Arizona has recovered nearly all of the jobs lost during the height of the COVID-19 pandemic. Some parts of the state, specifically the Phoenix area and Pinal County exurbs, recorded 297,000 more employees than they had last April.

For the second month in a row, Arizona leads the nation in small business job creation according to the Small Business Jobs Index from Paychex and IHS Markit. In February, Gov. Doug Ducey set a goal of adding 325,000 jobs to the economy within the year, which Arizona has already . Of the 331,500 jobs shed since April 2020, Arizona has recovered 94% of them.

The number of Arizonans relying on unemployment benefits has also dropped from nearly 200,000 to only 30,000 according to Jim Rounds, an Arizona economist.

The success that Arizona has achieved in its recovery from COVID-19 is even more impressive when put into a national context and compared with the recovery rates of other states. The Wall Street Journal showing the ICU occupancy rates for states earlier this year in January compared with the end of August.

Arizona is seen as one of the few states that have managed not to return to higher ICU occupation rates over the course of the year and following the introduction of the Delta Variant.

 Arizona鈥檚 economy outpaces the national average in several important ways.

Arizona is nationally for the highest Real GDP relative to Pre-Covid levels.

As Arizona looks to continue the growth of its almost completely recovered economy, the driving forces behind the state鈥檚 exceptional growth should be acknowledged. 

A recent produced in August by ThinkWhy, a Dallas-based company working to bring AI-driven labor market solutions, ranks Metro Phoenix as the No. 2 ranked labor market in the United States. The company uses a ranking index that identifies and tracks the 10 most important performance indicators used to measure economic performance. ThinkWhy鈥檚 study found that the biggest economic drivers for the Phoenix-Mesa-Scottsdale metro area are 鈥渘et migration鈥� and 鈥渃ollege degree holders.鈥�

Economic observers believe vibrant public-private partnerships, a foundationally pro-growth regulatory agenda and an embrace of expanded trade relations with inter-and intra-national neighbors could provide a formula for continued economic success. 

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The governors of the two border states, Arizona and Sonora, Mexico, came together last week to celebrate their shared accomplishments in furthering the region鈥檚 growth as a global economic force over the past six years.  

Arizona Governor Doug Ducey and Sonora Governor Claudia Pavlovich spoke at a special virtual meeting of the and to highlight their shared successes as well as their friendship since they both were first elected in 2015. The event also honored Pavlovich, Sonora鈥檚 first female head of state, who is finishing out her term this year. 

鈥淭oday we see these common roots and unbreakable ties everywhere,鈥� Juan Ciscomani, senior adviser to the governor and vice chair of the AMC, said during introductory remarks. 鈥淭hey are in our economies and our businesses, they are in our binational tourism, they are in our trade relationships, they are in the arts 鈥� and they are definitely in our food!鈥�

More than 800 people tuned in to the event, 鈥淎rizona-Sonora: Transcendent Leadership Sonora-Arizona: Liderazgo Trascendente,鈥� Arizona Public Service was the prime sponsor of the event. 

Legacy and mission: improving quality of life, economic development 

This year, the two commissions are celebrating 62 years of collaboration in promoting the region. Founded in 1959 by former governors Paul Fannin and 脕lvaro Obreg贸n, the commissions鈥� mission is to improve the quality of life for citizens through public-private collaborations. Economic development is a key focus.   

During their tenure, Ducey and Pavlovich have developed one of the strongest and most fruitful relationships in the history of the border, said Jessica Pacheco, president of the AMC board of directors. 

Friendship and free trade 

In the process, free and open trade between the two states and countries has created one of the largest economies in the world, benefitting both states. Two-way trade between Mexico and Arizona reached $17.51 billion in 2019.  

鈥淚n every metric that we measure, there鈥檚 been improvement,鈥� Ducey said. 

鈥淚 know the citizens of Arizona have heard me say dozens of times that Mexico is our number one trading partner and it鈥檚 not even close 鈥� this is four times any other trading partner the state of Arizona has,鈥� he said. 

Pavlovich expressed similar sentiments about Sonora. 

鈥淚t seems like I see a new skyscraper going up everyday,鈥� Pavlovich said in Spanish. 

Shared accomplishments 

At the event, they listed key accomplishments of the two relationship over the past six years, including;

-The Unified Cargo Processing program between the U.S. Customs and Border Protection agency and Mexico鈥檚 Tax Administration Service allows for officers from both agencies to work side by side at ports of entry to jointly inspect and process cargo shipments. The has eliminated the need for separate inspections and reduced wait times for goods crossing the border. 

-The Border Liaison Unit works with the international commercial transportation industry to ensure safe and efficient movement of people, goods and services. Among its are to hold training workshops and classes for truck operators in both states to improve border crossing efficiency to reduce wait times.

-Safety corridor from Lukeville to Puerto Pe帽asco, also known as Rocky Point. This 63-mile safety corridor along Highway 8 was created to improve safety for travelers. The initiative included improved lighting and increased law enforcement and emergency services. 

-Educational partnerships Sonora and Arizona universities and colleges have entered into a number of agreements and memorandums of understanding to provide more opportunities for research and students, including tuition waivers and reduced tuition for international students. 

-Arizona-Sonora Business Expo draws hundreds of exhibitors and thousands of visitors each year, focusing on the region’s high-growth industries like aerospace, mining, construction, manufacturing, medical devices, renewable energy and tourism.

–Expansion and investment at ports of entry at border crossings. For example, nearly $60 million of private investment has resulted from improvements to border infrastructure in Nogales, Arizona, for warehouses and distribution centers to support international commerce.

–United States-Mexico-Canada Agreement Both governors worked to encourage  passage of the new . The agreement replaced the outdated NAFTA to bring tariff-free trade into the modern age. There are new chapters on digital trade, protection of intellectual property, and the opening up of international trade to more small and medium-sized businesses.

