LiveAtState: U.S.-Mexico Economic Relationship

Jose W. Fernandez
Assistant Secretary, Bureau of Economic and Business Affairs
Washington, DC
January 31, 2013

This transcript is also available in Spanish.

This video is also available with  closed captioning in English and Spanish on YouTube.

PETER VELASCO: Welcome to Live State, an interactive Internet and video format of the Department of State, one of its platforms for dialog with international media. Welcome journalists and other guests who are meeting us here today. And today, I'm in the studio with Assistant Secretary of State, Mr. Jose Fernandez. Welcome.

JOSE FERNANDEZ: Hello, a pleasure.

PETER VELASCO: Mr. Fernandez will be answering your questions about his recent visit to Mexico where he strengthened bilateral relations with the United States and Mexico. I am not sure if you want to share some questions -- some words with our participants.

JOSE FERNANDEZ: Well thank you very much, thank you Peter, and thank you all who are listening. Good to be here, and as Peter said, last week I was with three other colleagues who were also Assistant Secretaries. One from the Commerce Department, the other one from the Treasury Department, who is also our Minister of Finance, and then our Assistant Secretary from the Transportation Department. And the four of us went to Mexico together to try to answer the call of President Peña Nieto; when he was in the United States on other occasions, and he was in the newspapers here in the U.S. too, and spoke of increasing the economic relationship with the United States and putting it on par with the level we have in the area of security and other issues. Then we went and met with several officials of the new government of President Peña Nieto to talk about how we can make the vision of the Mexican president a reality. We had two days of meetings; we came back with great optimism and with much interest in trying to promote specific projects in Mexico to strengthen our economic relations. They are economic relations -- and I hope we have some questions on this. They are economic relations which themselves are already very strong. We have 500 billion dollars in trade, whether in goods or services with Mexico every year. Our trade has quadrupled since the signing of NAFTA. Every day, more than one billion dollars go from one side of the border to the other. So, trade relations are very, very tight, but it's also important to find a way to continue increasing them, further improving them. And that was the purpose of the trip; we returned as I said, looking forward, with many projects, and now we are actually making those talks a reality.

PETER VELASCO: And let me remind you that you should send your questions at the bottom of the window, where it says "questions to the Department of State official." If at any time during the talk you have trouble writing your questions, please send us an email through and we shall place your questions on the list. We will try to answer as many questions as possible in these thirty minutes, and we remind you that if you want to have the latest news of the Department of State, you can follow us via Twitter at @StateDept, and also @USAenEspañol.

Let's start with our first question, from Gabriela Chavez of El Financiero: What place does Mexico have in the U.S. trade agenda?

JOSE FERNANDEZ: In our trade agenda, Mexico is at the core. I say that because the statistics show it. First, Mexico is our second largest export market for the United States. It's our third largest source of imports. As I said before, we have $500 billion a year moving from one side to the other, of our international trade. Every day we have more than one billion dollars in trade that goes from one place and crosses the border. Yet, something very important in my opinion, which is almost unique in our trade relations with Mexico, is that we not only buy and sell among us, but also we manufacture products together. It's not just a buy-sell relationship, but a partnership relationship, an association, and that's a term that is widely used in commercial relations, in diplomatic relations, but in this case is true. I say this because 40% of what the United States imports from Mexico has been manufactured in the United States, or a product that began in the United States, went to Mexico, it was incorporated into a Mexican product and returned to be sold here. And the same goes for what we are selling to Mexico; a lot of what we sell to Mexico, part of that has been manufactured in Mexico. It came from Mexico to here and was re-exported. So that's a unique relationship; it's something that very few countries have and is something we should look for ways to further develop... this association we have; because it's the type of association, and it's something that President Peña Nieto understands very well and has spoken about. It's the type of association that will allow us to compete in global markets against very important competing countries.

