USMCA in Practice: What it Means for the Future of US-Mexico Relations

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Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at fedsoc.org.

 

 

Greg Walsh:  Welcome to The Federalist Society’s Teleforum conference call. This afternoon’s topic is titled “USMCA in Practice: What It Means for the Future of US-Mexico Relations.” My name is Greg Walsh, and I’m Assistant Director of Practice Groups at The Federalist Society.

 

As always, please note that all expressions of opinion are those of the experts on today’s call.

 

Today, we are fortunate to have with us Ambassador Jeffrey Davidow, Senior Counselor at the Cohen Group and former U.S. Ambassador to Mexico and Assistant Secretary of State for Western Hemisphere Affairs; Ana Rosa Quintana, a Senior Policy Analyst of Latin American and the Western Hemisphere at the Heritage Foundation; and moderating is Harout Jack Samra, an Associate at DLA Piper. After our speakers give their opening remarks, we will go to audience Q&A. Thank you all for sharing with us today. Harout, the floor is yours.

 

Harout Jack Samra:  Thank you, Greg, and thank you again to The Federalist Society and the International and National Security Practice Group for hosting today’s program. As you said, the topic for today’s program is “USMCA in Practice: What It Means for the Future of US-Mexico Relations.” As many of you who’ve dialed in today will know, the USMCA, the United States-Mexico-Canada Agreement, entered into force here in the United States on July 1, 2020. This is obviously an important milestone in the long and very significant, on both sides of the border, history between the United States and Mexico, a relationship that is profound in a lot of ways: historic, economic, cultural.

 

Today’s panel of experts—and I’m grateful to Greg for introducing our experts, and I’ll introduce them more thoroughly in a moment—is going to discuss some of the anticipated effects of the USMCA and also put it in context. As Greg mentioned, we are featuring today Ambassador Jeffrey Davidow, who is a Senior Counselor with the Cohen Group in Washington, D.C. Over the 34 years of his career in the foreign service, Ambassador Davidow became one of the U.S.’s most senior and well-respected diplomats.

 

He has extensive experience in both Latin America and in Africa, having served as the U.S. Ambassador to Mexico, Venezuela, and Zambia. He also headed the State Department’s efforts in Latin America, serving as Assistant Secretary of State for Western Hemisphere Affairs. He retired in 2003 from the U.S. State Department with the rank of Career Ambassador, the highest position in a foreign service, which by law can be held by no more than five individuals at one time.

 

We’re also featuring today Ana Rosa Quintana, who’s a Senior Policy Analyst concentrating on Latin America and the Western Hemisphere at the Heritage Foundation. In this role, she leads the Heritage Foundation’s efforts on U.S. policy through Latin America. She’s a prolific author and is frequently cited in major media outlets. Many of you may have seen her before in interviews throughout the media.

 

She’s also testified multiple times before the U.S. Congress and holds a master’s degree of Arts and Global Affairs and a bachelor’s degree in Political Science from Florida International University. She’s also received certificates and is experienced working in the government, concentrating on national security, Latin America, and Caribbean studies. So with that, I’ll turn it to the panel, and we’ll begin maybe with a very high-level overview on the U.S.-Mexico relationship. And if I can ask maybe Ambassador Davidow just to talk a little bit about how this relationship is important on both sides of the border.

 

Amb. Jeffrey Davidow:  Well, thank you and thank you for the invitation. And I’ll try to be brief and go over a fair amount of recent history. And by recent, I mean in the last quarter of a century. I am sure that everybody who’s listening is aware of the critical importance of Mexico to the United States in terms of commerce and investment.

 

Mexico is now, depending on the month of the year, our first, second, and third largest trading partner. We trade about $560 billion a year with Mexico. In terms of foreign direct investment, the U.S. is the largest investor in Mexico, averaging somewhere between 12 and 20 billion new investment a year. The economic integration is very deep.

 

I’m not saying anybody in this audience thinks this way. I think there are some people in our country who still think that Mexico’s producing plastic widgets and paper flowers. That’s not the case. And those people had a rude awakening in the opening days of COVID when, in March and April of this year, both countries instituted lockdown procedures on industries but left the door open for crucial, essential factories.

 

There was a problem, however, because there was not enough coordination. And Mexico kept work going on a number of infrastructure projects and a few other things. The U.S. actually came up with a fairly elaborate list of industries that were deemed essential, many of them in the defense area.

 

And what became apparent very quickly was our industries, the construction of whatever we’re putting together in those factories, is heavily dependent upon inputs from Mexico. And as I say, it’s not paper flowers anymore. So I worked, along with many other people, in March and April trying to get coordination between the U.S. list and the Mexican list. And it wasn’t easy because there were many, many actors involved, not just industrial actors but health and government. So I think that was a good wakeup call to remind us just how important and how integrative our economies are to each other.

