A MONTHLY NEWSLETTER ON NAFTA AND RELATED ISSUES

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1 August 2007 * Volume 12, Issue 08 NAFTA Works A MONTHLY NEWSLETTER ON NAFTA AND RELATED ISSUES INSIDE THIS ISSUE 1 Security and Prosperity Partnership 1 Trade Highlights 2 Summary of the 2007 NAFTA Commission Meeting 2 Diario Oficial 3 Related Events 4 Profile of Nuevo Leon 5 Profile of Alabama 6 Success Stories 6 Selected Readings 6 Mexico Economic SECURITY AND PROSPERITY PARTNERSHIP (SPP): BENEFICIAL FOR NORTH AMERICA The SPP is a cooperation scheme between Mexico, the US and Canada launched in 2005, to advance on common objectives to enhance the prosperity, the security and the quality of life of the three countries. At the latest Ministerial meeting in Montebello, Canada, August 20 and 21, they agreed to focus the SPP agenda in the following year on advancing regulatory cooperation, ensure the protection of intellectual property rights, border facilitation for legitimate trade and people, and assessment and implementation of the North American Competitiveness Council (NACC) recommendations. A North American Regulatory Cooperation Framework will lower transaction costs for businesses, producers, and consumers by streamlining regulations and regulatory processes and by encouraging compatibility of regulations to eliminate redundant testing and certification requirements. The Intellectual Property (IP) Action Strategy will combat counterfeiting and piracy by enhancing detection and deterrence, expanding public awareness and outreach efforts, and developing measurements to assess progress toward IP enforcement. This Strategy identifies best civil, criminal and administrative enforcement measures; shares information and intelligence regarding piracy and counterfeiting; facilitates communication and information exchange on border enforcement techniques, and collaborates on public awareness campaigns. Mexico and the United States established a bilateral Border Facilitation Working Group to address border congestion, current and future infrastructure needs, customs cooperation and expansion of voluntary programs such as SENTRI and FAST, stakeholder outreach and technology. The two governments will start working in four key points of entry: Nuevo Laredo - Laredo; Ciudad Juarez El Paso; Nogales, Sonora - Nogales, Arizona; and Tijuana San Diego. Mexico acknowledges the work done by the members of the NACC and is fully committed to a comprehensive assessment and implementation of their recommendations to the three governments regarding border facilitation, regulatory cooperation, and energy cooperation. In fact, Mexico has already started a process to implement a good number of the recommendations, particularly those for the short term. Furthermore, Mexico not only welcomes the NACC s recommendations, but also their readiness to work together with the governments in being part of the solution to the challenges that the three countries face as a region. George W. Bush, Stephen Harper, Felipe Calderón Continues on page 2 Volume 12, Issue 08 Page 1

2 SUMMARY OF THE 2007 NAFTA COMMISSION MEETING The three NAFTA representatives from Mexico, Canada, and the United States met in Vancouver on August 13 th and 14 th for talks aimed at expanding the flow of goods and services within the North American region. At the end of the meeting, David Emerson, Canada's Minister of International Trade; Eduardo Sojo, Mexico's Secretary of Economy; and Ambassador Susan C. Schwab, US Trade Representative released a joint statement outlying the overall outcome of the NAFTA Free Trade Commission (FTC) meeting. concluding the WTO Doha Round of negotiations. They also reiterated their commitment to examine the prospect of a Free Trade Area of the Asia-Pacific (FTAAP). In brief, the three countries have agreed that regional cooperation has provided significant benefits for economic growth and job creation in each country. They have also agreed to pursue new opportunities to promote further cooperation for the benefit of producers and consumers. The next NAFTA Commission meeting will be held in the United States in In its 14th year, the NAFTA has been a remarkable success story for all three partners. It has contributed to significant increases in trade and investment flows between Mexico, Canada, the United States and it has also contributed to economic growth and job creation throughout North America. In order to keep mutual commitment to increasing market efficiencies, economic growth, prosperity, and innovation in all three countries, the three governments have agreed to: a. develop a work plan to respond to the ever increasing pressures on North American competitiveness in next year s NAFTA commission meeting; b. facilitate trade in specific sectors in order to foster stronger competitive value chains in the swine, steel, consumer electronics, and chemicals sectors; and c. conduct an analysis of the free trade agreements that each country has negotiated subsequent to the NAFTA by identifying specific meaningful differences between agreements, especially those related to trade facilitation and transparency. Due to the significant progress on rules of origin that has been reached under NAFTA, representatives of the three countries agreed to a third set of changes, which will be implemented in 2008 and they will affect an estimated US 100 billion in trilateral trade. These efforts confirm NAFTA's ability to adapt to ever changing competitive conditions including new sourcing patterns and production methods. The three governments recognized the concept of cumulation of origin as an important mechanism for creating new business opportunities by strengthening the North American products global competitiveness. The Commission intends to instruct the Working Group on Rules of Origin to study further appropriate opportunities for cumulation. \ Eduardo Sojo, David Emerson and Susan C. Schwab. D iario Oficial Notices July Modifications to a Technical Regulation (Mexican Official Standard NOM-009-ZOO-1994), related to sanitary process on meat. July 31. August Notice determining the additional TRQ to import powdered milk originated from WTO countries during August 17. Notice that establishes an increase in the cap to import powdered milk originated from the United States during 2007, under the NAFTA TRQ. August 17. Notice establishing a temporary category for international freight cross-border carrier services between Mexico and the United States. August 30. In addition, the participants reaffirmed their commitment to multilateral trade liberalization and to successfully Volume 12, Issue 08 Page 2

