Regional Development Key to a Strong North American Trade Bloc

For many years now, a concern of mine has been that the purpose of free trade and the agreements that envelop trade between regions has not been properly explained or promoted to communities, especially at the grass roots level.  

Recently, Guillermo Malpica, trade commissioner of Mexico and now executive director at the American Chamber of Commerce in Monterrey, Mexico, paid San Antonio a visit for a series of roundtables and presentations on the United States-Mexico-Canada Agreement(USMCA). At an energy sector meeting with Malpica, San Antonio energy industry leaders investing in Mexico were expecting to get a sense of direction and clarity regarding Mexico’s energy policies.   

One roundtable participant asked “what industries are the winners and the losers” in the USMCA. When you ask questions like these, you are basically taking apart a macroeconomic tool and looking at the individual parts. Separate parts don’t work unless they are put together like a precision clock. 

These types of agreements are not meant to be dissected. Not unlike the cute little frog you dissected in school, the innards don’t look pretty. Trade agreements are macroeconomic tools that are designed to benefit economies. Yes, there were industries that were hit very hard once NAFTA came into play, but those industries were not ready.

The signals were clear when Mexico agreed to enter the General Agreement for Trade and Tariffs GATT in 1978 (today the World Trade Organization). My father, the Deputy Director General for the Foreign Trade Institute of Mexico during the 1970s, would have conferences and meetings with Mexican manufacturers, warning them to be ready to compete, up their quality, and export.

But exporting was a hassle and most did not pay attention. The empresarios were cozy with a captive market in a closed economy, producing shabby products with 400 percent profit margins, and profits were being wired to Switzerland. “Empresarios ricos, empresas pobres” (rich business people, poor businesses) was the old adage.

And then came NAFTA. Companies that were not prepared bit the dust. Those that survived became distributors of foreign goods.      

Today, the North American economy is integrated through sophisticated supply chains. This is no longer a time of selling finished goods to each other, but a time of integration. Integration in terms of technology, advanced manufacturing, supply chain, and logistics, permits North America to compete efficiently as a trade bloc with other regions of the world and to supply these regions as well.

The promotion of regional economic development is a key element in all this. South Texas and Mexico are prime examples. Many of the energy companies – like Howard Energy and Valero – that met with the trade commissioner are headquartered here in San Antonio, while their terminals and refineries are located at the port of Corpus Christi. Using a variety of transportation modes:  rail, pipeline, maritime, and truck – these terminals supply Mexico with refined fuels. 

One example is the supply of Eagle Ford Shale natural gas from Corpus Christi via pipeline to industries in Monterrey. Fueled by inexpensive and abundant South Texas natural gas, these industries manufacture goods that are ultimately shipped to world markets. This is a champion example of regional economic integration. 

Mexico continues to develop pipelines for distribution with domestic and foreign direct investment. Many of these pipelines can be interconnected with rail services by Mexico railroads such as the Kansas City Southern de México (KCSM) and Ferromex. Logistics at its finest. 

It is in our best interest to support Mexico’s current policy of developing self-sufficient oil and gas production. The Mexico market is growing exponentially and can be serviced by domestic and foreign fuel products alike. Mexico is in a blessed geographic position. It has the best of both worlds regarding energy, with fossil fuels in the gulf and a great geography for wind and solar renewable energy in the west and northwest.  

While some are concerned about Mexico’s dependence on U.S. fuels, I see this as part of an integrated trade bloc that nourishes itself. But markets can and will shift. Today, Mexico enjoys cheap and abundant South Texas natural gas, tomorrow it may not.

Liquefied Natural Gas (LNG) makes it possible to ship natural gas in a safe and manageable way to worldwide markets. LNG markets are much more lucrative than those serviced by shipping natural gas by pipeline. Mexico needs to be ready by developing the country’s own fuel production and refining. Manufacturing centers in Mexico may run into natural gas supply issues that can damage the integrated supply chain.  

These are confusing times. Protectionist policies have damaged many U.S. industries, as well as those in Canada and Mexico. Tariffs mostly hurt U.S. business and consumers. Costs get passed on to businesses and ultimately the consumer, no different than any other cost.

Ford Motor Company just announced one billion dollars in losses and massive layoffs due to tariffs and trade wars. U.S. agriculture producers are being brutally hurt by trade wars ignited by U.S. protectionist policies.