 

Now, beyond the economics, NAFTA, which came into effect in ’94, ’95, compelled Mexico to modernize a lot of its political and administrative structures. What foreign companies wanted in order to invest -- what foreign traders needed in order to invest was competent government activity in Mexico. So we saw in the ‘90s and the early 2000s an emphasis -- a growing emphasis on things like sanctity of contracts, rule of law, creation of independent autonomous Mexican regulatory agencies. And this was accompanied by changes in society of more liberal press, greater pluralism.

 

Let me stress by no means was this complete in any sense of the word. But without NAFTA, the political change in Mexico would not have been needed and would not have come. And of course, the crowning moment in this was in 2000 when a new political party won the presidential election, replacing an old party that had had power for 70 years. And it was a peaceful transition. In 2006, there was another election, and that same party that had won in 2000 won again. But again, a free election. 2012, the old party came back in. That was the government of Enrique Pena Nieto.

 

Now, in 2018, we had the election of a party of the left lead by Andres Manuel Lopez Obrador, called by everyone AMLO for his initials. AMLO presented himself as an unabashed reform candidate with considerable attention to 21st century socialism. In point of fact, what AMLO is installing in Mexico is not so much a new reform but a return to the past.

 

He believes that Mexico’s greatest time was during the ‘50s and ‘60s when the economy was growing, when the dominate party that held power for 70 years, the PRI, was able to control the government, the press, and what have you. He left the PRI because he wanted to strike out more to the left. But AMLO in many ways is returning to the past. What do I mean by this? A number of things.

 

Many of the independent, autonomous agencies that were created basically as a form of checks and balances related to elections, relating to energy and other parts of the economy have been vesicated. They may still exist, but they’ve lost power. In the clearest return to the past has been his firm desire to reestablish Pemex, Mexico’s oil company, and the CFE, which is Mexico’s state-owned electricity company -- return them to their point in history where they were the jewels in the crown. This is cutting directly across the energy reform which the previous administration passed, a constitutional reform, which welcomed for the first time in Mexico since the 1930s considerable foreign investment.

 

Now, AMLO’s election and his campaign was very attractive to a large majority of Mexicans. And it was attractive because, for all the changes that have come about under NAFTA and the significant growth of the middle class, the development of new industrial economies, Mexico remains a poor country. The majority of its people are poor. And with the new freer press, more and more Mexicans are aware of the ongoing corruption that has been a mark of Mexican government, not just in the last few years, but one can say almost forever.

 

So a disaffected population not getting as rich as they thought they would because of the new economy and much, much more aware of the weaknesses of the society in terms of corruption—of course, one of its manifestations is violence—that propelled AMLO to a very significant victory. And as I say, he is pushing for the reestablishment of Pemex, which is the most indebted oil company in the world -- to a premier position. Same thing with the electricity commission, and he’s introduced a lot of really questionable infrastructure projects: building a new airport, building a new train system and so forth. Which might not be bad, but the economy really cannot deal with it. And of course, with COVID, we are going to see something above a 10 percent decline in GDP for this year and probably continuing on until next year.

 

But let me finally say something about the U.S. relationship with Mexico. And here’s an area where AMLO, I think, has handled himself fairly well. It was expected that this leftist would immediately clash and have increasing problems with President Trump. But in point of fact, they’ve worked out a number of agreements that seem to meet the immediate needs of the two countries.

 

Now in part, that’s because they’re quite similar as individuals. And before people start having heart fibrillation and thinking I’m calling President Trump a 21st century socialist, please calm down. The fact of the matter is they both are somewhat populists. They’re highly nationalists in their approaches. They’re very personalistic in how they run their government.

 

AMLO has a two or two and a half press conference every morning. It’s the equivalent of the Twitter barrage. And they both share a general disdain or suspicion for the structures of government and the institutions of government. So they are not that far apart in temperament. And in terms of a couple of big issues, particularly Mexico’s willingness to stop the inflow or the pass through of Central America migrants into the United States, they have reached agreement and in the whole question of negotiating a new trade agreement.

 

Now, there are many people who will tell you that it was absolutely necessary to reform NAFTA after 25 years. I happen to be one of those people who felt that NAFTA was sort of doing okay. But what happened was President Trump came in and made no bones about the fact he was going to withdraw the United States from NAFTA, pure and simple. And this, of course, got the attention of the Mexican and Canadian governments, and it lead to a lengthy period of negotiation.

 

When AMLO took over government, he kept the negotiating team of the previous administration. And ultimately what came out was the USMCA, which is better than NAFTA but, in my view, not that markedly so. But it does introduce some new ideas and catches the agreement up with some of the many changes that have come in the last 25 years, particularly the digital age.