3 N AFTA Related Events ENCUENTRO DE NEGOCIOS INTERNACIONALES 2007 October 11-12, 2007 Meeting of Mexican businessmen, international investors, trade representatives and local authorities through working groups to explore business opportunities in the agribusiness, furniture, construction, and metal mechanics sectors. Centro Pymexporta Laguna, A.C. Location: Torreón, Coahuila MEXICO IX QUALITY INTERNATIONAL CONGRESS. September 03-04, 2007 Congress and exposition of quality systems intends for micro, small and medium-sized enterprises. Location: Hotel Sheraton Centro Histórico. Mexico City MEXICO Telephone: +52 (55) Fax: +52 (55) Website: EXPO CAFE September 06-08, 2007 One of the most important coffee trade shows in Mexico Location: World Trade Center. Mexico City MEXICO Telephone: +52 (55) Fax: +52 (55) Website: XIX EXPO NACIONAL FERRETERA September 07-09, 2007 Hardware products. Location: Expo Guadalajara Convention Center. Guadalajara, Jalisco. MEXICO Telephone: 52 (55) / 52 (55) / 52 (55) Fax: 52 (55) or 52 (55) info@expoferretera.com.mx Website: CONTACT CENTERS/BUSINESS PROCESS OUTSOURCING MEXICO SUMMIT September 10-13, 2007 Alternatives to locate and manage Contact Centers/Business Process Outsourcing operations in Mexico Location: Hotel Crowne Plaza, Monterrey, Mexico Telephone: 52 (55) infosummit@imt.com.mx Website: LAS AMERICAS SECURITY SHOW September 18-20, 2007 Products and services designed for security and protection, such as: access, alarms and CCTV controls, radio and information systems. Location: Centro Banamex. Mexico City MEXICO Telephone: +52 (55) Fax: +52 (55) mbmanrique@lasamericassecurityshow.com Website: CUMBRE EMPRESARIAL VERACRUZ September 19-21, 2007 Expo of fresh and processed foods, handicrafts, decoration articles, beverages, metal-mechanic sector and petrochemical sector. Location: World Trade Center Veracruz. Veracruz, Veracruz MEXICO Telephone: +52 (228) , +52 (229) ext. 110 and 111 Fax: +52 (228) Ext. 3743, +52 (229) ext anabelgil@cumbreempresarialveracruz.com, lmontero@sedecop.gob.mx, Website: LATIN AMERICAN FOOD SHOW September 19-21, 2007 Food and beverages exhibition Location: Cancún Center. Cancún, Quintana Roo MEXICO Telephone: +52 (55) / Fax: +52 (55) ventas@lafs.com.mx Website: EXPO COSMETICA September 23-26, 2007 Raw materials for the cosmetic industry, packages and laboratory equipment Location: World Trade Center. Mexico City MEXICO Telephone: +52 (55) / Fax: +52 (55) apoyo.tecnico@sqcm.org Website: EXPOSICION NACIONAL DE CALZADO MODAMA September 24-26, 2007 Ladies and girls footwear and leather goods fashion show Location: Expo Guadalajara. Guadalajara, Jalisco MEXICO Telephone: +52 (33) / Fax: +52 (33) modama@cicej.com.mx Website: METALFORM MEXICO September 26-28, 2007 Metal stamping, fabricating and forming exposition Location: Cintermex. Monterrey, Nuevo León MEXICO Telephone: +52 (81) Fax: +52 (81) marcela.ordaz@giprex.com Website: SAPICA September 27-30, 2007 International shoe fair. Promotion of Spring-Summer 2008 footwear line Location: Poliforum León. León, Guanajuato MEXICO Telephone: +52 (477) Fax: +52 (477) comunicacion@ciceg.org Website: Volume 12, Issue 08 Page 3