PETER VELASCO: Okay, we continue with the topic of trade between the U.S. and Mexico. The next question comes from Martin from Diario de Juarez: There are some sectors such as transport where the measures established by NAFTA have not been implemented, i.e., there is no opening from either government. Is it worth to overhaul the Free Trade Agreement based on these conflicts?

JOSE FERNANDEZ: Let's start over, because as I said before NAFTA has been a success. And again, the figures show it, one billion dollars daily from one side of the border to the other. And also what I said earlier, what we are doing, we are pervading much more. But NAFTA has allowed us to solve problems. And this is very important, problems that previously might have required many years of diplomacy, now they allow us... There is a forum; I think there is a forum to address these small disputes. In the field of transport, in the field of trucks, for example, we have a pilot project in which we are trying to find ways to allow, experimenting to see how you can allow trucks from Mexico to transport goods into the United States. It's a project that has taken over a year, led by the Department of Transportation where we have helped. And it's a project born from NAFTA. But speaking of renegotiation, a question I was asked in Mexico, which surprised me somewhat, is whether we will renegotiate NAFTA through the TPP, the Transpacific Partnership. The answer is no, the answer is that the TPP, the Transpacific Partnership is an agreement with eleven countries; it's an agreement with countries representing more than a third of the world's trade, and an agreement that will increase our trade to a much higher standard. So it's not about renegotiating NAFTA, it is about trying to incorporate our economic relations to a much higher level and also incorporate nine other countries, including Canada.

PETER VELASCO: Maybe you already answered this question, which comes from Isabel from CNN, asking if we can talk a little about the importance of the TPP; is it relevant to activating the global economy and avoiding protectionism?

JOSE FERNANDEZ: The TPP is the largest international commercial project this year. It's what President Obama has ordered. It's an agreement that we would like to finish it this year; we hope to finish it this year, and is a project that, as I said, includes eleven countries, many of them in Latin America, not just Mexico and Canada, but also Peru and Chile. So what we will do is to create an agreement that will allow goods to go from one country to another, and also with very high standards related to issues, for example, labor issues so as not to compete based on who would pay less to workers, rather that we can all benefit from free trade including the labor sector, including also the industrial sector. It's a project that we want to finish this year; it's a project that we think, that if we can complete, will change and improve our trade relations in the Pacific in a very important way.

PETER VELASCO: Luis Duran of EL Mural Mexico asks us, asks you: What is your opinion on the Mexican economy?

JOSE FERNANDEZ: I've been working with Mexico for almost thirty years. I started... this is my first job with the government, before that I was a corporate lawyer in New York, and I'm more fascinated by how the Mexican economy has changed. Not only due to oil, but also by what has been done at the border, by what has been accomplished with the trade in the United States. Today, it's an amazing rapport, at least when you go to the border. Then we see how Mexico has joined as a partner with the United States; we also see how the last two or three years were difficult in the Mexican economy. And we have seen how it has been possible to improve Mexico's commercial growth in the last year; it has been one of the highest in Latin America. That is something that gives us a lot of optimism; we admire greatly what Mexicans have done, reviving their economy, and we think that together we can do more. So we think that Mexico is a country that has a very important market and is also a country that imports a lot, which has become a regional economic power.

PETER VELASCO: And Alejandra asks if there has been a line of U.S. involvement or a binational initiative on energy.

JOSE FERNANDEZ: Well, we signed last year, in fact, at the beginning of last year, we signed a very important agreement to explore oil in the Gulf of Mexico. It was signed February. The Mexican Congress approved it, our Congress still has to approve it, and this a good example of how we can do things together. And that's an issue we will continue to look for ways to accomplish here in the U.S. We also have several projects in the field of renewable energy, and this is something that we actually discussed with some of our colleagues in Mexico on our last visit. How can we find ways to cooperate to create more renewable energy sources in a world that is increasingly hotter, right?

