00:42:47,440 --> 00:42:50,640
Speaker 14: actually a US component. That's a figure that has been

756
00:42:50,640 --> 00:42:53,360
Speaker 14: there for quite some time. So you have to again

757
00:42:53,400 --> 00:42:55,880
Speaker 14: if you go into the needy greedy of the deficit,

758
00:42:55,960 --> 00:43:01,400
Speaker 14: I think that needs to be taken into account. Usmca's

759
00:43:01,400 --> 00:43:06,280
Speaker 14: first negotiation, I think it became clear that the US

760
00:43:06,400 --> 00:43:12,880
Speaker 14: wanted to capture a bigger chunk of the growth of

761
00:43:12,920 --> 00:43:15,839
Speaker 14: the auto industry into the future. And I think that

762
00:43:16,040 --> 00:43:17,160
Speaker 14: is going to be accomplished.

763
00:43:18,160 --> 00:43:19,239
Speaker 8: I hope it does not.

764
00:43:19,600 --> 00:43:24,160
Speaker 14: It is accomplished in a way that companies which are

765
00:43:24,239 --> 00:43:28,880
Speaker 14: really North American for GM to mention a few.

766
00:43:28,960 --> 00:43:30,560
Speaker 8: They operate throughout the Americas.

767
00:43:31,160 --> 00:43:34,120
Speaker 14: It's done so in a way that they can continue

768
00:43:34,200 --> 00:43:38,759
Speaker 14: to be competitive worldwide. And if that addresses the concerns

769
00:43:38,760 --> 00:43:41,719
Speaker 14: by the administration, which I think it's possible, I.

770
00:43:41,640 --> 00:43:44,279
Speaker 8: Think we should get to a good place.

771
00:43:44,920 --> 00:43:47,720
Speaker 14: Within a few months, hopefully, or you know certainly within

772
00:43:47,760 --> 00:43:49,360
Speaker 14: the next twelve months.

773
00:43:49,400 --> 00:43:52,719
Speaker 1: You talk about certainty and businesses, Certainly the United States,

774
00:43:52,800 --> 00:43:55,120
Speaker 1: Canada and Mexico want just to know what the rules are.

775
00:43:55,880 --> 00:43:58,120
Speaker 1: Even more than what the rules are specifically, just know

776
00:43:58,160 --> 00:44:01,160
Speaker 1: what they are when they stand past. What are the

777
00:44:01,160 --> 00:44:03,400
Speaker 1: prospects of that right now? Because there's also, as I

778
00:44:03,480 --> 00:44:05,839
Speaker 1: understand it, the terms of the USBCA, the possibility of,

779
00:44:05,840 --> 00:44:08,439
Speaker 1: like every year you get to redo this thing, take

780
00:44:08,440 --> 00:44:11,120
Speaker 1: another look at it, and goodness knows, President Trump seems

781
00:44:11,120 --> 00:44:12,360
Speaker 1: to enjoy that process.

782
00:44:13,239 --> 00:44:13,560
Speaker 8: Well.

783
00:44:13,800 --> 00:44:17,480
Speaker 13: I think that if the countries come to an agreement

784
00:44:18,080 --> 00:44:24,000
Speaker 13: to review and then make modifications to USMCA, then they

785
00:44:24,040 --> 00:44:27,759
Speaker 13: have the option of renewing it. And if it is renewed,

786
00:44:28,200 --> 00:44:30,640
Speaker 13: then the next review comes up in six years, not

787
00:44:30,840 --> 00:44:33,839
Speaker 13: one year. It sort of extends it for sixteen years

788
00:44:33,880 --> 00:44:36,520
Speaker 13: with another review in six years. So I think that

789
00:44:36,520 --> 00:44:38,480
Speaker 13: that's the way the clause was created. The cause was

790
00:44:38,480 --> 00:44:42,560
Speaker 13: created with the understanding that all three parties would come

791
00:44:42,600 --> 00:44:45,360
Speaker 13: every six years and say is it still fit for purpose?

792
00:44:45,640 --> 00:44:47,800
Speaker 13: Do we need to make modifications. We thought that was

793
00:44:47,840 --> 00:44:51,080
Speaker 13: the right timing for a variety of reasons, and I

794
00:44:51,160 --> 00:44:53,560
Speaker 13: still do. I mean, we all lived with the NAFTA

795
00:44:53,840 --> 00:44:59,120
Speaker 13: that became impossible to modify until it wasn't until President Trump,

796
00:44:59,160 --> 00:45:01,680
Speaker 13: and you know, to be fair, he went to a

797
00:45:01,719 --> 00:45:04,800
Speaker 13: place that people had not been willing to go before,

798
00:45:04,920 --> 00:45:06,560
Speaker 13: which was to open it up and have a good