By the same token, the U.S. government announced subsidies for agricultural producers to balance things out. So how does this work? The protectionist policies cause a trade war that hurts U.S. agricultural exports and then the government offsets the losses with subsidies paid by taxpayer money? History does not lie. Mercantilism has always failed and free trade has always been encouraged during times of peace and prosperity.

How Porfirio Díaz Changed the Course of Music and Influenced the Origins of Jazz By: Luís Espinosa

Jelly Roll Morton, an American ragtime and early jazz pianist, bandleader and composer said that if you do not obtain Latin rhythms you will never have the correct tinge to obtain jazz. So is it possible that the music so characteristic of New Orleans have a Mexico influence?
Mexico composer and pianist Francisco Tellez confirms this idea through the historic fact that the now U.S. states of California, New Mexico, Texas among others were territories of Mexico up until the middle of the XIX century. Fertile ground for cross cultural activity between Afro-Americans and Mexicans. In regard to this hypothesis, academic Geraldine Céliér, wrote “the fact that we do not have any recording or evidence about Mexico jazz prior to the 1950’s permits us to speculate that this evidence is contained in the Mexico genres of boleros, mariachi, contemporary or classical, ranchera, corridos, huapangos and sones. The universe of the endemic music of Mexico shares the same libertarian ideals as jazz.

John Storm Roberts gives us the answer to this question when in 1979 he published the first edition of “The Latin Tinge” with the subtitle: The impact of Latin American music in the United States. It is here that we can find one of the most unusual episodes in the history of jazz.
In the years 1884 & 1885 New Orleans was the host to the World Industrial & Cotton Exposition. Cotton producers from around the world were invited to participate. Mexico had been invited since 1869. President Porfirio Diaz who had just begun his second term was an important sponsor of this exhibition. He sent the Eighth Cavalry Regiment band which was comprised of almost 100 musicians and directed by Encarnación Payén. The idea was to not only to show the industrial process of cotton in the Pavilion of Mexico but to also showcase the quality of Mexican musicians.

The form and style of the Mexican musicians had an important influence on the New Orleans bands as well as on their interpretation of this form and style. “El Jazz en México”, a book by Alain Derbez tells us that during their stay in New Orleans, the Mexican Cavalry Band inspired the writing of a report in the music magazine Century, published under the title of “Very Mexican Band”. Among the Mexican musicians’ scores came danzas, habaneras, military marches and three danzones. Other local publishers published the printed scores of many of these popular songs. The music of Mexico was part of the musical life of New Orleans in an early period of jazz. A period considered the birth of jazz in the United States.

Several members of that band sent by Porfirio Diaz stayed in New Orleans, among them, the saxophonist Joe Viscara, of whom the jazz drummer Papa Jack Laine said: "He almost does not speak English, but the son of bitch really can blow!" The influence of Mexican music on jazz was so profound that a magazine of the time in New Orleans, affirmed that the word "Jazz" was a degeneration of the word "Jarabe", a music genre endemic to Mexico. There were even those who ventured to assure that the Jazz was the result of the attempts of black musicians to play Mexican music.

Many of the musicians in the early stages of New Orleans jazz were of Mexican origin. Like the clarinetist Lorenzo Tío, whose father was from Tampico and was a member of the Eighth Regiment Calvary band. Lorenzo taught many clarinetists in young New Orleans jazz bands. Another was Luis Florencio Ramos, an original member of the Eighth Regiment Calvary band sent by Porfirio Diaz. And there was Alcides Nuñez, who performed for a whole season with the Original Dixieland Jass Band, a group that recorded the first jazz music album in 1920. Several Hispanic surnames stand out in jazz studies that were rooted in New Orleans.

Tom Bethel in his book “George Lewis, Jazzist from New Orleans” described Lorenzo Tío as the Mexican clarinetist who "attended the 1885 cotton exhibition and whose classical style influenced so much that he is considered as the introducer of the clarinet in jazz." Blues composer H.C. Handy tells in his autobiography, "Father of the Blues", that in early times it was Mexicans and Europeans who played clarinets in black bands. Lorenzo Tío Jr. (son) was known to be the teacher of the clarinetist Sidney Bechet.

Saxophonist Richard “Dickie” Landry performed in Mexico in March 1983. During the performance he talked about the Mexican band at the Cotton fair. He said that for his first concert in Mexico he was inspired by the success of the World Cotton Fair in New Orleans. He described the performance of the Mexican band as a parade that flooded music to the city, "it was the first time that the New Orleans jazz players heard the clarinet sound ... the Tío Brothers remained in New Orleans after the exhibition to teach the American musicians how to integrate these instruments (clarinet) into their bands and music."

