August 4, 2017

California Senator Ben Hueso’s State Senate Bill 357 would establish a California trade office in Mexico City. The San Diego Regional Chamber of Commerce is the official sponsor of the bill recognizing the importance of having boots on the ground representation at the government and financial capital of our number one trading partner.

Q: Why have representation in Mexico?

A: A trade office is able to assist businesses enter a foreign market and remain competitive. It can also assist in promoting foreign investment in California. California has the sixth largest economy in the world and a leading trade and investment partner, yet we are the only border state without a trade office in Mexico.

Q: What are some examples of the services the office can provide?

A: The primary functions of a trade office include: promoting state businesses, help facilitating business delegations and trade shows, local government advocacy, and providing information and support on incentive packages, site selection, local workforce, and facilitating regulatory systems and permits.

Q: The State of California already has a very positive relationship with Mexico, is this simply motivated by the national political sentiment?

A: A similar bill was introduced by Senator Correa in 2013 long before the current national narrative on the U.S.-Mexico relationship. The bill received full support from the state legislature and the private sector recognizing back then the need for such state promotion in Mexico. The private sector has also supported other bills which would increase trade with Mexico such as the Enhanced Driver’s License bill. Both pieces of legislation were vetoed by Governor Brown. We are at a critical point with California in the spotlight leading on important national issues and in international trade, the relationship with China taking the forefront. It is important we demonstrate California’s commitment to the binational economic and political relationship.

Q: What need does the trade office in Mexico meet that is not currently being fulfilled?

A:

• Individualized State Promotion
  There are federal government agencies with offices in Mexico, but none that have California’s interests as a priority. California can benefit from having someone specialized in California’s economy to promote investment opportunities in our state specifically.

• Quality and consistency of quality
  The quality of the work provided by others depends on the workload and assistance can result in low performance when competing across U.S. interests.

Q: Why in Mexico City?

A: Mexico City is the commercial and political capital of Mexico. Having boots on the ground representation will strengthen the California and Mexico political and commercial relationship.

Q: How many states have representation in Mexico?

A: Twenty-five of the 50 U.S. states have at least one trade office in Mexico.

• California is the only state along the U.S.-Mexico border without a trade office in Mexico.
• 15 of the U.S. states with a trade office in Mexico rank Mexico as their first or second largest export market. Two additional rank it as third.

1. Q. Why should California have representation in Mexico, but not necessarily in other countries?
   

• Mexico is the top market for exports from California – valued at over $25,250 million. Many states only have representation in Mexico and justify the focus with the value of trade the state conducts. Mexico is a priority export market.
• Some state trade offices in Mexico (i.e. Iowa) also provide assistance in South America for the same cost and eliminating the need for additional physical offices.

Q: Do you need a physical office with state employees?

A: Yes, it is important to have a physical presence in Mexico with a representative who is actively working to identify buyers for California goods and services as well as opportunities for California businesses to expand in Mexico. However, it is not necessary to have the office staffed by state employees. Many offices were previously structured in this way and were not economically sustainable. The common model seen across trade offices is to hire an independent contractor. This can be an individual or an existing company which specializes in trade promotion.

Q: What are the staffing needs of a trade office?

A: States have obtained representation in Mexico with as few as 1 to 2 employees.

Q: What is the typical cost?

A: $100,000 to $300,000 annually. As an alternative, the cost can be allocated on a project by project basis or as needed with a contract in place.

Q: Why were previous trade offices in Mexico closed?

A: A downturn in the economy and inefficiencies in the structure and management of the office have caused closures in the past. Under economic downturns, the state can eliminate or temporarily suspend funding. A way to address inefficiency concerns is to create metrics of success for the trade office and monitor the metrics closely. Also, the State (GO-Biz) can increase the rate of return by vetting companies seeking assistance to ensure they are export ready.

Q: Should the office be funded by the private sector?

A: 100 percent of state trade offices are publicly funded in order to prevent any perception of favoritism or bias. State funded and state backed offices also signal a greater commitment from the state which increases credibility and stability, two important factors for a prosperous businesses environment.

Q: In what way are California jobs and businesses adversely impacted on their relationship with Mexico by not having an office in Mexico?

A: California is competing with states who have a direct advocate in Mexico. Mexican businesses seeking to expand into the U.S. are participating in business visits organized by other states. In order to be competitive and attract businesses to California, we must have equal representation.

On a separate front, businesses seeking to expand into the Mexican market are at disadvantage in comparison to the rest of the states that do have an office as they are left to vet consultants on their own, and often receive misguided assistance or none at all. The private sector is collectively investing more time and resources in the services that this office could provide.

Case study:

San Diego Regional Chamber staff recently traveled to Guadalajara and met with two companies considering expansion into the U.S. market. One company is a nationwide transportation (trucking) company and the other is a restaurant chain. Both were considering Texas as their U.S. base of operations. Since the Chamber’s visit, which included promotion of California as the ideal location for the company headquarters, the restaurant business has selected San Diego, California. The Chamber is continuing talks with the trucking company to work on attracting their business to San Diego as well.

Like these businesses, many others consider location based on a wide variety of factors including tax incentives and regulations. California is as competitive as any other state given its ample workforce and quality of life, but the message and advocacy is left to chance without active representation.