鈥淪taying the course鈥� through five presidents, Covid-19

Since 2015, when the two were first elected to office, the region has attracted hundreds of new companies, thousands of new jobs and billions of dollars in investment, they said. Growing supply and distribution chains near the border are bringing in major corporations like Lucid Motors, which is investing $1 billion in an electric vehicle factory in Casa Grande.

Both said it took staying the course during times of political turmoil, the changeover of three American presidents and two Mexican presidents, and Covid-19. 

鈥淎rizona and Sonora have already shown what can be achieved when you chart a course and lead a vision. Together we鈥檝e shown the world that everyone is better off when you put politics aside and put people first,鈥� Ducey said.

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Business and civic leaders met virtually to discuss the opportunities that Arizona and its sister state, Sonora, Mexico, should focus on during COVID-19 and beyond to strengthen cross border trade during the Arizona and Mexico Town Hall last week.

Now that the new United States Mexico-Canada Agreement (USMCA) is in effect, the two countries are strategically positioned to expand commerce in the region, participants said. 

Expanding e-commerce, improving ports of entry and travel corridors, and tapping into colleges to produce more qualified workers for the region were among the top recommendations. 

About 70 people from Arizona and Sonora attended the event, Cross-Border Connecting: Implementation of the USMCA — Opportunities for Arizona and Sonora. Phoenix law firm Jennings, Strouss and Salmon sponsored the event. 

Glenn Hamer, the president and CEO of the Arizona Chamber of Commerce, was the featured speaker. He talked about why the USMCA, which updates and expands on NAFTA, is so important for both states, improvements in the new agreement, and the need to protect free trade during the coming elections.

There鈥檚 much at stake, particularly now with economies struggling during the coronavirus, Hamer said. 

鈥淚f you take a look at just the numbers since NAFTA went into effect, they’re staggering. Before the world stopped, Arizona鈥檚 trade relationship with Canada and Mexico was worth $20 billion (annually). For the U.S., the trading block is worth $1.3 trillion.鈥�

Hamer spoke of the improvements in the new modernized agreement including a new chapter to help small and medium businesses benefit more from trade, new protections for digital trade and intellectual property, and de minimis rules that raise thresholds from 7 to 10 percent, which provide cost savings by allowing more cross-border shipments to occur that won鈥檛 be required to be conducted as formal customs transactions. 

Most essential element of new deal: duty-free trade 

But by far, the most essential ingredient in the new deal is that it maintains 鈥渄uty-free, tax-free鈥� trade between the three countries, Hamer said.听

鈥淭his is the world’s most prosperous trading block. It is that big a deal and it affects every sector of the economy, whether its financial services, energy, manufacturing, health care, agriculture, semiconductors, electronics, mining, tourism — you couldn鈥檛 pick an important sector of our state鈥檚 economy that hasn鈥檛 been affected in a positive way,鈥� Hamer said 

鈥淎nd the same goes for direct foregn investment. Our friends from Canada are far and away the largest source of foreign direct investment (FDI) into Arizona. In terms of Arizona and the United States, we鈥檙e the biggest source of FDI in Canada and Mexico.鈥�

Recommendations 

During breakout sessions, participants targeted opportunities to focus on to improve regional tourism and commerce. Among the most mentioned were:

-Expand ecommerce, particularly during COVID-19, to increase shipping at a time when consumers and businesses need it most

-Encourage investment in border points of entry to streamline processes and move cargo and tourism traffic more quickly and safely

-Invest in the modernization of heavily traveled tourist and cargo corridors 

-Promote relationships between municipalities and states on projects, including messaging to inform Americans about safety protocols in communities like Rocky Point that are taking measures to protect visitors from COVID-19 

-Support more cross border relationships between business and industry with universities, colleges and trade schools to produce workers for the region

About Arizona and Mexico Town Hall 

The Arizona and Mexico Town Hall is part of the nonprofit Arizona Town Hall that 鈥渂rings diverse people together to solve critical and often divisive policy issues.鈥� 

鈥淭he goal of these programs is to strengthen the economic opportunities as well as the quality of life for Arizonans and Sonorans as sister states who work together, and to show by example to the other states of our nations how we can work together to  improve each others lives by building these cultural bridges,鈥� said Tara Jackson, president of the Arizona Town Hall. 

To read more about the town hall, visit: . 

To read more about how the USMCA benefits Arizona and the U.S., go to: .

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Arizona Senators Martha McSally and Kyrsten Sinema joined Representatives Tom O鈥橦alleran, Greg Stanton, Debbie Lesko, Andy Biggs, David Schweikert, Ruben Gallego, and Raul Grijalva in urging U.S. Trade Representative Robert Lighthizer to protect 鈥渇ree, fair, and reciprocal trade鈥� with Mexico.

The letter comes amid discussions among Trump Administration officials over whether to implement a new 鈥渟easonal trade remedy鈥� to protect growers in the Southeast U.S., which the delegation argues will hurt Arizona importers and shoppers. 

By  increasing barriers to the importation of Mexico fresh tomatoes in the form of tariffs or duties, the policy could potentially raise prices for domestic consumers.

Complicating matters is Florida and Georgia鈥檚 importance to the president鈥檚 reelection. 

Disputes linger despite USMCA implementation

Following the ratification of the U.S-Mexico-Canada Agreement (USMCA), a landmark trade agreement that replaced the North American Free Trade Agreement (NAFTA), the three North American powers are still debating the implementation of new rules.

Mexican firms, for instance, have been by American petroleum companies of participating in unfair trade practices that 鈥淸throw] up roadblocks to American companies seeking permits for new or rebranded gas stations, energy storage facilities, and liquefied natural gas terminals,鈥� said Gary Clyde Hufbauer, a nonresident fellow at the Peterson Institute for International Economics.

Hufbauer said that 鈥渇aithful implementation of the United States-Mexico-Canada Agreement is鈥� important鈥� for all member nations.

In the past weeks, President Trump was also accused of stymying the process of implementation when he a 10% increase in aluminum tariffs on Canada after they had been lifted more than a year earlier.

In response, Canada levied $2.7 billion in tariffs on American goods.

Despite the disputes, business leaders and economists remain optimistic that the USMCA will stimulate economic expansion.