PETER VELASCO: Oscar Delgado from La Jornada Aguas Calientes changes the subject a bit. He asks, the immigration reform, specifically the issue that President Obama and the Senate seek to promote on strengthening border security; will it affect the economic relationship between the two countries, or represent a barrier to exports from Mexico to the United States?

JOSE FERNANDEZ: No, what President Obama has said, and also what is being discussed today in our Congress, is that he supports a comprehensive law that is general and includes not only the protection of our borders but also incorporates many conditions, the incorporation of many of these illegal immigrants into the formal sector. This is a topic that will strengthen and will pervade our relationship a lot of more. This is a topic... when you go to the border -- and sometimes it is difficult to tell where the U.S. border ends and where the Mexican border begins -- and that is a rapport, it is something that will continue being pursued by immigration reform; finding ways to recognize what and that reality is, and it's also very important because it strengthens our borders, provides for employers, to have to be forced to check the permits of those they employ. And it's a very comprehensive relationship that is still being debated between various political sectors in this country. But after all, the regularization of the immigration issue has to help trade relations between Mexico and the United States.

PETER VELASCO: Gabriela Chavez of El Financiero, is asking us, what about tariffs on Mexican tomatoes?

JOSE FERNANDEZ: This is a topic of great importance for both countries and is an issue that our trade department deals with. It's not an issue that we here, at the Department of State are leading or are following closely, and is a process established by U.S. law. What the Department of Commerce has done now is to request comments, it is requesting that anyone who has any opinion on this, to communicate it to the Department of Commerce. It is indeed a subject they are reviewing at this time and an issue between the government of Mexico and us; we are keeping in contact on this.

PETER VELASCO: And now, Eduardo Camacho of El Universal, asks, how much have the lack of structural reforms and insecurity in Mexico limited further investment in Mexico?

JOSE FERNANDEZ: Well, first Mexico continues to get a lot of foreign investment. U.S. investment in Mexico exceeds 90,000 million and is rising. Mexico continues to be for many companies, a country where you want to invest; where you see beyond the possibility for them export products, but also because it has a very an important domestic market. However, every country, every investor, and this I can say it based on my private sector experience, every investor when thinking about going to a country, investing in a country, the first thing he does is to look at foreign investment regulations, look how the judiciary systems works in a country, looks into the security aspects, and naturally it's an issue that he must weigh, but again, Mexico remains a place that receives and will continue to receive much investment from the U.S. in coming years.

PETER VELASCO: Santiago asks, can you comment on plans to allocate more resources and technology for border development, to facilitate the flow of trade between the two countries?

JOSE FERNANDEZ: It's a great question and a topic that we discuss a lot with various ministries in Mexico. There is lot to do; we can do a lot together in the fields of transport, logistics in the field of security, to streamline our trade. There has been talk of a 21st century border initiative. We have today a council from both countries for cooperation on regulatory issues, what we can do to try to facilitate trade between our borders. What can we do so that our regulations, regulations on cars, on pharmaceuticals, on many products, can be incorporated so you do not have to get a permit again in Mexico for a North American product that we know meets global regulations and Mexican regulations. This type of comparison is something that has been discussed a lot, especially in the field of transport, where there is much to be done because you can still improve traffic between our borders.

PETER VELASCO: Ivette Saldaña of El Financiero asks: What further action will be taken within the 21st century border program? There was a proposal to perform border customs from Mexico, from the place of departure and to remove the customs restrictions at the borders. Is this action still ongoing?

JOSE FERNANDEZ: It's part of what we need to discuss; it's part of what we have to streamline about our transportation. What can we do to limit the bottleneck at the border, so that traffic of legitimate goods can be expedited, and at the same time ensuring that security issues are not ignored, because it is also a border that both countries want to keep secure. So it's a topic that we are looking into, an issue where we can do a lot together. We speak, for example, about roads that the Mexican government wants to improve; how American companies could integrate the technology we have in this country to streamline transport. How could we cooperate to enforce a goal for both countries? Find a way so our borders are made easier to get from one place to another.