 

So let me just finish by saying that I think right now the U.S.-Mexico relationship is in something of a COVID coma. The border is essentially closed for people. Trade is still flowing through. But much of the kind of activity that has marked the growing integration between the United States and Mexico at a government level dealing with violence, dealing with narcotics, dealing with migration, dealing with agriculture, this all pretty much on hold from my perspective. Neither administration is particularly adept nor concerned about pushing forward.

 

When we get beyond COVID, we’re going to have significant deficiencies in terms of what is absolutely necessary, which is the increasing of the levels of cooperation and coordination between the governments and the creation and functioning of important mechanisms. Let me stop there, and I know Ana has a lot of very interesting points to make about the new MCA. And I’ll be glad to answer any questions from anybody who I haven’t put to sleep as yet.

 

Harout Jack Samra:  Well, thank you for that introduction and really setting the table in this way, Ambassador Davidow. And you’re right. I’d like to turn it over to Ana. And in many ways, you raised a number of topics, and I’d like Ana to comment on those but also to expand on a few of these points. And these include some of your comments regarding the broader relationship between the two countries, Mexico as an important trade partner, but just as importantly an important target for U.S. foreign direct investment flowing from the U.S. into Mexico.

 

And Ana also was the principle author of an interesting report on USMCA and looking forward from the current COVID coma, to use Ambassador Davidow’s terms. I think among the important points that you raised, Ana, in that report—which I would refer anyone who’s listening to the Heritage website—is that all three of these countries in this broad North American free trade area, United States, Mexico, and Canada, are among the most important trading partners, if not the most important trading partners, for each of those countries and that this traded area has developed into one of the most prosperous free trade regions in the world but that it’s imperative, as you say in your report, that these partners work to accelerate the economic come back, recovering from COVID, and that the USMCA provides a good foundation for that.

 

So with that, I know that there’s a lot to cover, but I’ll hand it over to Ana to follow up on some of those points and to maybe talk a little bit about her report and what they found as far as COVID-19 and the pass back from an economic standpoint for North America.

 

Ana Rosa Quintana:  Sure. Thank you, again, for the invitation, for being here, and thank you for letting me speak alongside Ambassador Davidow. I think he’s somebody who had an incredibly storied career who was in Mexico during the 9/11 attacks. I think for somebody like him to have been in Mexico during that incredibly tumultuous transition from the PRI to PAN, I think that’s such a pivotal point in Mexico’s history and for somebody like me who’s a Mexico nerd I would just -- I think that’s just something I think not enough Americans know about just how much that fundamentally changed Mexico.

 

But on that point on just how USMCA can be used kind of as a launching pad, I think the point that the Ambassador brought up on just how much economic disruption and supply chain disruption was brought about because of Mexico’s haphazard decision to not coordinate with the United States and not coordinate with the Canadians, there was just no North American coordination on aligning of the essential sectors. So one example, Mexico just decided to shutdown its mining sector. And one of the unintended consequences of doing this was there is a very critical asthma medication, for example, that one of the primary ingredients for this asthma medication Mexico is the world’s second largest producer -- the second largest producer and the second largest source of fluorite.

 

The world’s top producer of this mineral is China. And China, of course, is not being very generous with fluorite because it’s a mineral that goes into an asthma medication. And fluorite went into emergency inhalers, and it was used to treat COVID patients. And for a significant chunk of time this year, there was a significant shortage of Ventolin. There you go. That was the name of the medication -- Ventolin. And so for asthma sufferers, as well for COVID patients, there was a significant problem.

 

So not only are we dealing with the PRC essentially weaponizing a medication, we’re also dealing with Mexico who just decided to say, “Hey, you know what? We’re going to shut down our mining sector because why not? Because we have no health plan in place. Because we’re not going to coordinate with our largest trading partner. We’re also not going to coordinate with our trade partner, Canada, up north. We’re just going to not take any health precautions and instead of just doing anything for our health crisis, we’re just going to implement radical social distancing policies. And this is going to be our pathway forward.”

 

As a consequence, like the Ambassador mentioned, Mexico’s economic prognosis is looking quite dire. I think the 10 percent economic contraction that’s been predicted is now also being revised because they already entered 2020 in a recession because of AMLO’s populist, nationalistic economic policies. He’s strongly dissuading and not providing certainty to international investors. And he’s also essentially weaponizing the bully pulpit of the presidency to various industries and companies.

 

So you imagine going into a pandemic where you shutdown various sectors and already you are weaponizing the presidency and implementing these quite awful economic policies. And this is where the guarantees provided in trade agreements -- the legal guarantees and certainties provided in trade agreements help keep everybody kind of essentially in check and should help provide for guarantees for investors. So in this report, we outline steps that can help catalyst economic recovery because essentially what was discovered was -- kind of when the shutdowns were occurring was that, if one government declares one sector nonessential, there are secondary and tertiary consequences of this.