Agriculture

The commercial relationship between Arizona and Mexico is significantly bolstered by the flow of imported Mexican produce to the state. 

Since the turn of the century, Arizona has seen an expanded agricultural importation relationship with Mexico, the University of Arizona鈥檚 Eller College of Management.

The dispute arising from the importation of Mexican agricultural products, specifically tomatoes and avocados, arose in 2019 when Trump Administration officials regarding 鈥渋ncreasing organized crime activity in Michoac谩n — the main avocado producing state in Mexico.鈥� 

They also had separate worries surrounding competition between the U.S. agricultural sector and the Mexican agricultural sector.

30% of all Mexico-grown tomato imports, the Nogales, Ariz. commercial port of entry is key to the Southwestern economy and Arizona commerce. This places Arizona at the center of the current conflict.

A 2018 by UArizona found that U.S. and Canadian importation of fresh tomatoes from Mexico is responsible for more than 30,000 U.S. jobs. 

Economic impacts

In 2019, when the U.S. considered levying a 17.5% tariff on Mexican tomatoes, economists from Arizona State University that 鈥渃onsumers could pay 40% to 85% more for vine-ripe and other fresh tomatoes.鈥�

If the U.S. administration establishes protectionist trade remedies, trade advocates  worry that Mexico will retaliate in kind againstAmerican imports. 

In January, Mexican Deputy Trade Minister Luz Maria de la Mora , 鈥淚f the U.S. government seeks any action of this kind against Mexican agricultural exports, the government of Mexico will apply similar measures to U.S. products.鈥�

As occurred last week between the U.S. and Canada, there is a possibility of a new trade dispute erupting — this time along the Southern border.

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American consumers and industries could face price hikes on fresh produce and aluminum products as trade conflicts with Arizona鈥檚 top two trading partners heat up. 

Just weeks after the new 鈥渢ariff-free鈥� United States-Mexico-Canada Agreement (USMCA) went into effect July 1, President Donald Trump announced he was reimposing a punishing 10 percent tariff on Canadian aluminum. Canada retaliated in kind the following day.

Meanwhile, a domestic trade dispute over fresh produce from Mexico is threatening to stir up a new round of tariff battles as well.  

Both measures could disrupt relations with Arizona鈥檚 top two trading partners, Mexico and Canada, during a time when many Americans are faced with financial hardships due to COVID-19 shutdowns, opponents said. 

鈥淭ariffs are taxes, plain and simple,鈥� said Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry. 鈥淎s trade partners with Canada and Mexico, we see every day how Arizona benefits from these relationships.

鈥淓fforts should be focused on expanding market access for American manufacturers and growing economic opportunities with our closest partners to lead to a greater variety of goods and price competition for U.S. consumers.鈥�

Here is a rundown of what鈥檚 happening:

U.S. hearings on produce from Mexico alarm industry

Of concern to importers and exporters is a long festering domestic battle over a rarely-used 鈥渢rade remedy鈥� to affect seasonal produce coming from Mexico like tomatoes, peppers and strawberries. 

For years, farmers in the Southeast have made a number of claims about Mexico, including that government subsidies to agriculture have harmed American farmers who cannot compete with the low price of produce flooding north over the border.

During heated hearings before U.S. trade officials last week, representatives from states like Florida called for the seasonality rule — known as Section 301 — to be enforced to improve the domestic competitiveness of American farmers.

Representatives of Southeast agriculture testified that Mexican tomatoes and other produce are being sold well below fair market prices — a practice known as dumping — which it鈥檚 creating 鈥渦nfair鈥� challenges for growers to compete.

But opponents dispute those claims and have the research to prove it, said the Fresh Produce Association of the Americas (FPAA), which is headquartered in Nogales, Arizona. 

A recent analysis by the University of Arizona, for example, shows that since 1995, the U.S. has used up to 41 percent of its allowable subsidies while Mexico has averaged just 2 percent, the FPAA said last week. Also, the analysis did not include the $28 billion in aid to U.S. farmers to compensate them for the financial harm caused by trade  disputes with foreign trading partners last year. 

The so-called trade 鈥渞emedy鈥� would hurt American pocketbooks by instigating costly new tariffs on Mexican imports, the FPAA said. 

鈥淐onsumers would pay more for strawberries, blueberries, bell peppers, tomatoes, sweet corn and watermelon if tariffs or quotas are put on these items through a 301 trade action as requested today by the Florida Fruit & Vegetable Association,鈥� the FPAA stated in a that countered the 鈥渞hetorical鈥� claims one by one.  

Action could instigate another tariff war with Mexico 

Imposing the action potentially could instigate 鈥渘umerous and unending tit-for-tat trade wars鈥� with Mexico just weeks after the USMCA went into effect, the FPAA said.

That could imperil $40 billion in U.S. agricultural exports to Mexico and push up the cost of fresh produce from Mexico, said the FPAA, which represents 120 U.S. member companies involved in importing and marketing fresh fruits and vegetables grown in Mexico and distributed across the U.S. and the world. 

Bipartisan front in Arizona opposes attack on 鈥渇ree trade鈥� 

Arizona鈥檚 congressional delegation has stepped in to intervene, calling on the White House to reject the proposal. 

鈥淭his trade remedy would affect Arizona鈥檚 economy, the U.S. agribusiness supply chain, and consumers all across the country who enjoy a diverse selection of tomatoes at low prices,鈥� said a letter sent by nine Arizona congressional members to the U.S. Trade Representative Robert Lighthizer. 

The letter was signed by Arizona U.S. senators Kyrsten Sinema (D) and Martha McSally (R) and representatives Tom O鈥橦alleran (D), Ra煤l M. Grijalva (D), Andy Biggs (R), David Schweikert (R), Ruben Gallego (D), Debbie Lesko (R) and Greg Stanton (D). 

鈥淪uch a provision would run counter to consumer preferences, undermine the spirit and benefits of free trade, risk reciprocal or retaliatory actions from our trade partners, and harm U.S. industries in order to artificially support a small segment of regional growers鈥� interests,鈥� the letter said.