The New Orleans Industrial and Cotton World Exposition was the event not only where Mexico contributed to the birth of jazz but also contributed in the inclusion of brass instruments in this genre.
Bibliography:

Alain Derbez, El Jazz en México: datos para una historia (México: Fondo de Cultura económica, 2001)
Aurelio Tello, La Música en México: panorama del siglo XX (México: Fondo de Cultura Económica, 2010)
John Storm Roberts, The Latin Tinge: The Impact of Latin American Music on the United States (New York: Oxford University, 1999), 36.

BUY USA... overseas

Sean Spicer has Athlete's tongue.

Trade deficits cannot be washed away with with a "border tax." this is an absolutely ridiculous notion. In the case of the United States the deficit is due more to the value of the dollar and oil prices.
Watch the trde deficit retract as oil prices g up and fossil fuels export volumes rise.

With this said, the U.S. should aggressively pursue the export of its energy products. And I mean aggressively. Which I am certain and confident will happen. In addition, the U.S. should continue to EXPAND the marketing of it products overseas. The Obama administration had a very successful campaign in this regard that should be expanded. I had a personal involvement in this with the DOC.

Instead of expanding the military, take some of the budget allocation for this and put those funds into U.S. goods & services promotion overseas. Expand the Foreign Commercial Service (FCS) and Foreign Agricultural Service (FAS). These services are part of the Department of Commerce and Dept. of Agriculture located at the embassies overseas.

Marketing and promoting the country's goods and services overseas is a great a thing. And fun to do!. Regretfully, under the the current environment this may be very hard to do. We are globally closing the doors on ourselves. #####

Free Trade. It matters. by Jorge Canavati

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Today, the United States has a record in manufacturing and exporting. International trade being a primary cause for this growth. Trade is a fundamental creator and supporter of jobs. It is not possible to manufacture and export if you do not import. Parts, raw material, technology, services; whatever component necessary to manufacture. Trade. Pure and simple. The act of moving one ocean container of imported goods at a U.S. seaport supports three jobs. 2013 numbers show that U.S. export alone supported close to 11.5 million jobs. Trade with Mexico supports almost half of this number! “Made in USA” jobs really matter. During that year, the U.S exported to over 230 countries. Though more than a third of that was to Canada and Mexico. Think about that. North America supplies itself. An exemplary trade bloc.

NAFTA is not about the U.S. selling a television set to Mexico or Mexico selling an automobile to the United States. The complete and absolute supply chain and market are symbiotic. One cannot exist without the other. Any interruption at all will cause economic damage and fierce job loss, especially in the United States.   

It is very easy and popular to point fingers at other countries when there is a shift in manufacturing jobs. Don’t blame other countries. Blame the R2D2’s and C3PO’s. Take General Motors, for example. GM is cranking out more automobiles than ever before with less workers. What is going on? More with less. This means technology and automation are the culprits for jobs fading away. Yes, manufacturing has come back from the far east, (the famous “re-shoring” term), but to highly automated manufacturing. Steel once made in China is now being made here again at very sophisticated high tech the mini-mills using scrap. By 2020 the United States will be the most competitive country in the world as is relates to manufacturing and mostly with high tech automation. The economics are better than re-training a person. And on a positive note, confidence in the U.S. economy has caused healthy foreign direct investment. The job creation caused by this in combination with other things has offset whatever jobs migrated out of the U.S.

We also like to use the term “cheap labor” when we refer to Mexico or other countries. This needs to be put into perspective. Cheap labor has a sweat shop connotation to it. Mexico, for example has very strict labor laws. And costs are more in tune to economies of scale thank “cheap labor.” Ironically, as the peso slides due to the pessimism in the market triggered by the grim rhetorical climate on trade, it makes manufacturing there more cost effective.

I am a big supporter of Bi national Shared Production. A plant in Mexico or the U.S. has an intrinsic supply chain value creating bi national jobs and growth. Let’s take Toyota Motor Manufacturing of Texas (TMMTX) for example. This plant located in San Antonio assembles Tundra trucks. The supplier of chassis is in Monterrey Mexico, the chassis are brought up on rail to the plant located in San Antonio, Texas. This must be an efficient rail service for such critical components to make it on time. Air cargo services have been developed for automotive parts. The tier suppliers on the TMMTX campus and their suppliers not only supply the San Antonio plant but supply automotive plants in Mexico. Parts manufactured in Mexico supply the Toyota plant in San Antonio as well. Partially assembled components cross the border multiple times. This is not endemic to San Antonio. Other plants in Mexico and the U.S. are all interconnected to include other areas of the world as well. Manufacturing, trade and job creation are integrated in North America. Symbiotic supply chains.....