 

So if Mexico, when they declare their one manufacturing sector nonessential, the U.S. defense industry is going to be impacted because Mexico produces a significant chunk of the United States’ headsets for our law enforcement officials and for the U.S. intelligence community and whatnot. There’s just so much -- the economic integration and interconnectedness is incredibly significant. So in this paper we just outline various steps that both the U.S. government, the Mexican government, and the Canadian government can take, including one step in particular that they need to create a trilateral economic recovery commission and just immediately by transforming this already existing office at the State Department.

 

It’s called the High-Level Economic Dialogue -- that’s just the U.S.-Mexico High Level Economic Dialogue into a trilateral economic recovery commission. This just seems so common sense and just seems nonsensical. But there just doesn’t seem to be much movement on this.

 

We should also be synchronizing our economic recovery timetables to overcome these shortages and production delays. How many of us have tried to place orders online and have seen “Due to COVID there’s going to be a significant delay”? Now imagine if you are a manufacturer trying to produce X widget.

 

We’re already in October. We know that the pandemic is going to continue. We should already be planning contingencies for this. And U.S. manufacturers, considering how deeply integrated they are within Mexico, should already have some guarantees with their Mexican counterparts in place. And the Mexican government should not be impeding this process.

 

And I think one point on -- I think that I’d really like to underscore about the U.S.-Mexico relationship that I think often gets lost in these discussions because also we talk about the importance of the economic relationship and the high volumes of trade that flow back and forth -- that I think doesn’t get discussed enough is that, while joint economic security expanded throughout these last 20 plus years of NAFTA, America cooperation with Mexican law enforcement and security services and intelligence services significantly expanded to unprecedented levels. The U.S.-Mexico partnership did not evolve overnight. We were frenemies at one point.

 

The U.S. and Mexico, just because we shared a border does not mean that our governments and our security institutions got along. I mean, there was a point where the Mexican government was actively involved in the murder of a U.S. law enforcement official. And I think sometimes some folks probably forgot about this until Netflix unfortunately reminded us with that special on Narcos, or whatever that show was.

 

And I think, as NAFTA establishes code of conduct for effective and secure trade and facilitated our trade, it also created this really needed framework for improved rules of engagement on national security matters as well. And we now actually have our Mexican counterparts working to keep America safe. From D.C., we view the Mexico relationship as a foreign policy relationship. But we have to remember along the border, for them, this is a domestic policy relationship.

 

For them, they interact with their Mexican counterparts, whether it’s the agriculture official on the other side, the water official on the other side, the Mexican police officer, whatever. That is somebody who they deal with on an everyday basis simply because of the proximity of the country. And I think this dynamic and growing relationship is -- I think it’s something that cannot be just underscored or just kind of ignored.

 

And I think the reason why, frankly, we found ourselves in a situation about when Trump came into office and so many people wondering, well, why does Trump dislike NAFTA so much, and why does he want to renegotiation this agreement so much? -- I guess there’s a crowd of two people: folks who were like, “Well, NAFTA’s fantastic. Why does he hate it so much?” Well, because he heard from so many people throughout the rest of America, people who’s jobs were actually impacted -- who’s livelihoods were impacted by trade that they didn’t benefit -- not only did they not benefit from it but they didn’t also understand nor were they impacted by the benefits of the bilateral relationship.

 

And I would say that’s a large consequence of, one, people not advocating for the relationship enough or not explaining the relationship enough. And two, I think we’ve also seen that our policymakers have not done a good enough job of kind of maintaining the relationship, like the opportune side of the relationship and the positives of the relationship. And also the -- and I think it’s also a consequence of Mexican diplomats not doing a good enough job of cultivating the relationship beyond just the D.C. to Mexico City side.

 

They didn’t do a good enough job kind of cultivating it nationwide beyond the issue of immigration. And they were kind of egged on with these affinity Latino whatever groups and just focusing on largely issues of immigration. And they were kind of egged on by major corporations in the United States who were just like, “Well, let’s just work with national council La Raza,” who’s now UnidosUS or whatever. And the focus was just all on immigration.

 

And then come the Trump era, and they’re just like, “Well, what do you mean people don’t value Mexico?” And it’s like, well, because all that people hear about Mexico is that the Mexican government is actively just working with these National Council La Raza groups to work on amnesty and legalizing immigration, and that’s it. And so I think there’s a lot of lessons that were learned, frankly, not quick enough. And I hope they’ve now learned to do a better job of kind of advocating for the relationship on a consistent basis. And with that, I will wind down so we can move on to the next question.