Canadian and U.S. aluminum hit with new trade taxes

In another blow to many industries that rely on aluminum, President Trump reimposed tariffs on Canadian aluminum this month. Canadian Prime Minister Justin Trudeau responded the next day with retaliatory tariffs on $2.7 billion worth of U.S. aluminium products. 

During a at the Whirlpool Corporation Manufacturing Plant in Clyde, Ohio August 6, the president said that the tariffs were being reimposed to stop Canadian aluminum producers from flooding the U.S. with exports that will 鈥渒ill all our aluminum jobs.鈥� 

鈥淐anada was taking advantage of us, as usual, and I signed it…because the aluminum business was being decimated by Canada,鈥� Trump stated. 鈥淰ery unfair to our jobs and our great aluminum workers.鈥�

鈥淭o be a strong nation, America must be a manufacturing nation and not be led by a bunch of fools,鈥� the president said. 鈥淭hat means protecting our national industrial base.鈥�

Industry leaders, U.S. Chamber oppose tariffs

But many aluminum manufacturers and industry advocates said the tariffs will only push up costs for producing items like cars, household appliances and beer cans. 

Calling the tariffs 鈥渁 step in the wrong direction,鈥� Myron Brilliant, the head of international affairs for the U.S. Chamber of Commerce, issued a opposing the new trade duties. They will raise costs for American manufacturers and draw retaliation against U.S. exports.

鈥淭oday more than ever, American businesses of all sizes depend on trade as an engine of growth and job creation,鈥� he said.

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Arizona companies export an annual $9.7 billion in goods tariff-free to Canada and Mexico largely due to the North American Free Trade Agreement (NAFTA) that took effect in 1994.  

Flash forward to 2020 and the new modernized version of that accord, the United States-Mexico-Canada Agreement (USMCA), is now in place, giving Arizona more chances to reap the benefits of free trade, trade experts said Tuesday.

Top Arizona Exports to Canada and Mexico, 2017

Computer & Electronic Products ($2.1 Billion)
Electrical Equipment, Appliances & Components ($1.3 Billion)
Minerals & Ores ($1.1 Billion)
Transportation Equipment ($947.2 Million)
Machinery ($727 Million)
Agricultural Products ($536.9 Million)
Plastics & Rubber Products ($528.6 Million)
Fabricated Metal Products ($440.6 Million)
Chemicals ($386.2 Million)
Primary Metal Products ($278.8 Million)

How this new agreement impacts Arizona businesses was the topic of a panel discussion hosted by the Arizona Chamber of Commerce and Industry. The event, entitled A New Era for Trade: USMCA Implementation & Growing Arizona鈥檚 Trade Ties, detailed the changes in the new agreement that went into effect July 1. 

Four panelists, all who are involved in strengthening economic ties and trade between Arizona, Canada and Mexico, were the speakers: Zaib Shaikh, consul general of Canada in Los Angeles; Jorge Yescas, consul general of Mexico in Phoenix; Juan Ciscomani, senior adviser for regional and international affairs for the Arizona Office of the Governor; and Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry. 

New rules to advance world鈥檚 largest free trading block 

Among the new chapters and provisions in the USMCA lauded by the panelists were higher dollar thresholds for duty-free sales, labor reforms and higher wages for auto workers in Mexico, legally binding standards to protect the environment, protections for intellectual property, gender equity provisions, and new measures to help small- and medium-sized companies more fully access the global market. 

The new treaty also positions the three countries to come out of the pandemic in a stronger position, united together as a global competitive force, the Chamber鈥檚 Hamer said.  

鈥淭he more we use the tools of this agreement, the more prosperous all three countries will be, and the faster we鈥檒l get out of this damage that the pandemic has caused us all,鈥� Hamer said. 

Free trade in a region with 470 million customers 

Mexico and Canada are Arizona鈥檚 top trading partners. Canada also is the No. 1 country with direct foreign investment here. 

For North America, the USMCA represents a region with 470 million consumers and an annual marketplace of more than $1.2 trillion in trade.   

鈥淚n this time of the pandemic, as we look forward to what the agreement means to the reset and the recovery, those kinds of numbers are really meaningful,鈥� said Shaikh, consul general of Canada, whose job is to encourage cooperation between Canada and听Arizona, Southern California and Nevada. 鈥淔rom a Canada perspective, the USMCA is a top-notch updated modern agreement, but it also is a preservation of the North American Free Trade Agreement. There will be no new tariffs.鈥澨�

New and improved USMCA changes

The USMCA鈥檚 stated purpose is to deepen gains from trade and preserve and expand regional trade and production by further 鈥渋ncentivizing the production and sourcing of goods and materials in the region.鈥�

Here are some of the most important changes in the new agreement, the panelists said:

New Rules of Origin

More stringent rules from the automotive industry. Seventy-five percent of vehicles, including electric vehicles, must be produced in North America instead of the former 62.5 percent, and 40-45 percent of vehicles are to be assembled by workers who earn at least $16 an hour.

Yescas, consul general for Mexico in Phoenix, said his country鈥檚 president and congress overwhelmingly support labor reforms including the 鈥済radual鈥� increase of hourly wages and 鈥渢he extension of labor protections for migrant workers and the protection of women from discrimination.鈥� 

These new rules will benefit Arizona, tilting automotive original equipment manufacturers (OEMs) toward the southern part of the U.S. and Mexico.

Arizona is well positioned, given its proximity to OEMs in Northwest Mexico like Ford in Sonora, and Toyota in Baja California, and its connectivity via I-19 to Mexico鈥檚 Highway 15 corridor, leading to the Baj铆o automotive cluster. Trinational electrical vehicle projects, such as the Lucid Motors factory in Casa Grande and the Nikola truck factory in Coolidge, also are well positioned to meet USMCA goals and leverage research and development and auto assembly in the U.S.