And I have yet to touch upon the most important player in all of this: the U.S. consumer. Competitive prices at retailers are due to trade. Ask Wal Mart. By the way, Wal Mart is not a retailer but a very sophisticated, well lubricated logistics machine. Therefore, your automobile costs you thirty thousand dollars and not eighty thousand dollars. Threatening manufacturers that may migrate a plant to another country with heavy tariffs only raises the cost to the consumer. The recent Ford decision to move some manufacturing to their Mexico plants was a decision based on the need for re-tooling one plant in the U.S. for a newer model. Manufacturers that have plants throughout the world have a grander vision of how things should work. It is not one against the other. Things are one. This is globalization. These organizations see what is beneficial between regions. Protectionism can make all this come to a screeching halt. Protectionism is a strong basis for abysmal recessions in economies. And South Texas should be worried.

Let’s take Corpus Christi for example. In recent years, this Texas city has been a success story in attracting domestic and foreign direct investment. Over 40 billion dollars have been invested here recent years. Manufacturing and energy company from all over the world have invested here for various more many reasons: 1) a friendly business environment, 2) labor availability 3) cheap gas, 4) excellent logistics and 5) a closeness to Mexico a major trading partner. Corpus Christi is becoming a primary supplier of natural gas to Mexico and primarily to Monterrey, a top industrial center in the country and a key component to north American business. Gross shifts in trade policy can and will affect manufacturing which in turn will affect the supply of fuels to places like Monterrey. Not to mention the effect on jobs created by this foreign direct investment.

Other advancements in bi national trade will certainly be damaged. Let’s take for example, the U.S. Customs-Mexico Aduana recent protocols. Though both countries have shared cooperative protocols in the past, such as bi-national agricultural export inspections. The most recent agreements regarding customs has special significance. For the first time in history Mexico customs is on U.S. soil clearing automotive parts at the Laredo International Airport bound for Mexico. Thought this operation is small it has teeth. First, it is air cargo which basically guarantees non-tampering security in pre-cleared goods. The good arrive to Mexico already Mexico customs cleared. This project is a prototype and by no means is it endemic to Laredo. In the foreseeable future, this project may very well be done on inter modal transportation from other parts in the U.S. such as Chicago. In other words, Mexico customs will clear goods from the manufacturing or distribution source in a secure location in Chicago, then the cargoes will be securely transported to destination within Mexico already customs cleared. And by the same token, U.S. Customs is now in Chihuahua clearing cargoes bound for the U.S. and for the first in history though under very strict conditions and protocols, the U.S. agents are armed. Mexico adjusted laws for this to happen. Until recently this was unheard of. Great examples of bi national cooperation in trade. This could all vaporize under a protectionist umbrella.

It is also very naïve and foolish to believe that other countries will be willing to buy U.S. goods without reciprocal arrangements. The rhetoric today is very confusing to people. We hear how the incoming government will support U.S. agriculture. And at the same time, we hear of the abandonment of the trans Pacific Partnership which is a huge booster to U.S. agriculture. By the way, agriculture in the U.S. is suffering due to a lack of U.S. workers willing to do the jobs. U.S. farmers are obliged to bring in workers from Mexico and other places on temporary HIB-A work visas to get the fruits and vegetables to your table. Go figure.    

A renowned air conditioning company has their plant in Monterrey with the distribution center in San Antonio. This not only helps consumers keep their homes cooled here at competitive

prices but it has more than supported various U.S. trucking companies in business in transporting the units to the U.S. market the drivers are thankful for the work and jobs. I attend the San Antonio Transportation Association monthly luncheons as much as I can. And without fail, the trucking companies attending are always looking for drivers. There is a lack of drivers in the United States. And as manufacturing and trade grows so will the need for these jobs. These are good paying, honorable jobs. So, if a manufacturing plant migrates, re-training is in order. As well as reassignments. Jobs abound in the United States. Ed Rendell, the former governor of Pennsylvania has a precise view on this. But to be honest, the part of society involved in open and free trade which is a minority, has done a very poor job in educating and sharing information with John and Jane Q. Public. Me included. We have behaved like elitists. We have done too little too late in promoting and marketing trade in a way that is acceptable to society. And this is when populism rattles its sabre.