For more information on SB 357 click here.

August 4, 2017

On July 27^th, Republican leadership in Congress and the White House formally stepped down from pushing the Border Adjustment Tax. The BAT would have offered tax breaks to U.S. companies exporting goods overseas, but add a tax as high as 20 percent on imported goods.

The border adjustment provision was introduced to the U.S. House of Representatives earlier this year, designed to even out imbalances in money flows across borders and encourage domestic production by increasing the price of imports. During the Chamber’s visit to Mexico City this March, Jerry Sanders discussed the topic with Mayor Kevin Faulconer and Mayor of Tijuana, Juan Manuel Gastelum. He further predicted the tax would be difficult to pass given the presence of Border States who have both Republicans and Democrats “who understand the importance of trade”.

Jerry had also testified along with Congressman Scott Peters at a hearing on border economics, formally opposing the President’s Border Adjustment Tax. Congressman Peters stated that it is not necessary to choose between a safe border and one that facilitates prosperous international trade and tourism.

August 4, 2017

Seventeen Mayors from border cities along the U.S. – Mexico border gathered for the Border Mayors Association Binational Summit 2017 hosted in San Diego and Tijuana on July 26^th and 27^th. Jerry Sanders gave welcoming remarks as one of the three mayors who founded the organization when he served as the Mayor of San Diego. The group gave a unified message in support of free trade as NAFTA negotiations come forward. Mayor Kevin Faulconer commented “even though we’re in different states, we have similar views on the importance of our relationship with Mexico”, and next to Mayor Juan Manuel Gastelum, they highlighted their cities’ interdependence as part of a cross-border region. Both Mayors joined the Chamber’s delegation to Mexico City earlier this year, and plan to join our upcoming trip to Washington D.C. in September.

Chamber VP Paola Avila participated as a speaker on the Modernization of NAFTA panel, highlighting the importance of binational areas to the cross-border economy and North America’s general economic competitiveness.

The Summit allowed the mayors to hear from experts on U.S.-Mexico relations, NAFTA, border infrastructure, urban development, and cross-border tourism. They later signed a joint resolution highlighting the positive impact of trade in job creation -14 million of U.S. jobs, and 43 U.S. states list Canada and Mexico as their first or second largest export market- and urging the President and Congress of the U.S. and of Mexico to modernize and optimize NAFTA ensuring that all businesses, regardless of size, have the opportunity to participate in trade.

To read the BMA resolution click here.

August 4, 2017

Last month Baja California hosted a Health and Wellness Forum.  It welcomed more than 2,000 national and international attendees with more than 80 exhibitors, conferences, panel discussions, and a gastronomic garden.

Mexico is the second most visited location for health and wellness tourism worldwide. The state of Baja welcomed over 2.4 million patients and companions in 2016. The Baja Health and Wellness forum was an important platform to publicize the wide range of health services and products offered in the region.

Governor of Baja, Francisco Vega, highlighted that events like these seek to strengthen the growth and development of its business in the health industry with emphasis on medical tourism.

In recognition of the economic engines that the binational health care and medical tourism are for the region, the Chamber focused on this topic at the Cross-Border Business Forum held August 2^nd.  The Forum addressed key points including the current trends in medical tourism, the programs and partnerships providing healthcare to our binational population, and what the future will bring for this industry as well as the role that the government plays in its development.

August 4, 2017

The Chamber hosted a presentation by Anthony Kleppe, Senior Asset Manager with the General Services Administration (GSA), where he announced a temporary closure of all southbound vehicle traffic on the I-5 and I-805 freeways. Traffic will be redirected to State Route 905 from 3:00 a.m. on Saturday, September 23^rd until noon on Monday, September 25^th, 2017. Therefore, access to Mexico through El Chaparral-San Ysidro Port of Entry will be closed during that period and rerouted to Otay Port of Entry via SR-905. Access through Tecate will also be available.

The closure is part of the ongoing San Ysidro POE enhancement project that will ultimately benefit the cross-border community with the realignment of I-5, expansion of southbound lanes from 5 to 10, and the construction of 8 new additional northbound inspection lanes.

We strongly recommend avoiding crossing to Mexico during the closure and as wait times are expected to be lengthy. MTS network will be operating normally and access to San Ysidro through public transportation will not be affected.

The following stage of the realignment project consists of opening three lanes, with a fourth lane added by the third week of November. The Chamber will continue to provide updates on the project as it develops.

The project is scheduled for completion in June 2019.

To download the GSA 1-5 South Realignment Plan, click here.

To see any updates please visit: www.gsa.gov/5realign

Stage 5 overview, temporary I-5 realignment, and curve complete and open to the public.

August 4, 2017

After much advocacy from the Chamber and partner organizations, PedWest southbound was opened on July 31^st, operating daily from 6:00 a.m. to 10:00 p.m. The completion of this project will significantly improve the efficient movement of the 63,000 pedestrians crossing each day by providing a second pedestrian entrance into Mexico at El Chaparral-San Ysidro Port of Entry.

PedWest will help relieve congestion during the upcoming vehicular lane closures during the realignment of I-5 south. Improving our region’s border infrastructure is a key priority for the Chamber and vital to our region’s economy. The San Diego-Tijuana region continues to solidify its reputation as a model for building bridges and unifying its binational community.