 

Harout Jack Samra:  Sure. And as a follow up, just confirming top trading partners as of July 2020, year to date Mexico, as Ambassador Davidow said and I think as, Ana, you suggested as well, is currently the number one trading partner to the United States, accounting for roughly 14 percent of total U.S. trade, imports and exports. Number two, just behind Mexico, is Canada. And then, again, sort of counter what people’s perceptions might be, China’s number three, and China roughly accounts for a very comparable number, about 13.5 percent of total U.S. trade. But Mexico and Canada combined are closer to 30 percent of total trade for the U.S.

 

So as Ambassador Davidow mentioned, there are a number of sort of change -- and Ana, as well, suggested there have been a number of changes that tweak to a degree what had been this overall structure of NAFTA that had really brought a lot of change and in many ways has significantly changed the basis of the relationship between the U.S. and Mexico, both from an economic standpoint but even from a political and intragovernmental standpoint as it relates to each of the -- well, in particular, Mexico’s internal policies. But some of the changes that have been implemented -- and I’ll refer to them in passing, and our panel might have just a few comments about some of them -- relate to things like updated rules of origin and other related customs laws and rules of evidence, things like new provisions addressing digital trade. This is obviously a different world than where we were 30 years ago.

 

So part of the USMCA has been directed to address this new very, very important and growingly significant -- increasingly significant area of economic activity and trade between two countries. Two other areas that maybe I’ll ask the panel to briefly mention or discuss are some of the additional labor protections that have been instituted and the process that has been created around those, as well as the process in light of sort of the broader foreign direct investment relationship between Mexico and the United States, some of the protections for investors. Before we jump into that, I should mention that we’re about at the halfway point at this point.

 

We’re going to reserve about 10 minutes at the end. So if you do have questions, please hold on to them. And Greg will open up the lines of any of you who have questions in about 15 to 20 minutes.

 

So many of these changes, turning back to the subject at hand, are a combination of maybe some of the political factors, as well as some of the policy factors that influence the negotiation of these agreements. And just as an initial item, let’s talk a little bit about some of the labor protections. And I know, Ambassador Davidow, you had some thoughts on that -- on sort of the political realities that surround approving a new trade agreement such as this one and how the labor protections play into that.

 

So if you could maybe comment on that, and then we’ll turn it over to Ana maybe just to fill in some of the blanks about the new process that’s being contemplated and what it means from a broader economic standpoint and why it’s important. So Ambassador Davidow?

 

Amb. Jeffrey Davidow:  Right. Well, labor and environmental issues were topics way back when NAFTA was originally negotiated. But the Mexican government in particular was very, very reluctant to see the United States in any way stick its nose into Mexican labor. And for generations, the Mexican labor movement has really represented the Mexican labor movement rather than the Mexican worker.

 

And this was particularly galling to the American workers who felt that the company X in the United States who goes done and has a labor union in their factor in Guanajuato -- it’s really something, in many cases, of a farce. The labor union really doesn’t represent the workers. The leaders are bought off. They’re often in-house labor unions with special deals and special payouts.

 

So over the years, there’s been a strong sentiment growing in the American labor movement -- which by the way, as we all know, has in itself been diminishing in recent years -- that a new NAFTA, the USMCA, had to have new provisions to ensure that Mexico’s very elaborate labor legislation, which has often led the world in terms of legislation and often been the last in terms of implementing it -- that Mexico would have to be called to order. So structures were set up in the USMCA which would allow for commissions to be established when and if there were complaints either by Mexican labor unions or American labor unions to try to ascertain the truth of the labor situation. It’ll be very difficult to organize, but I think it’s probably a step -- no, not probably, it is a step in the right direction.

 

Harout Jack Samra:  Yeah. And thank you for that, Ambassador. So maybe, Ana, if you could tell us a little bit about sort of the structures that have been created in the new USMCA and how they’re intended to play out -- that Ambassador Davidow referenced.

 

Ana Rosa Quintana:  Sure. Yeah. I’m of the perspective that I think labor policies should have a minimal role in trade agreements. I think it’s used to protect the basic rights of freedom from forced labor and just allow for free association. And I think what happened here is that there were kind of some segues with a side letter and a side article, particularly with like a SOGI article with sexual orientation and gender identity policy like Article, I think it was 23.9, which made an inappropriate reference to sexual orientation and gender identity, to kind of advance a particular social agenda.

 

Apparently, the Canadians at one point wanted an entire sexual orientation and gender identity chapter, which was a little galling, and thankfully the administration made it so it was only one innocuous nonbinding sentence, one article, which -- in reference to labor rights. But what finally made it through in terms of labor is that kind of towards the end -- and this is more like to get congressional democratic support -- is a U.S. entity can kind of commission or kind of enact or kind of like request that a rapid response mechanism in light of a supposed or an alleged violation of a Mexican worker’s rights -- they can commission a rapid response mechanism to convene an interagency, like, labor committee, with USTR and the Department of Labor overseeing it whenever a denial of rights has occurred in any sort of priority facility or sector. And that kind of covers any sort of good or mining or manufacturing facility that’s kind of under the USMCA kind of umbrella, which is essentially everything.