Agricultural access

The agreement preserves market access for Arizona鈥檚 agricultural industry and includes additional U.S. access to Canada鈥檚 poultry, dairy and turkey听 markets. There are additional measures to improve phytosanitary inspections.

In Arizona where agriculture is a key industry, tariff-free trade is essential to the economy, said Ciscomani, who also is vice chair of the board of directors for the that has been working for 61 years to improve economic, cultural and tourism ties between Arizona and Mexico.

Yuma alone produces the vast majority of America鈥檚 green leafy vegetables in the winter months, Ciscomani said. 

鈥淎griculture has always been a staple for the Arizona economy so we鈥檙e excited about the advantages tariff-free trade brings to the sector,鈥� Ciscomani said. 鈥淚t did well under NAFTA and the new improvements will set it up for further expanded success.鈥�

Higher duty-free thresholds

Minimum thresholds were increased, removing tariffs on more goods. This will allow for additional flexibility in sourcing globally while also keeping the duty-free incentive to source in North America. This also would have a positive impact on the SkyBridge project at Phoenix-Mesa Gateway Airport, a new operation that capitalizes on the U.S.-Mexico Unified Cargo Processing that expedites import and export processing times of goods.

Stronger IP protections

New protections for intellectual property extend patent protections to 10 years from eight in Canada, expand copyright protections, and broaden trademark rules to cover sound marks and scent marks. Penalties are increased for violating trade secrets or trading counterfeit goods. Custom rules for detaining illegal counterfeit goods have been modified. Internet service providers are now required to implement a 鈥渘otice and takedown鈥� system in Mexico when digital information infringes on ownership rights.

Digital Trade and cybersecurity

New provisions for digital trade such as e-books, music, software and video games include a prohibition on tariffs on digital products distributed electronically, rules for validating e-signature and e-documents, anti-spam measures, and coordinated cybersecurity measures for the three countries鈥� highly integrated telecommunication systems.

Small businesses will benefit for first time

For the first time in a U.S. trade agreement, the USMCA includes a dedicated chapter on small- and medium-sized enterprises (SMEs) and other provisions targeting this group including:

-Establishes information-sharing tools to help SMEs to better understand the benefits of the agreement

– Creates a committee on SMEs issues comprised of government officials from each country to ensure they benefit from the agreement

To read more about the new USMCA and its impacts in Arizona, go to: .

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Mexico鈥檚 president, Andr茅s Manuel L贸pez Obrador (AMLO), is under heavy fire for his delayed and shaky response to the coronavirus and his failure to provide significant stimulus funding to shore up the private sector. 

Add in rising violence and tanking oil prices and the economic outlook for this year is gloomy: Mexico鈥檚 economy is projected to contract by , according to the International Monetary Bank (IMF). 

鈥淢exico under AMLO appears to be entering a dark period of economic decline and spiraling violence,鈥� said Ryan Berg, a research fellow for the American Enterprise Institute (), who studies Latin American foreign policy and development issues. 

As many as 20 million Mexicans could slip into poverty, said Berg, who spoke to 探花精选 about the implications for Arizona and North America. 

Headlines attack 鈥渋ndifferent fiscal response鈥�

A rash of articles and editorials critical of AMLO appeared in Bloomberg, Forbes, the Washington Post, Aljazeera and other major news outlets this week to mark the official opening of the new trade agreement, the United States-Mexico-Canada Agreement (USMCA). 

鈥淟opez Obrador Is making Mexico鈥檚 tragedy worse,鈥� blared a headline from Bloomberg鈥檚 editorial board Wednesday. 鈥淭he government鈥檚 indifferent fiscal response is inexcusable.鈥�

Some of his actions have been labeled irresponsible. He has downplayed the need for mass testing. And until recently, AMLO continued to hold large public rallies, shaking hands and kissing people.

Business groups calling on AMLO to aid private sector

As AMLO prepares to meet with President Trump in Washington D.C. July 8, business leaders and advocates are urging U.S. officials to press AMLO to follow the lead of other countries that have rushed financial aid to help businesses survive the pandemic.   

The meeting is meant to celebrate the USMCA, the successor accord to NAFTA that has fueled the three economies to become the largest free trade group in the world for more than two decades. 

But Mexico鈥檚 response and missteps in reacting to the virus are producing challenges that could hurt the recovery of supply chains and economies on both sides of the border, Berg said. 

Here are a few takeaways from Berg:

Missteps and misguided policies 

Mexico is the least poised of the three partner nations to take advantage of the new trade deal, he said.   

The rapid spread of COVID-19 cases is wearing on the country鈥檚 already fragile health system, and continues to cripple the main pillars of the Mexican economy — tourism, energy production, and manufacturing.  

Meanwhile, AMLO continues to reopen the economy as cases are skyrocketing. And as  Mexican officials have downplayed mass testing, it had 231,770 confirmed cases and 28,510 deaths as of today, according to the John Hopkins .

鈥淔or a successful reopening, tests need to come back positive at a rate of around 5 percent,鈥� Berg said. 鈥淭en percent is dangerous. Twenty percent is crazy. Mexico is returning coronavirus tests with a 50 percent positive rate, which is way too high for a successful reopening. It would seem as though USMCA is coinciding with a massive surge in cases.鈥�

Contentious relationship with private sector 

AMLO also 鈥渉as indulged his contentious relationship with the private sector鈥� instead of bolstering the economic model that has brought Mexico tremendous growth over the past 25 years under NAFTA, Berg said. 

In April, AMLO yielded to pressure to help businesses and informal workers, who make up more than 50 percent of the economy, approving a $25.6 billion stimulus package. 

But it was too little, too late. 

鈥淢exico has spent less than any country in the region as a percentage of its GDP, save for the Bahamas, to support its industrial base,鈥� Berg said.

Meanwhile, AMLO continues to focus on 鈥減et projects鈥� like the new airport in Mexico State that has been plagued by cost overruns and delays, the Mayan train project in the Yucatan Peninsula, and a large new refinery for the heavily indebted state-owned petroleum company, Pemex.