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5 Alabama Exports to Mexico * (Billions of US Dollars) In 2006, Alabama's exports to Mexico reached $960 million, up $753 million from their level in Among all US states, Alabama ranked 23th as an exporter of goods to Mexico in In 13 years of NAFTA, Alabama's exports to Mexico have increased 364%, while those to the rest of the world rose 242%. Since NAFTA was implemented, Alabama's sales to Mexico have grown at an average annual rate of 13%. In 2006, the exports to Mexico grew 5%. Mexico is an important customer of Alabama. It has been the 3rd largest export market for goods from Alabama in 2006, up from 4th in 1993, illustrating the impact of NAFTA for Alabama's growing business. Mexico accounts for 7% of Alabama total exports. Source: US Census, WISER and SE-NAFTA by SIC AND by NAICS. There were an estimated 2.82 thousand jobs in Alabama dependent on exports of manufactured goods to Mexico in These jobs represented 1% of Alabama's total manufacturing employment. Volume 12, Issue 08 Page 5

6 Success Stories Ducommun Incorporated Announces New Manufacturing Facility in Mexico Docommun Incorporated announced that its subsidiary Ducommun AeroStructures (DAS) has established a subsidiary in Mexico. The new plant is located in Guaymas, in the Mexican State of Sonora, approximately five hours south of San Diego on the eastern shore of the Gulf of California. This facility will focus on the production of aircraft structural components and subassemblies for commercial aircrafts. Ducommun s chairman and CEO Joseph C. Berenato stated that the new production facility will allow DAS to increase its productivity and competitiveness which will enable DAS to seek new business in the highly competitive global aerostructures marketplace. Hawker Beechcrafts arrives to Mexico The government of the Mexican State of Chihuahua announced of the establishment of a new plant of the American aerospatial company Hawker Beechcraft. The new facility will be located in the capital city of Chihuahua and it will bring about 250 jobs during its first years of operation. The number of jobs offered will increase to 650 in the following five years. Hawker Beechcraft will invest up to $170 million dollars to start its production process. Executives of the company informed they had chosen the city of Chihuahua for its geographical location and its qualified workforce, as well as the availability of local suppliers. Reyes Baeza, Governor of the State, said the state capacity to train specialized workers in the aerospatial industry through the High Tech Training Center (Canaltect) was another factor considered by Hawker for making the decision to establish in Chihuahua. Michelin opens retread shop in Mexico Greenville-based Michelin North America recently opened its new $40 million commercial truck retreading product facility in Mexico to serve primarily the Mexican market, said Brad Beall, the company's development manager for Michelin Retread Technology. Company officials said construction on the facility began in mid-2006, with plans to eventually hire about 120 employees. Michelin, which placed its retread production plant in the city of Queretaro adjacent to its Mexican headquarters and passenger and light truck tire manufacturing facility, has more than 700 employees in Mexico Lenovo opens a new manufacturing plant in Mexico Lenovo Group Ltd., the world's third-largest PC manufacturer, plans to ramp up its PC production by spending US$30 million on two new manufacturing and fulfillment plants in Mexico and India. The Monterrey, Mexico, facility is due to open in mid It will represent Lenovo's largest manufacturing investment outside of China, capable of producing five million PCs annually. The new plant will employ 750 workers and will supply computers to the Americas. Waterborne rail ferry links Mobile, Alabama with Mexico (AP), July 25, International Shipholding Corp. is set to receive a 580-foot-long vessel that sails between Mobile, Alabama and Mexico loaded with 115 rail cars. The rail cars at the terminal are filled with products, such as wood, chemicals and metals, bound for the Port of Coatzacoalcos, Veracruz in Mexico. The ship returns to Mobile with Mexican durable goods, including Corona beer, which are distributed up the East Coast. The waterborne rail ferry eliminates the long rail trip by land. Selected Readings Latin America and The Caribbean in the World Economy Trends 2007 Division of International Trade and Integration August 2007 Economic Comission for Latin America and the Caribbean An analysis of recent trends in the economies of the United States, the European Union and Japan as well as a number of emerging Asian economies. The determinants of the imbalances existing among these economies are examined, and the role of these disequilibria as the principal risk factor in what nonetheless remains a positive global environment is considered. Factors influencing the trade performance of Latin America and the Caribbean are discussed, as are the region's trade results and outlook in 2006 and The chapter concludes with an analysis of the difficult negotiation process being pursued in the Doha Round and how it has been affected by changes in United States trade policy. Mexico Creating the Foundations for Equitable Growth June 18, 2007 Colombia and Mexico Country Management Unit The World Bank Mexico has undergone a dramatic political, institutional and economic transformation over the last two decades. A major feature of the political transition has been the end of centralized decision making and the rise of checks and balances in a context of increasingly open and competitive elections. This paper examines how decision making, including the enactment of reforms, has evolved during this period. It provides results on the productivity of the legislative process in Mexico, and crosscountry evidence on how political institutions impact policy outcomes. Volume 12, Issue 08 Page 6