 

It’s like aluminum, auto parts, aerospace, kind of like the whole shebang. And while that’s ongoing, the United States has the authority to suspend --

 

Harout Jack Samra:  I think we may have lost Ana. Ana, are you on the line?

 

Ana Rosa Quintana:  Yeah. Sorry. I’m right here. Can you hear me? Hello?

 

Amb. Jeffrey Davidow:  I can hear her.

 

Greg Walsh:  I can still hear you, Ana.

 

Ana Rosa Quintana:  Oh, can you hear me? Okay. Great. I’m sorry. I thought -- can you guys hear me? Are we okay?

 

Greg Walsh:  Yes, ma’am.

 

Amb. Jeffrey Davidow:  I can hear you. This is Jeff. I can hear you.

 

Ana Rosa Quintana:  All right. Great. So in that process, while that investigation is ongoing, the United States has the authority to kind of suspend importation from that particular facility. So in the end, if the United States determines that a denial of rights has occurred, they can completely suspend the preferential access that that entity has and impose penalties. So kind of this is meant to supplement Mexico’s labor reforms that were passed in mid-2019.

 

I think this is one of these situations where it’s like, yes, we understand that the objective here is good -- that the objective here is to support and enable and facilitate Mexico’s effort in pursuing labor -- in pursuing stronger labor reforms. And the idea is stronger labor reforms and stronger labor policies in Mexico will inevitably lead to a more competitive labor market in the United States. My concern is you have a situation in Mexico where, what, 50, 60 percent of the labor population inside of the country is in the informal sector, literally people who are employed in the informal sector.

 

What is being done there? USMCA does nothing to address that. So we’re now targeting and unfairly kind of putting these burdens on regulations, kind of burdens on policies on the laborers that are within the legal realm and I think not addressing kind of the most vulnerable populations within the country. And also, I think, again, allowing for that SOGI article to have gotten in there -- we have to remember sexual orientation, that’s an immutable concept to gender identity. It’s a subjective internal perception, and you’re contradicting this idea that we’re -- and it’s also inside of USMCA that USMCA will not allow for any sort of unfair targeting or any sort of discrimination against any party on their basis of sex. But yet there’s a SOGI kind of policy, a SOGI article.

 

I don’t know. I think this is where I understand that there has to be some sort of give and take. We’re dealing with partners who don’t necessarily have our perspective. But this now puts a different standard in terms of future trade agreements in place.

 

Harout Jack Samra:  Yeah. Thank you, Ana. And another area where there has been, I know, some change -- and for those of us who weren’t on the international dispute side like I am, this has been notable. And that is in the area of investor state dispute resolution in the new USMCA. NAFTA, of course, provided for international investment arbitration to protect any investor interests in the foreign country from, for example, arbitrary and capricious regulations or other takings that might occur.

 

The new USMCA largely does away with these after a sunset period within the U.S.-Mexico dynamic and entirely -- and also there are similar changes as well in the U.S.-Canada dynamic as well. I know, Ana, if you could maybe briefly comment on sort of the dispute resolution dynamic in the new USMCA and maybe some of the issues surrounding that.

 

Ana Rosa Quintana:  Sure. So from my understanding -- and again, I’m not an attorney, so I’m probably going to butcher the specific kind of -- the actual terminology. But from my understanding, it’s investors have to essentially exhaust all local and administrative tribunals if they are not -- they have to exhaust local and administrative tribunals and wait a timeline of like 30 months. And it’s for all investments outside of -- it’s like government contracts, oil and gas, telecommunications, transportations, and infrastructure sectors. It’s everything that falls outside of the heavy, upfront cost intensive sectors.

 

So obviously, an infrastructure project is a very cost effected -- kind of like very costly upfront investment. So this is a bit concerning because it’s what protections -- there’s very limited protections provided here for investors. You’re reducing the scope of relief available for American firms. And this is -- for the ones especially operating in noncovered sectors in Mexico.

 

And I think during the negotiation process there also wasn’t any sort of concept or idea that going into this that they were going to be encountering a president as nationalistic and as populist and as leftist as AMLO, who’s now governing and conducting economic policy by referendum. You literally have multibillion-dollar projects that are being shutdown in Mexico because the president is conducting a referendum, and he’ll organize a referendum and then shutdown a project because the majority of citizens will vote against it. It happened to Corona’s brewery, and it happened to the $14 billion airport project.

 

When he was president-elect, he held a referendum. 1 million people out of 129 million people in Mexico voted against it. And he said, “Okay. We’re just going to shut it down.”