PETER VELASCO: Martin Coronado from Diario de Juarez asks: alerts or "travel warnings" for travel to Mexico have prohibited military and officials from traveling to Mexico, business people, such as cosmetics companies, do not travel because the insurance companies prohibit them. What should Mexican authorities do to convince the U.S. government to eliminate these "travel warnings"?

JOSE FERNANDEZ: I think we have to make it clear, that travel warnings do not reflect our relationship with a country. What we do with these warnings is give information to our citizens about the dangers that they might face in a country. It's a commitment that we have, like any other country, towards the safety of their citizens. And it's something we are continually reviewing because we want to give the right information to our citizens. But it's important to be clear that this does not reflect what we think about a country, it just gives information about traveling to a country. I personally have gone to Mexico all my life. And there have been travel warnings. And it's something that, well, one looks at, and what every citizen takes into account when going to a country. But it does not reflect what we think about a country with which we have such good and close relationship such as Mexico. And the truth is that every time I go, I am impressed with the warmth I receive.

PETER VELASCO: And following on that subject a little, for Mexican tourists looking at the United States as a travel destination, economically speaking, based on this ... Oscar Delgado wants to know if there will be greater flexibility for people looking to get a visa to travel to the United States.

JOSE FERNANDEZ: We have increased, I think by two million the number of visas that we issued last year in Mexico, so that people could visit our country. President Obama, last year in Orlando, Florida spoke of a new initiative to boost tourism to the United States. Tourism to the United States reflects over 10% of our GDP. It's a major source of employment, and it goes beyond the jobs; it creates links, creates relationships between people and that is something that I, who travels to many parts of the world, I realize that people who have been in the United States think better of the United States. People who know us, who have been in our national parks, who have been in our cities feel much more affinity to America, our values, what we think. So it's a strategic initiative that has commercial roots, but also social and human roots to try to boost our tourism and Mexico is part of that. The fact that last year, we granted two million visas to Mexican citizens to come to this country, something we had not done in previous years, reflects the importance we attach to tourism from Mexico and other countries.

PETER VELASCO: Changing the subject a little, Isabel from CNN asks, who will the U.S. support to head the WTO?

JOSE FERNANDEZ: The best candidate right now, I think there are seven or eight candidates. Many have come to see us here in Washington, and they are doing the rounds for several countries, but right now we do not have, and I say this in a very transparent manner, we do not have an opinion on who is the best. There is a period, as you know, a couple of months in which the prospective candidates go to many countries, speak of the mission they have for the WTO and what they want to do, and ask for support. We are in the middle of that, as I said, we have received I think three or four candidates. We have not seen them all, and inside our government, our agency has not arrived at any conclusion.

PETER VELASCO: And Monica Delgado of Notimex is asking us, what are the expectations of bilateral trade in the new administration of President Obama and when talking about immigration reform?

JOSE FERNANDEZ: We already spoke about the immigration part, and so with regard to trade, two years ago in 2009 if I remember, excuse me, 2010, President Obama launched the National Export Initiative which deals with, or orders asks all in the U.S. government to double U.S. exports in the next five years, i.e., from 2010 to 2015 by doing so will create two million additional jobs in this country. We have done very well in the first two and half years. I don't have the latest figures but we continue to meet the goals in order to reach that double goal, and we do it for a couple of reasons: first, because in the U.S., only one percent of our companies export, if we double them, we go from 1% to 2 %; it is important and should not be too difficult. And if we can do it, and this is the second reason, we will create the kind of jobs we want to create, because export jobs are better paid than regular jobs in non-exported products, so we want... we have placed great emphasis on exports in the United States, and we will continue doing so.

PETER VELASCO: Silvia from the Reforma newspaper asks, how to address the issue of money laundering? We know that U.S. banks are involved and what measures are being taken on that?