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Sources:

·        “Why Robots, Not Trade, Are Behind So Many Job Losses”, Paul Wiseman AP Nov 4, 2016

·        “The Role of Exports in the U.S. Economy” An economic report of the U.S Department of Commerce May 2014

·        U.S. Trade Representative website.

Jorge Canavati is the principal at J. Canavati & Co. LLC. An international consulting, agency and commercial representation firm. He lives in San Antonio, Texas

Mr. Canavati has over 30 years of experience in International Trade, multimodal transportation, air cargo and logistics. He is the author of various articles and editorials on Mexico and world trade and transportation issues.

Mr. Canavati is on the board of various international trade organizations and is the official U.S. representative of the National Importers and Exporters Association of Mexico (ANIERM). He serves on the Border Trade Advisory Committee (Texas Transportation Commission) appointed by Texas Secretary of State Hope Andrade and re-appointed by Secretary John Steen. He serves on the Camino Real District Export Council, appointed by the U.S. Secretary of Commerce. He was recently appointed to the board of the San Antonio-Mexico friendship council and nominated to the San Antonio Business Journal Who’s Who list in Energy Logistics.

He lectures at various universities and participates on various high level panels per year at international trade events. He has been married for 33 years to Daisy Miriam and has two children, Jorge Mauricio 30 and Gabriela Sofía 28 and a gorgeous granddaughter Penelope Michelle of 9 months.

STAY IN YOUR OFFICE

http://www.mysanantonio.com/http://www.mysanantonio.com/opinion/editorials/article/Reining-in-Bexar-s-world-travelers-5186827.php opinion/editorials/article/Reining-in-Bexar-s-world-travelers-5186827.php

A witch hunt. Results for International business development travel take an incredible amount of time and effort, especially for public entities such as Bexar County. Most of the time it takes years for a project to develop, Years, literally. Especially if you have various other cities or counties as potential competitors plus no one knows you. It is next to impossible to have any immediate "expected outcome" from these trips. If you dont put your wares in front of the custom...er someone else will. The author cites Travis and Harris counties as not being able to recall an international trip. Dduuhh. These counties are magnets for foreign direct investment, industries and trade. They don't need to lift one finger. They are NOT the underdog. San Antonio is. And guess what? Most of the world has no clue where San Antonio geographically! When I go to China, I have a map in my breast pocket to which I point to everytime. Never fails. The only reference to San Antonio are the Spurs. Great. But no business.
The budget should double for this type travel, especially since the county has done an outstanding job in the automotive sector. The automotive sector in our region is skyrocketing and we need to be much more aggressive in being involved. But what do we do? We do the little crab dance and move backwards. But who gives a damn? We have the River walk.

REAL ESTATE MUSIC BLUES

http://www.expressnews.com/news/local/article/San-Antonio-s-new-music-scene-5155749.php

I hate it when venues close...

This is a big issue. These venues loose their leases and big developers come in with huge project or landlords jack up the rates to the stratosphere. This is also a big issue in restaurants. Just four days ago, a great authentic Mexican eatery in Stone Oak, CIELITO LINDO (loved their Caldo Tlapeño with three extra chipotles) was forced to close because the landlord jacked up their rates. The owners were not about to work for the landlord. And r...ight in the same retail center there is a new outstanding place called VIDA MIA. It took the owners awhile to get the place over the top and now they are sweating bullets.

Back to the music venues: same stuff happens in Mexico City. An iconic jazz club and bistro THE BLUE MONK by the Pemex Tower just shuttered their doors because the real estate owners wanted the property back for new development (This re-developed area will be known as POLANCO II). I understand business and profit, but there needs to be a middle ground somewhere...money is crushing culture.

FAST TRAIN TO MAYBE

Check this out.


http://www.mysanantonio.com/news/us-world/border-mexico/article/Fast-train-to-Monterrey-on-the-horizon-5150132.php

Is the investment worth it? and it not about pre-clearing U.S. Customs anymore, It about Homeland Security Federal Inspections Services as a whole. and WHO will pay for that. The feds usually will say "GREAT," here's ouir monthly bill for our services. With a project like this, this can easily run into the millions per month. And WHO will pay for the construction of the pre-clearance center? Will the Mexico government invest in a pre-cealrnce center in SA. This is a two way street (pardon the pun).