 

Harout Jack Samra:  Yeah. And that’s a significant -- and this is an area of significant change as it relates to the foreign direct investment side. As I mentioned, between U.S. and Canada they’ve really largely done away with investor state arbitration, which is a subject of considerable controversy not only here in the U.S. but throughout the world. And those of us who have some experience in that space have been really a witness to the increasing controversy surrounding this as countries throughout Europe as well have increasingly been moving back away from including these kinds of agreements in their free trade or other bilateral investment treaties.

 

And so here, as we approach the last 10 minutes, Greg, I would ask you maybe if you’d like to give a quick instruction to anyone who would like to ask questions. And we can begin to open the forum for questions. And we can also proceed as questions arrive.

 

Greg Walsh:  Let’s go to audience questions.

 

Harout Jack Samra:  All right. So we can continue, and as questions arise, Greg, please go ahead and interrupt. And we can pick up that question. The last topic, I think, that I wanted to discuss over the course of this hour is the future of U.S. trade and foreign relations and really try to consider this from both sides.

 

On the one hand we have Mexico in this sort of AMLO era, and where are we going to go from here? But on the other hand, we also have the U.S. with the election upcoming just in the next month and a half or so. So if either of you -- Ambassador Davidow, if you’d like to maybe address the future of this relationship, if you’d like to kick that off, we can do that. And then once you’re finished, if there are any questions, we can resume with those.

 

Amb. Jeffrey Davidow:  Okay. Well, the U.S.-Mexico relationship has never been a totally easy one. In fact, more often than not it can be conflictive all through history. And what I think NAFTA offered and the USMCA has offered is the possibility of something very new an encouraging. There are people -- and I happen to be one of them -- who look at North America, Canada, the United States, and Mexico, as an incredible important economic block in the world, outshining the European Union and any other collection. And I think basically the three countries, for their own political reasons, have missed the boat.

 

I think we have not done enough to really promote the kind of economic integration that we should have done. Now, maybe some point in the future we’ll be able to do it. In the very short term, I think once we get through COVID we may be going into a period of some considerable concern because the problems that have existed for quite some time -- violence, narcotics, immigration -- they really haven’t been addressed in any significant way.

 

The current Mexican government is no more competent in dealing with them than have past governments been. And we’ll see more focus on that. I think if we really do see a decrease in Mexican GDP of 10 percent or more, we will see the re-initiation of Mexican immigration to the United States. Keep in mind, in recent years, the flow through Mexico has largely been Central Americans, and Mexicans have largely stayed at home. In many years, there was a net zero flow from Mexico.

 

So I think we’re going to see once things return to normality some of the same old problems. Some will be more acute. And because of what’s happened in the last couple of years in terms of the degradation of the institutions both with each government and in the cooperation between the two governments, I think we can be heading into a really rough time. And this will have an impact on foreign direct investment.

 

Harout Jack Samra:  Yeah. Thank you for that. Greg, if there’s any questions, we can take them now. Otherwise, I’ll turn it back to Ana.

 

Greg Walsh:  Ms. Quintana.

 

Ana Rosa Quintana:  Yep.

 

Harout Jack Samra:  All right. Go ahead, Ana.

 

Ana Rosa Quintana:  So I think kind of looking forward, I think the kinship that’s transpired between Trump and AMLO is going to pave the way for Trump to now want to have some serious and some mature conversations with his Mexican counterpart and to really want to do something to deal with the crime issue -- to deal with both crime and to deal with both kind of making a serious kind of heavy punch on drugs. And I think I agree. I think we are entering a period in which we are going to see a significant uptick and potentially a prolonged uptick in Mexican migration to the United States.

 

And it’s not going to be family units. It’s going to be single males coming to the United States for economic opportunities. I think we’re also going to potentially be seeing an uptick in Central American migration as well. So that’s going to be kind of like this double edge sword to the United States that’s going to be quite difficult to confront.

 

I don’t necessarily see a change in Mexico’s migration policy, in their respect in them addressing Central American migration simply because the polls in Mexico indicate that Mexicans do not support illegal immigration from Central America into Mexico. I mean, it’s over 60 percent of Mexicans, and this was last year. They just don’t support it because they don’t support Mexican welfare being used to help people from another country when Mexico’s poverty rates are over 45 percent.

 

I think the other side is I think you’re also going to potentially see AMLO focused on dealing with the surging crime and homicide and insecurity rates as a means to potentially deflect from his own mishandling of the economy and also his own kind of growing authoritarian and concentration of political power. Also, I think you’re also going to potentially and behind the scenes -- and we’re probably only going to be hearing about this maybe later on in the future -- is we’re going to see a bit of a growth in collaboration between the United States on traditional sensitive issues -- the collaboration against narco trafficking and on security issues. Again, these are always traditionally sensitive issues, but we’re going to -- they’ve laid the platform over these last few years with the USMCA negotiations that there is a significant level of trust between both capitals and I think despite kind of how the media portrays it and despite kind of how other folks who have a political -- some of the politically minded folks as we are in a very hotly contested political environment right now.

