The United States, Mexico and Canada have maintained excellent diplomatic and commercial relations for years
. That is why the presidents and the prime minister of these three countries are called the three
friends, but that friendship could be coming to an end or at least it seems that
the uncomfortable compadre of the neighborhood has already shown his face. To the point that last week Canada joined
Mexico in an official complaint against the US to combat a position of the Biden
administration that both countries consider advantageous or as we colloquially say: Gandalla. While the
US argues that it is within its rights due to a difference in the interpretation of criteria.
But that interpretation of the criteria of the Biden administration could
cost Mexico and Canada thousands of jobs and multimillion-dollar economic losses and that is why
both countries have already come together to announce not only that they filed a formal complaint, but also retaliation
that could cost them back. to the US a loss equal to or worse than that of both countries. If you are interested in
knowing what has caused all this dispute, what these measures consist of and how it could affect
you, not only if you live in any of these three countries but also in any part of
the American continent, because in this video I am going to tell you . I am Víctor and this is The Mexican Family.
To explain the origin of the dispute in a very simple way, let's imagine that you are the owner
of a large bicycle shop and your neighbors produce parts and spare parts for bicycles, if
you join them you could sell your products at a better price, especially if you will sign a kind
of agreement with the local government so that the bicycles that are manufactured in your neighborhood will not
pay taxes, thus producing bicycles on a large scale, you will give your neighbors more work
and it will do very well, not only for your neighborhood but for the everyone who buys a bicycle in your community,
instead of importing and buying bicycles from countries like China, because something like that happens with Mexico,
USA and Canada in 1988 they began to agree to market each other on a large
scale and depend less than asia and in 1994 the first free trade agreement came into force,
now known as T MEC and based on our example, although today the apples of discord
are not bicycles if it is something or similar, the motor vehicles that are the most valuable
product traded between these three countries. Thousands of jobs depend on the
automotive industry in these three countries. In Mexico alone, hundreds of vehicles of all kinds
are produced every year , from work vehicles to luxury cars such as Audi, BMW, Chrysler, Ford, General Motors,
Honda, Kia, Mazda, Nissan, Toyota and even Volkswagen and before to continue explaining what the problem is,
I have to tell you that it is not just about cars, this is the main problem that has already
sparked a trade war between these three countries, it includes various products that range
from tomato sauce to whiskey and that could get worse very soon. Now let's see this vehicle is
an Audi Q5 we could say that it is a Mexican vehicle it is produced in Mexico to be exact
in the state of Puebla, but for many this is a German car and this is the beginning of the problem
the initial dispute between Canada and Mexico against the United States focuses on how the three countries define a
North American vehicle and is that a provision of the new trade agreement establishes that by
2025 75 percent of each vehicle and certain basic components must be manufactured in
the country of origin to be able to cross a North American border without paying taxes if those
products do not reach that 75 percent of home-made products, the United States can charge an additional tax
according to the rules of the world trade organization, but the interpretation that the
Biden administration now wants to give to this rule It is stricter than that of Mexico and Canada,
this to make it difficult for vehicles that come from Canada or Mexico to pay this tax and theirs to
be e xentos, this under a new bill called Build Back Better, which many have considered
as a protectionist policy and that I will explain to you in a moment. The concrete problem
is that Mexico and Canada are fighting because the trade agreement they signed establishes that if 75
percent of an essential component of a car is manufactured regionally, that is enough to
define it as a duty-free vehicle in North America and for components. essential
we refer to the engine, transmissions, chassis, body, axles, suspension, steering and batteries,
but now the Joe Biden administration says that they misunderstood the fine print and that it
must be 75 percent of the entire vehicle including headlights, wheels, bulbs, trim and even
the rearview mirrors and as you will understand with this interpretation it is almost impossible for
75 percent of all those tiny parts of a vehicle to be made in north america
especially the semiconductors that are only produced in taiwan and with this the Biden
administration intends to pass to the scale to all the vehicles of its commercial partners but not to its
electric vehicles that do not not only would they not pay taxes but they would even have an
additional discount or also called a fiscal stimulus let's put it this way in this example of
the bicycle shop in the beginning you agreed with your neighbors that if 75 percent of the most
essential of the bicycle as the tire or the chain had been made by your neighbors in their
homes it was a local bicycle, regardless of whether the seat, the reflectors or the bell came
from Asia, but suddenly you start asking your neighbors not to pay taxes on your
shop must make more than half of all the components of the bicycle by themselves. Not only
would they have nowhere to get them, it would be impossible especially if from the beginning you knew that your
neighbors were not dedicated to that and worse still, imagine that now your big bike store starts
selling electric bikes at a discount. Why would someone buy the old chain bike
that now pays an additional tax and is therefore more expensive? The only thing you would do
is bankrupt your neighbors, but they also sell other products such as tomatoes, electronic meat
, and in retaliation, what is going to happen is that they are going to sell them to you now more expensively and
