By: Octavio de la Torre
President of Concanaco Servytur
As president of Concanaco Servytur, I have witnessed the positive impact that free trade has had on our country’s economy and on the lives of millions of Mexicans. Since I assumed this position, I have considered our trade relationship with the United States and Canada to represent more than an exchange of goods: it is a demonstration of how collaboration between nations can build a shared future. That’s why the recent announcement of a possible 25% tariff on products from Mexico and Canada, starting on January 20, 2025, made by the president-elect of the United States, is a reason for concern, but also for action, through trilateral dialogue and the strengthening of the commercial relationship between countries, economic stability and the continuity of the fundamental principles of the Treaty between Mexico, the United States and Canada (T-MEC).
Free trade has been a determining factor in the economic development of North America. Since the entry into force of the T-MEC in 2020, Mexico, the United States and Canada have reinforced their economic integration, achieving tangible benefits for businesses and consumers.
Tariff Implications
The tariff measure, in the case of being implemented, could lead to commercial disputes that would affect the global competitiveness of the region, generate economic crises and instability in the commercial markets of other regions. Creating a situation in which this agreement is infringed by unilateral measures is not only alarming, but also a call to protect what we have built together. We can’t forget that in 2018, when we faced steel and aluminum tariffs, the response was an escalation of retaliation that harmed both sides. Our country slapped tariffs on U.S. products, including steel, aluminum, agricultural products and other goods, at rates ranging from 7 percent to 25 percent. Repeating that cycle would be a mistake we must avoid.
Faced with this scenario, I am convinced that the key is dialogue. From Concanaco Servytur, we call on the governments of Mexico and Canada to work closely with the private sectors of their respective countries and to establish working groups with the government of the United States, where the openness to an open and constructive dialogue prevails in order to address the demands and conditions related to current issues and correspondence between the three countries, finding viable solutions that respect existing agreements. Work should be carried out through constructive dialogue and cooperation and prioritize the economic wellbeing of the region.
The North American Free Trade Agreement
The North American Free Trade Agreement and its renovation as T-MEC aim not only to stimulate trade, but also to promote substantial improvements in the living conditions of the population of the signatory countries. These principles must prevail as a central axis in any future action.
We will also meet with the corresponding government authorities, such as the Ministry of Economy and the Ministry of Foreign Affairs, to propose strategies, objectives and lines of action, and to form a solid and united front as a country.
We have the experience, the relationships with commercial actors in Canada and the United States and, above all, the responsibility to obtain the best economic conditions for the 4.8 millions of entrepreneurs we represent in Mexico.
Concanaco Servytur´s Role
At Concanaco Servytur, we represent more than 4.8 million businessmen who contribute 66% of the national Gross Domestic Product and generate 37 million formal jobs, which means 7 out of 10 of them; we register 63.7% of the ISR tax income and 77.8% of the IVA tax collection. We are committed to strengthen trade relations and are willing to collaborate with federal authorities to design strategies that protect Mexico’s interests.
Although my priority is to preserve the T-MEC and avoid measures that would fracture our trade relationship, we cannot rule out other scenarios. If the treaty were to come to an end, our relations would be governed by the rules of the World Trade Organization (WTO) and the principle of most-favored-nation (MFN) treatment, which would imply higher costs and less flexibility. However, as a country we have shown that we know how to adapt, and I am sure that, with strategy and vision, we will always come out ahead.
This principle, which guides our global trade system, obliges WTO members to grant all nations non-discriminatory trade conditions, which implies the same tariff treatment offered to the most favored partner.
In this regard, WTO Chairman Ngozi Okonjo-Iweala has repeatedly pointed out that compliance with these rules is essential to maintain a balanced and functional international trading system.
However, for the members of the T-MEC, a return to these provisions could imply higher costs and complexities for the productive sectors, and also tables for dialogue and implementation of new trade agreements or the adaptation of existing ones.
Let us remember that free trade, through treaties such as the T-MEC, and economic stability, are indispensable tools to be competitive with other commercial blocs and for the growth and development of the three countries, which has repercussions on solid public policies in this area, and on programs and actions that benefit their populations, such as shared prosperity.
For more political, business and cultural information visit all of our Mundo Ejecutivo platforms.