 

There is a significant -- the U.S.-Mexico relationship, it’s not -- I don’t think I’ve ever seen kind of just the level of back and forth between both capitals. It’s pretty extensive. And AMLO really -- the kinship between both leaders is there.

 

Harout Jack Samra:  Yeah. And on that front, one of the topics I was interested in addressing as well is just the potential conflict with the election here in the U.S. What, if any, changes do you see in the event that there is a change in power in the coming election? Maybe we can begin with Ana.

 

Ana Rosa Quintana:  Sure. So I think that, from what I’ve seen kind of online and from what I’ve seen from Biden advisors and what they have said, I think they are just unhappy with how the Mexican administration has been so close to -- has gotten so close to President Trump. And I think they are a bit concerned with certain policies that the AMLO administration has implemented. And I think their perspective is that they have kind of criticized the Mexican president a bit as well, and I just don’t understand how they can potentially have a positive relationship going forward with our largest trading partner if they’ve kind of taken that approach.

 

And also, I think their perspective has largely been very migration focused and U.S. Latino focused. And I think, again, that’s very limited in scope. It’s the same way that they’re also approaching the U.S.-Brazil bilateral relationship. It’s very climate change focused. That’s only one myopic, tiny dot within the plethora of issues that are on the agenda.

 

And so I’m not sure as to how productive they’re going to be when we’ve seen just how much the relationship has advanced with the U.S. and Mexico under Trump. Regardless of how much they may dislike Trump, regardless how distasteful or how unstatesmanlike he may be, there are legitimate areas where we’ve seen the relationship advance. So I’m not sure if they’re going to take it to a place where they’re going to allow domestic, progressive agenda kind of lead the way in a foreign policy relationship.

 

Harout Jack Samra:  Yeah. All right. Well, in the last few minutes, maybe I can ask each of the speakers, beginning with Ambassador Davidow, just to offer any last thoughts they might have or parting thoughts to today’s program. Ambassador?

 

Amb. Jeffrey Davidow:  Well, let me go back to what I said a little earlier. I do think that the Mexican-U.S.-Canadian relationship has tremendous benefits to this region, to the individual countries. And with good leadership, it could really change the nature of the relationship and deepen it. We’re looking for ways, which is obvious, to increase our economic strength in the light of growing opposition or growing challenges from China and elsewhere.

 

We have a made to order environment in North America. And too often both Republican and Democratic administrations have gotten tied up in the minutiae, in the little things, and have just not maintained a big focus. And I think that would be very important. I’m not sure either of the presidential candidates is going to have that at the top of their list or is capable of it. But that’s where we should be heading.

 

Harout Jack Samra:  Ana, any final thoughts?

 

Ana Rosa Quintana:  Sure. I hope that kind of moving forward, now that we’re in this post-USMCA world, that both sides and both governments and also kind of civil society leaders and also private sector leaders really don’t -- they don’t forget just how much work they had to do during the USMCA negotiation process to kind of remind people and teach folks how important that bilateral relationship is and just how much it has impacted and has benefited the United States, how much it has impacted and benefited Mexico and kind of like, from a trilateral perspective, how much its impacted and benefited Canada as well. And I think they shouldn’t lose sight of that, and they shouldn’t lose sight of the fact that this takes regular work, regular consistent work and kind of regular and consistent engagement. And it shouldn’t just be focused on just the political issues and just kind of the hot issues de jour of the day.

 

It shouldn’t just be on immigration. It’s kind of like what Ambassador said. It should be kind of big picture. We should be thinking very big. We should be modernizing our security, kind of our bilateral security cooperation. We should be thinking kind of like how can we take the relationship into kind of the next -- into kind of like the next era.

 

But that requires consistent maintenance and not taking it for granted that folks in Kansas over their dining room table are going to know exactly just how much Mexican investment goes into Kansas and then calling them -- thinking that they are not intelligent or intellectual for not knowing that. But yeah.

 

Harout Jack Samra:  Well, thank you again to those of you who dialed into today. As we reach now the end of the hour, I’d like to thank as well Ambassador Jeffrey Davidow and Ana Rosa Quintana for participating in today’s program and, of course, The Federalist Society and the International & National Security Practice Group for this platform. I look forward to speaking with everyone again in a future program. Greg, I’ll hand it back to you.

 

Greg Walsh:  Perfect. On behalf of The Federalist Society, I want to thank our speakers for the benefit of their valuable time and expertise today. We welcome listener feedback by email at [email protected]. Thank you all for joining us. We are adjourned.

 

[Music]

 

Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.