鈥淢any people think these glitzy projects are economically dubious and cost a lot of money. Money that could be better spent shoring up Mexican industry.鈥� 

More dialogue needed to define essential businesses

Resuscitating economies in Mexico and the U.S. after the pandemic will depend largely on the renewed productivity of the massive North American manufacturing supply chain, Berg said. 

One of the roadblocks has been Mexico鈥檚 鈥渉aphazard鈥� method for declaring which  industries are essential, he said.

In April, the National Association of Manufacturers sent a to AMLO, stating its members’ concerns about losing supply chains that have taken years to fortify. The letter contains 14 pages of signatures from leading manufacturers across America. 

In response, AMLO moved to open up more industries. Now, dialogue is needed to create harmonization between the three trading partners, including joint definitions of what is essential. 

鈥淪upply chains are so complicated that when we鈥檙e talking about the disruption of a supply chain, we could be talking about something as small as a screw or a nail or something that is nevertheless a very critical component that might be going over the border multiple times as it’s assembled,鈥� Berg said.

Opportunity for Mexico to reverse course

Unless Mexico adjusts its domestic policies, it is squandering an opportunity to expand its role in North American trade and production, Berg said. 

鈥淎t a time when many U.S. and Canadian businesses will be keen to take advantage of the USMCA to “nearshore” their supply chains, Mexico doesn’t seem to be in a position to take full advantage.鈥� 

If Mexico can prove that the country is safe for trade and manufacturing, it has many benefits to offer, he said. Mexico is graduating more people every year that are poised to enter high tech manufacturing and other skilled trades. Unlike China, it has managed to keep labor costs relatively low. 

鈥淚 think Mexico has a huge opportunity here. I think there is going to be a bipartisan consensus or a near bipartisan consensus to rethink some of these supply chains after the pandemic, particularly extracting some of these supply chains from China.鈥� 

鈥淲ith the right policies, Mexico could be a huge beneficiary of that.鈥�

Mexico鈥檚 recovery vital to Arizona  

For Arizona, Mexico鈥檚 recovery is vital. Here are some of the reasons why:

• Mexico is Arizona鈥檚 largest trading partner times four. Arizona鈥檚 two-way trade with Mexico was $16.6 billion in 2018: nearly $7.6 billion in exports and $9 billion in imports. 
• Arizona鈥檚 infrastructure supports international trade and tourism with six international border ports of entry, including one of the nation鈥檚 largest commercial ports, the Mariposa Port of Entry in Nogales, Arizona.
• Visitors from Mexico contribute between 60-70 percent of sales tax revenue in Arizona鈥檚 border communities.
• Together, Arizona and Mexico are leaders in the automotive industry, importing $968 million and $761 million in auto parts in 2016 鈥� net trade of nearly $1.7 billion annually.
• The automotive industry in Arizona and Sonora produces 1,488 vehicles daily, supporting more than 50,600 employees.
• Nearly 3.6 million people from Mexico choose Arizona as a travel destination annually, representing the largest segment of international tourism to Arizona.
• Tourism from Mexico accounts for the majority of all expenditures in Arizona by international visitors to the state. 
• Tourists from Mexico have an annual economic impact of $2.5 billion and support approximately 30,000 jobs throughout Arizona.  

(Source: )

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Prominent Valley business and education leaders said that some positive changes have come out of COVID-19 that should help Arizona鈥檚 economy recover.  

The state also is better positioned to rebound than other states because of its emphasis on attracting industry and graduating large numbers of highly trained students, they said during a webinar event Wednesday hosted by the PHX East Valley Partnership.

鈥淭he good news is that our region has learned a lot since the Great Recession and the events surrounding 9/11,鈥� said Denny Barney, president and CEO of the . 鈥淲e have diversified our economy, and our value proposition is as strong as ever.鈥�

Among some of the big wins that have bolstered the East Valley since the recession are corporate relocations, the expansion of global companies like Deloitte and Northrop-Grumman, and the groundbreaking of a world-class hub for digital education at ASU鈥檚 new campus in downtown Mesa, Barney said. 

Arizona better prepared for future than other states

Understanding the effects of the pandemic and what the future holds was the topic of the event, entitled: 鈥淧reparing for the Future Post-COVID-19.鈥� 

Featured speakers were Arizona State University (ASU) President Dr. Michael Crow; Greater Phoenix Economic Council (GPEC) President Chris Camacho; and longtime ASU economist and director of the L. William Seidman Research Institute at the W.P. Carey School of Business, Dennis Hoffman.

President Crow talked about the university鈥檚 ability to adapt quickly to make a massive shift from an on-campus model to a blended education model. The university also pushed forward research, innovation and humane efforts to combat the pandemic. 

Now, it just enrolled its largest summer session ever with 60,000 students. 

鈥淲e have to realize the old economy is gone,鈥� said Crow. He said institutions will have to be highly adaptable to face down the challenge and be on the 鈥渇ront wave鈥� of a new economy. 

鈥淚f you want to win economically. If you want to be competitive moving forward, your agility is going to be very important. The agility of your workforce. The ability to be resilient.鈥�

Silver linings and challenges ahead

Camacho of GPEC said the most daunting challenges for the state will be centered around sectors hardest hit like the restaurant and hospitality industries. 

Groups like , chambers of commerce, and cities have worked 鈥渋ntensely鈥� to reach out to small businesses. Their efforts combined with the federal Paycheck Protection Program (PPP) are mitigating the damage. 

Other sectors, meanwhile, have remained strong including the industrial sector. Some industries such as advanced manufacturing and financial and professional services will likely see faster recovery times than sectors like air travel. 

Some interesting twists could occur in the office market. Office space could shrink if companies transform into blended work places with more remote workers, or expand if corporations need  more room to allow for social distancing. 

Challenges ahead? The need to continue to invest in infrastructure and education, Camacho said.

Silver linings? The Phoenix region has earned 鈥渢ier one鈥� brand recognition with Fortune 500 and global corporations, he said. 

Revered corporations like Apple, Microsoft and Tesla are coming here to take advantage of the universities graduating engineers and other students who are ready to meet industry needs.