799
00:45:06,560 --> 00:45:08,560
Speaker 13: look at it, and that resulted in a much more

800
00:45:08,600 --> 00:45:10,799
Speaker 13: modern agreement that resulted in agreement that was much more

801
00:45:10,800 --> 00:45:13,400
Speaker 13: effective and a mechanism that allows us to look at

802
00:45:13,440 --> 00:45:15,680
Speaker 13: it every six years. So ideally, I think that, you know,

803
00:45:15,680 --> 00:45:19,319
Speaker 13: I think we will work cannibill, work really hard to

804
00:45:19,360 --> 00:45:22,920
Speaker 13: find some kind of solution that gives us stability, and

805
00:45:22,960 --> 00:45:24,319
Speaker 13: then we'll look at it again in six years.

806
00:45:24,760 --> 00:45:27,440
Speaker 1: What are the prospects of the result of this whenever

807
00:45:27,480 --> 00:45:31,680
Speaker 1: that happens, being actually enhanced trade among the three countries,

808
00:45:32,280 --> 00:45:34,840
Speaker 1: or is the goal instead just not losing what we

809
00:45:34,920 --> 00:45:38,560
Speaker 1: already have? Is there any goal of using this offensively

810
00:45:38,680 --> 00:45:41,080
Speaker 1: to have even more and better trade rather than just

811
00:45:41,160 --> 00:45:42,399
Speaker 1: let's not lose what we've got.

812
00:45:42,600 --> 00:45:47,440
Speaker 14: Well, I tend to think that we actually have not

813
00:45:47,719 --> 00:45:54,800
Speaker 14: seen the benefits of USMCA for a sufficient long period

814
00:45:54,880 --> 00:45:59,000
Speaker 14: of time. Let me explain why the agreement went into

815
00:45:59,040 --> 00:46:03,920
Speaker 14: effect into twenty right at the time that coveied hit,

816
00:46:05,280 --> 00:46:11,480
Speaker 14: so that was that immediately affected our economic business and

817
00:46:11,560 --> 00:46:17,160
Speaker 14: trade among ourselves. After that stabilize, you're beginning to see,

818
00:46:17,440 --> 00:46:22,719
Speaker 14: my view, a pickup in trade and employment thanks to

819
00:46:22,840 --> 00:46:26,279
Speaker 14: that agreement. I think what we're going to see is

820
00:46:26,360 --> 00:46:30,040
Speaker 14: tremendous benefits for the three countries. Now again I'm not

821
00:46:30,080 --> 00:46:32,879
Speaker 14: an iive we're not there yet, and I think we're

822
00:46:32,880 --> 00:46:37,600
Speaker 14: going to see we're seeing in our trade increase even

823
00:46:37,680 --> 00:46:45,440
Speaker 14: with tariffs nowadays, right we're seeing investment persident Trump wants Naturally,

824
00:46:45,480 --> 00:46:49,240
Speaker 14: every leader wants as much investment coming into their country,

825
00:46:49,760 --> 00:46:53,160
Speaker 14: and that's a central part of the discussion. The US

826
00:46:53,200 --> 00:46:56,759
Speaker 14: invests around one hundred and sixty billion dollars. That's the

827
00:46:56,880 --> 00:47:01,040
Speaker 14: stock of US foreign direct investment in Mexico. Mexico, unknown

828
00:47:01,080 --> 00:47:05,279
Speaker 14: to many Americans, has about sixty If you normalize that

829
00:47:05,440 --> 00:47:08,520
Speaker 14: by the size of the economy, Mexico is actually investing

830
00:47:08,719 --> 00:47:12,600
Speaker 14: more in the United States, in the United States in Mexico,

831
00:47:12,960 --> 00:47:16,480
Speaker 14: and there are a lot of Mexican companies willing to

832
00:47:16,560 --> 00:47:20,040
Speaker 14: invest more. And I think that's the certainty of having

833
00:47:21,400 --> 00:47:23,280
Speaker 14: the deal for the next sixteen years.

834
00:47:23,360 --> 00:47:27,839
Speaker 8: It's critical for them and essentially in all sectors. Even

835
00:47:27,920 --> 00:47:30,680
Speaker 8: if you talk to the agricultural sector here in the States.

836
00:47:30,760 --> 00:47:34,719
Speaker 14: They want that certainty also because they export billions of

837
00:47:34,840 --> 00:47:36,840
Speaker 14: dollars of grains to Mexico.

838
00:47:39,160 --> 00:47:40,879
Speaker 1: That does it for us here at Wall Street Wig,

839
00:47:41,200 --> 00:47:44,120
Speaker 1: I'm David Weston. See you next week for more stories

840
00:47:44,360 --> 00:48:00,279
Speaker 1: of capitalism.