Historically economically driven agreements among groups of people have existed perhaps since the beginnings of civilization, however as our populations grew and organization became more sophisticated conforming territorial bodies such as nations the need surfaced to establish concrete policies among different States that would aim for clear and mutually beneficial. In the western world and preceded firstly by feudalism and then mercantilism which prevailed from the 17th to the beginning of the 19th Century the first concrete free trade agreement that we know of was established between France and Britain in 1860 and was called the Cobden-Chevalier Treaty, this pact detonated a series of agreements among nations all around Europe and subsequently derived in the establishment of the GATT, the General Agreement on Tariffs and Trade which was signed by 23 countries and was the first worldwide multilateral free trade agreement, the GATT was created as a response to protectionists tendencies arising from the Great Depression which had slowed international trade by over 65% the GATT remained operational from its inception in 1948 until 1995 when it was replaced by a more sophisticated international regulatory system, the World Trade Organization. Since then some important economic blocks have been formed by the use of trade agreements including the North American Free Trade Agreement which was the first of its kind involving three countries and that was made so that eventually no duties would be applied to products interchanged between them. The goal of NAFTA was to eliminate barriers to trade and investment between the U.S., Canada and Mexico. Its official launch was made the first of January of 1994 and had remained unchanged up until 2018, when in November 3Oth of that year the United States Mexico Canada Agreement USMCA (T-MEC in Spanish) was signed to replace NAFTA and in essence modifies only a few aspects, for instance, any of three countries is obliged to notify it’s members in the case of a new FTA being signed with any other country, this was a request from the USA’s negotiation team, and everything points that tis concern is more than anything in relation to either Canada or Mexico signing and FTA with a country such as China, if this where to happen, Mexico, Canada or the USA (Unlikely) would need to make this effort public three months in advance, on another note USMCA has pushed on rules of origin for the manufacturing sector, particularly for automotive where the regional origin of components (Regional Value Content- RVC-) was raised from 62.5% to 75% meaning that 75% of the total value of parts for cars will need to be supplied regionally and only 25% can come from abroad, this includes of course China. Also, at least 70% of steal and aluminum should come from USMCA, also wages for car manufacturing workers should be in the minimum of USD $16.00 for at least 40% of it’s value, failing to comply to this will lead to a 2.5% tariff imposed on that vehicle. There is also a sixteen year validity for the treaty and a six year cycle review, other than this the majority of things remain the same, with some exceptions concerning rules of origin in components for other sectors such as textile for instance, where fibers may be produced anywhere, but each component starting with the yarn used to make the garments must be formed within the free trade area – that is, by USMCA members. In reality this sums up most things that should be considered in relation to the new treaty, meaning that Mexico not only continues to offer exceptional opportunities as the Latin American Manufacturing Platform for Asian Countries, particularly from China but enhances it’s position as the Gateway to penetrate the North American and Regional Markets, don’t forget, Mexico has 12 Free Trade Agreements that reach 46 economies, it is the country with the most free trade agreements in the world, this includes: USMCA, EU, European Free Trade Area, Japan, Israel and ten countries in Latin America. This means that manufacturing in Mexico not only gives international manufacturers closeness to the market in the American Continent, but it allows preferential, low or zero duty access as well, and if Europe, Japan or Israel are potential export markets you may also reach them with preferential treatment when manufactured in Mexico.

Sector of interest