鈥淭hat has become the X factor for our ability to compete in this global age of competition for advanced industries,鈥� Camacho said. 

As anti-globalization efforts continue, Arizona is in a good place to attract new industry. Housing prices, modern infrastructure and a skilled labor force will continue to act as a lure.    

Longtime economist predicts 24-month recovery

ASU Hoffman also expects the recovery to be much smoother this time around. 

He credits the state鈥檚 pro-business stance combined with universities focused on economic development. 

A decade-long effort to educate and graduate more students is filling local and state coffers as they move into careers. 

One benefit of COVID-19 could be that Arizona will be able to keep more graduates here as remote working becomes the new norm.  

鈥淵ou can live in the East Valley and work for Silicon Valley,鈥� Hoffman said.

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The United States and the United Kingdom have opened up negotiations over a free trade deal that both sides agree could help their economies recover from the coronavirus pandemic. 

Business leaders and advocacy groups are urging speed in cementing the pact. Strong investment ties and tariff-free trade greatly benefit both economies. 

In 2018 alone, nearly $262 billion in goods and services were traded between the two economies, supporting on both sides of the Atlantic.

鈥淯.S. firms have invested more than $750 billion in the U.K., and the American business community has a significant interest in ensuring the future stability and growth opportunities of the UK economy,鈥� the U.S. Chamber of Commerce said in a document outlining recommendations for the negotiations. 

Marjorie Chorlins, executive director of the chamber鈥檚 U.S.-U.K. Business Council said deepening trade and investment ties will allow both economies to demonstrate their leadership together and build on their shared strengths in services, the digital economy, advanced manufacturing, life sciences, the creative arts and other sectors. 

Council members are working with negotiators from both sides to secure a 鈥済old standard trade agreement that benefits workers, farmers, and citizens,鈥� Chorlins said.  

No deal puts companies at risk 

No deal, meanwhile, could put businesses at risk. Particularly small- and medium-sized companies that may not survive a new round of punishing trade tariffs on top of the  COVID-19 shutdowns, said Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry. 

Arizona has much at stake in the ongoing negotiations, he said. In 2018, Arizona businesses exported $928 million worth of goods and services to the U.K., making it one of the state鈥檚 top trading partners. 

The state鈥檚 key exports to the U.K. include transportation and aerospace equipment, computer and electronic products, manufactured machinery, agricultural products, and minerals and ores, according to the International Trade Administration. 

Thousands of Arizona jobs also are connected to or generated from investments by U.K. companies, Hamer said. Many are high paying positions in manufacturing, chemicals, pharmaceuticals, information technology, financial services and other sectors.

Trade deal goal: 鈥渃ommercial continuity鈥� as U.K. leaves the EU 

Among the goals of the trade agreement are to cooperate on global issues, strengthen trade and investment, and provide commercial continuity for businesses, workers and consumers as the U.K. leaves the European Union (EU), according to the Office of the   

U.S. Trade Representative Robert Lighthizer and U.K. International Trade Secretary Liz Truss kicked off the trade talks last month with a large cadre of staff and experts. They are to meet every six weeks. 

They will need to hammer out rules for digital trade and cross border data, rules of origin, sanitary and phytosanitary measures, competition, regulatory standards, and more.

Both the U.S. and the U.K. want a full deal, not a phased-in agreement or mini pacts.

Among its wants, the U.S. is seeking global standards for regulations on how cars and other products are produced. It鈥檚 also pushing for more access for its pharmaceutical and healthcare companies.

The U.K. is seeking more access for U.K. goods and services in the U.S. for accountancy, agriculture, architecture and financial services. 

Mitigating damage from the pandemic will be a top goal, the trade officials said in a joint statement.  

鈥淏oth parties agree that a Free Trade Agreement (FTA) would contribute to the long-term health of our economies, which is vitally important as we recover from the challenges posed by COVID-19,鈥� it states. 鈥淎n FTA is a priority for both countries and we share a commitment to secure an ambitious agreement that significantly boosts trade and investment. We will undertake negotiations at an accelerated pace and have committed the resources necessary to progress at a fast pace.鈥�

Business priorities for successful deal 

The U.S. Chamber鈥檚 U.S.-U.K. Business Council releasedfor these talks, underlining areas where 鈥渞obust agreement will benefit both sides.鈥�

Among the council recommendations:

Trade in industrial goods: Eliminate all tariffs on industrial goods traded between the U.S. and the U.K., include a high-standard chapter on technical barriers to trade to address non-tariff barriers, and expand market access for remanufactured goods exports by ensuring that they are not classified as used goods that are restricted or banned.

Trade in services: Secure high standard rules and open market access commitments to ensure access to the U.S. and UK services markets, including obligations for new services.

Trade in agricultural products: Address market access through tariff elimination and by resolving concerns about non-science-based restrictions on agricultural trade with a high- standard chapter on sanitary and phytosanitary measures.

Protect intellectual property: Address intellectual property rights and enforcement as they relate to patents, copyrights, trademarks, and trade secrets to enhance U.S. and U.K. leadership in innovative industries.

Protect investment: Eliminate forced technology transfers, reduce barriers to foreign direct investment by ensuring non-discriminatory treatment, ensure a high standard of protection for U.S. investors subject to an investor-state dispute settlement mechanism. 

Emerging technologies: Promote effective regulatory cooperation to address emerging technologies and prevent unnecessary regulatory divergence.

Digital trade: Facilitate a mutual right to transfer and store data across borders for all sectors, prohibit data localization requirements, ban customs duties and taxes on electronic transmissions, promote risk-based approaches to cybersecurity, foster cloud use across sectors, ensure non-discriminatory and interoperable frameworks for the protection of personal information, and align any plans to tax digital services with international tax regimes.

Procedural fairness for pharmaceuticals and medical devices: Seek standards to ensure that government regulatory reimbursement regimes are transparent, provide procedural fairness, are nondiscriminatory, and provide full market access for U.S. products.Section 232 Tariffs: Remove the U.S. Section 232 tariffs on imports of steel and aluminum from the U.K.