everyone loses at the end of the day. Well, something like this is happening and as you will understand neither Mexico nor Canada
are very happy to say and their annoyance has already been felt in retaliatory measures against the
US Flavio Volpe president of the Association of Parts Manufacturers in Canada said that if the
US going ahead with his interpretation could have major implications
across North America and said automakers could then choose
not to comply with the new rules and instead engage in just assembling without producing
essential components themselves, not even 75% not 10% or anything and they could just bring all
the components from China at a cheaper price and stop buying them guess who? To the US
hundreds of vehicle parts and simply accept the additional 2.5 percent
world trade organization tariff . In that scenario, the big winner would be China, which manufactures
those same parts that the US does but with very cheap labor, and the big loser would be the US,
which currently produces around 50 percent of all auto parts
produced in America. North in 2019 Canada, Mexico and the US agreed on a mechanism process
to resolve any dispute the dispute resolution panel that Mexico
has just inaugurated with the first complaint against the US and which is now formally joined by
Canada and to this Added to this is one more problem that has bothered both countries, the creation
of a tax incentive proposed by Biden that only applies to his electric vehicles that
are obviously manufactured in the US. Biden's proposal has not been well received by Republicans
and is that the measure, although it sounds quite good for US residents, could bring more
problems than benefits and that on the part of Canada, Deputy Prime Minister Christia n Freeland
sent a harsh letter to top US senators threatening to suspend parts
of the trade agreement with the US and impose sanctions on US products
in part of her letter the deputy minister said we are deeply concerned that
certain provisions of the proposed electric vehicle tax credits in the
Build Back Better Act violate US obligations under the US, Mexico, Canada agreement The proposal
amounts to a 34 percent tariff on electric vehicles assembled in Mexico and
Canada and is a significant threat to the Canadian automotive industry and is that much
of the so-called Build Back Better offers a subsidy of $12,500
for US residents who buy an electric vehicle that has been produced in the
US instead of a traditional gasoline-powered vehicle the Biden administration considers
This is a positive and necessary step to get d the market to gasoline vehicles and combat
climate change, but several Canadian economists dismiss Joe Biden's argument
saying that if this really is an effort to combat climate change, that it offers
the same discount of 12,500 dollars to all electric cars that that are also produced in
Canada and Mexico and not only those that are produced in the US and for this reason they consider that it is a
protectionist measure against free trade in short because any car manufactured
in Mexico and Canada will not receive this subsidy and will be taxed on top With an additional tax
due to the interpretation of the 75% rule that the Bailén administration is giving to the treaty,
this story is very similar to that of 2019 when the United States
Department of Commerce imposed 25 percent tariffs on steel imports. and 10% to aluminum,
justifying national security interests. Canada and Mexico were affected and both countries
took In retaliation, Canada for its part retaliated with its own 25 per
cent levy on US steel and 10 per cent on US aluminum and also imposed an additional 10
per cent tariff on multiple consumer items targeting products made
in the states. where the US senators who approved those tariffs lived
that list of products included the famous kentucky bourbon whiskey, lawnmowers,
ketchup, maple syrup, appliances, boats and many other items and now that history
repeats itself the vice Prime Minister of Canada has announced that in the next few days they will publish a
list of US products that may face tariff sanctions if there is no
satisfactory resolution to this problem and a week before Canada will announce this series of
tariff measures against the US Mexico had already announced that the secretary would
take commercial action against the US for these same reasons Mexico's economy ia violate the trade agreement
between the three countries the Mexican economy secretary Tatiana Clouthier sent a very precise
message that particularly caught the attention of Joe Biden, if the US Democrats
take economic measures that harm Mexico they run the risk of a negative reaction in
Mexican-American voters it seems that President Joe Biden is looking for votes for
his re-election next year if so there may be consequences and this speaks of a
very powerful factor that Mexico has in the US and Canada non-voters who have their vote in the US but his
heart is in Mexico and that they can vote for or against Biden and that is that recently
when a Canadian journalist from CBC News raised with him that there are at least a million Canadians
living in the US who could vote against bailén in the next elections the secretary
of the economy of Mexico Tatiana Clouthier responded to the Canadian still with a "hold my beer" saying do
we have 38 million Mexicans living in the US 38 million Mexicans are more than the entire
population of Canada and could define Biden's re-election by far
Tatiana Clouthier warned that the president of Mexico is also analyzing other economic
steps such as canceling various contracts to American companies for the generation
of energy in Mexico and to grant their services to a parastatal with a guaranteed participation
of more than 50% of the market, a kind of expropriation that does not please the United States
. In fact, the Wall Street Journal reported that mexican
national guard troops have already sealed the gates of a us-owned fuel terminal and that
has also put enormous pressure on the us and republicans are pressuring
the bailén administration to back down on its interpretation of the free
trade agreement and about his law rebuild better or Build Back Better tell me in the c comments who do you
think is right in the middle of this dispute and how do you think it should be resolved and if you
liked this video help me by subscribing to the channel I am victor and see you in the next video