JOSE FERNANDEZ: Well, there are many measures. We have several international agreements, we have great cooperation with many countries and it is an issue that our Department of Justice continues to pursue. Money laundering is a cancer that allows crime. Then, whether from arms trafficking, drug trafficking, it is important that we cut off that source of illicit funds. So, in fact, we have worked hard with Mexico in that topic.

PETER VELASCO: Victor Palacios from Tele Azteca says, what do you think about United States failing to comply with some of the NAFTA terms such as the heavy cargo transport, and what guarantees are there for this breach not to reoccur?

JOSE FERNANDEZ: Well, NAFTA has been a success. Not all agreements... We would not have diplomatic jobs if all treaties were met one hundred percent. So, there are always differences, there are always issues where the sharp edges need to be removed. But it has been complied with for the most part, and it has not just been complied with, it has been successful. NAFTA has methods for resolving disputes. But again, if we look at what has been done in the field of trucks, truck transportation, it's something where the two countries agreed to develop a project, to develop a way to resolve an issue that for many years was not resolved between the countries. So I believe what we have done is the guarantees. If you look at what both countries have done to comply with NAFTA, and what has been done so that a country complies when there is a violation of that agreement, I think that's the best guarantee we can have.

PETER VELASCO: Alejandra Mendoza asks regarding the energy projects you mentioned just now, what are they and how will they be implemented, and will that happen this year?

JOSE FERNANDEZ: Well, we have several projects. We are working in Mexico in renewable wind energy projects, to create a bilateral renewable energy market. We also have a program called the Unconventional Gas Technical Engagement Program, which is a very formal way of saying a program to find technical solutions for our gas needs. We also have an agreement signed recently, called the Energy and Climate Partnership of the Americas, which also shares the experience and expertise we have in the fields of renewable energy. We also have an energy coalition, what we call clean energy in which we have invested nearly $70 million, and we have many programs, because there is much to do in the field of renewable energy, and what we want to do it after this meeting we had in Mexico, is to find ways to activate and foster these projects further.

PETER VELASCO: Well, the last question comes from Christian Lopez, who is asking us, will there be any program or strategy to support “PYMES” within the actions?

JOSE FERNANDEZ: Very good question, and I am happy that this is the last question, because it's an issue that is worth noting. On our trip to Mexico, we met with the institute created by President Peña Nieto, a new institute called the Institute for Entrepreneurship, which seeks ways to encourage the creation of small and medium enterprises in Mexico. In the U.S., SMEs are a major source of jobs, new jobs, in the last five years. In Mexico, there are many small and medium enterprises that also want to grow, find a way to formalize, funding, and receive skills to grow. We here at the Department of State have established several programs to promote what is called Entrepreneurship. And we have done it... I have personally worked hard in Northern Africa; we have done it in Turkey, we have worked in many countries worldwide. And probably one of the projects that I in my opinion we can begin to work more quickly with Mexico, is to find ways to collaborate in the development of SMEs and entrepreneurship. There are many young people, and I met with a group of young people in Mexico City during my trip, who are interested in creating new businesses, who want to have access to technology that allows them to create new companies. And that's something we can do, and we do already. It's a subject on which we will not have to spend much time working on, because in the U.S., in our government, we have collaborated with many other countries. And this is about finding a way to use what we have done in other places to help small and medium enterprises in Mexico to do so. This is what every government wants to do; to create jobs and create wealth for its citizens to live better.

PETER VELASCO: Well, that's all the time we have today. Thank you for your questions, and thank you very much Mr. Fernandez for being with us today. We will have a link to the audio and video chat today for use shortly after the end of this program. I remind you that if you want the latest information on the Department of State, you can follow us via Twitter @statedept, and also @usaenespañol. If you want to follow our economic affairs, you can also follow us via Twitter at @econengage or on Facebook at We expect to be able to chat again with you in the future and wish you a happy day. Thank you very much.