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The CEO of the largest business advocacy group in America, the United States Chamber of Commerce, outlined a plan to spur half a million new startups and hundreds of new initial public offerings in 2020 at his annual State of Business Address in Washington, D.C. last week.

鈥淚f we want to create more wealth and opportunity for all Americans, the answer is more business, not less,鈥� longtime CEO Tom Donohue said. 鈥淲e need a wakeup call in this country that disincentivizing growth and disparaging corporations is no way to generate collective prosperity.鈥�

Donohue called on 鈥渂ipartisan鈥� leaders across business and government at all levels to 鈥渞einvigorate the American innovation machine鈥� by promoting measures like new technology and industry to address climate change, immigration reform and the 鈥渟ide gig鈥� economy.

These are just a few of hundreds of challenges the Chamber is taking on this year to push the nation forward in reaching a goal to surpass 500,000 business creations and 250 new initial public offerings (IPOs) annually, he said.

Startup revival for 鈥渃ollective prosperity鈥�

Business growth is not just about corporate profits, he said. It鈥檚 about trillions of new dollars for employee wages and local, state and federal taxes for schools, social programs, government operations and highways and infrastructure, he said.

New business growth reduces 鈥渋ncome inequality,鈥� Donohue said. But instead of growing in America, startups are declining, according to U.S. Census data, Donohue said.

鈥淲e should all be troubled that we have 20 percent fewer startups than we did three decades ago, when we were a smaller country,” he said. “We should all be worried that there are half as many public companies today as in 1996.鈥�

Arizona haven for startups

Meanwhile, Arizona is in a better position than many states in startup creation.

The state鈥檚 two largest universities spin out a steady stream of startups in bioscience, technology, water conservation and other industries annually.

Last year, University of Arizona startups alone pumped $585 million into the economy, according to a report released last month by the university鈥檚 McGuire Center for Entrepreneurship.

Arizona and metro Phoenix consistently rank among the top places to start a business by various publications and organizations. A released last month by content and comparison platform Comparisun named Arizona the fifth-best state in which to launch a startup.

Challenges ahead

During his speech last week, Donohue highlighted a number of challenges it will embark on addressing this year, including threats to the gig economy, harmful isolationist trade policy and climate change.

Threats to the 鈥渟ide gig鈥� economy

One battle this year will be to stand up against recent attacks at the state level that are eroding opportunities in the gig economy and other business sectors, Donohue said.

Of concern is one law just passed in California that alters the definition of private contractors and freelancers. Employers will now be required to provide benefits to a new class of worker.

鈥淯nder such proposals, Lyft and Uber drivers would be deemed employees and not independent contractors,鈥� Donohue said. 鈥淭he result? The business model that has revolutionized entire sectors of the economy will screech to a halt. The same is true for the innovation we are seeing in everything from home repair tasks to grocery delivery.

鈥淎t stake is the flexibility and independence that have made 鈥渟ide gigs鈥� or second jobs an important part of how millions of Americans support themselves and their families,鈥� he said.

Such regulations impact not only drivers for ride-hailing services but other industries as well.

The U.S. Chamber released a听 detailing how new state regulations of the gig economy will suppress business opportunities and limit consumer choice and services.

States鈥� adopting costly data privacy rules

Another initiative will be to fight encroaching states鈥� regulations over data privacy.

As federal lawmakers have failed to adopt a national policy for data privacy, states are stepping in. That鈥檚 proving costly for businesses, Donohue said.

He cited California鈥檚 new Consumer Privacy Act and said the initial price tag of compliance is $55 billion in the state, with small businesses facing up-front costs of $50,000 each.

鈥淲ashington鈥檚 inability to make progress on data privacy is resulting in a patchwork of state rules and regulations that will stifle the free flow of goods and services across state borders,鈥澨� he said. 鈥淐an you imagine effectively running a company when you have 50 different sets of standards to comply with? This would create conflict for businesses, confusion for consumers, and increase costs for everyone.鈥�

Other goals and challenges for 2020 include:

Global competitiveness and free trade

Donahue said America must show proactive leadership around the world to foster U.S. businesses.

鈥淓ngaging with the world is our best strategy for strong national security and lasting prosperity,鈥� Donohue said. 鈥淓mbracing free trade doesn鈥檛 mean ignoring unfair practices aimed at us. It means leading the way in setting the rules and enforcing them, based on the simple propositions that more trade is better than less trade, more customers are better than fewer customers, and expanding markets globally will benefit everyone.鈥�

He lauded the U.S. House passage of the United States-Mexico-Canada Agreement (USMCA) and raised the need for trade agreements with the United Kingdom, the European Union, Japan, Brazil and markets in Africa. He stressed the importance of U.S. engagement in the booming Asia-Pacific.

Immigration reform

Donahue said action is needed to update cumbersome immigration practices to make it more efficient for businesses to hire qualified foreign workers of all skill levels.听

Climate change innovation

Donahue said he wants to see research and development of new technology and industry to tackle climate issues. Currently, there are 35 bipartisan bills in Congress designed to help address climate change through innovation and investment.

Passage of a comprehensive infrastructure package

As the nation鈥檚 highways, bridges, water and sewer systems and other infrastructure continue to deteriorate, Congress must step up, Donahue said.

Abusive class action lawyers

States are increasingly fertile ground for business opponents to advance questionable agendas, Donohue said, including the class action trial bar鈥檚 sweeping new focus on municipality litigation targeting businesses under the public nuisance law.

Bipartisan politicians

Real change will require bipartisan politicians, Donohue said.

鈥淭he business community must not, and will not, stand on the sidelines of these debates,鈥� Donohue said. 鈥淲hile the Chamber never engages in presidential politics, we will praise or criticize proposals by presidential candidates from both parties. We will lead the opposition to the policies that undermine the job creators, that penalize the innovators and that target the wealth creators and investors that allow Americans to provide for their families and plan for their futures.鈥�

To read more about Donohue鈥檚 address, go to:

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