Remarks at the Mexico Business Summit

Remarks
John J. Sullivan
Deputy Secretary of State
San Luis Potosi, Mexico
October 23, 2017


Date: 10/23/2017 Description: Deputy Secretary of State John Sullivan delivers remarks at the Mexico Business Summit in San Luis Potosi, Mexico on October 23, 2017. - State Dept ImageDEPUTY SECRETARY SULLIVAN: Thank you Mr. Garcia Cacho [Executive Director, Business Summit] for the invitation to speak, and for the warm welcome and introduction. And I’d also like to recognize the Tourism Secretary of Mexico, Secretary De La Madrid, who is joining us today.

I am grateful to be here in this beautiful setting, beautiful San Luis Potosi, for this important Summit – and special thanks to Governor Carreras Lopez for hosting us. This city and state has a deep and rich history. The mines that helped establish this community offered wealth and opportunities for trade. And today, the city has a vibrant economy that encompasses many industries and foreign investment.

This dynamic city is a fitting backdrop for this 15th annual Business Summit, where important questions about Mexico’s future – including its strategic priorities around the globe – are addressed.

Now as many of you may know, unlike Secretary Tillerson, I am not a native Texan – I did not grow up as an immediate neighbor to Mexico.

But, several members of my family lived for many years in Cuernavaca. So, although I was born and raised in New England, I’ve always considered myself at least partially a “mexicano.” I’ve always understood Mexico to be a strong partner of the United States.

No one can deny the tremendous importance of the United States’ partnership with our southern neighbor.

The U.S. and Mexico work together on expansive, far-reaching issues that impact the daily lives of all Americans and all Mexicans.

Our strong economic ties, close community and cultural connections, and a shared border provide the foundation for our extensive bilateral cooperation.

We cooperate along our shared border, we work closely on sensitive security and law enforcement issues, and pursue, together, common economic and trade interests.

As recent events have demonstrated, we console and support each other when heartbreaking natural disasters strike, including in my own family´s adopted state of Morelos – we offer assistance to help our communities recover and rebuild.

Together we are grateful for the strong bilateral relationship between our nations, and we must also continue to work together to address broader regional and global issues, such as countering narcotics trafficking, building prosperity in Central America, creating regional consensus on Venezuela, and generating support at the United Nations for sanctions on North Korea.

So, I am delighted to have this opportunity to talk with all of you – leaders and entrepreneurs from across Mexico – about the nature of our close bilateral relationship.

The first issue I’d like to address is the strength of the US-Mexico economic partnership – and how we depend on each other for trade, economic growth, and the prosperity of our entire continent.

Mexico is the United States’ third largest trading partner and second largest export market. Two-way trade in goods and services totaled $587 billion last year.

Our agricultural trade is particularly impressive.

Mexico is the third largest agricultural export market for the United States, buying billions of dollars of corn, soybeans, dairy, pork, and beef. Nearly four-fifths of Mexico’s entire food imports come from the United States.

This expansive trade supports millions of U.S. jobs, both directly and indirectly, to create more opportunities on both sides of the border. According to the U.S. Department of Commerce, the U.S. export of goods and services to Mexico supported more than 1.2 million jobs in 2015.

There is no question that our economies are strongly linked and that we depend on one other. That was true yesterday, is true today, and will be true tomorrow.

However, our economic partnership is not only about our own prosperity, but is dependent upon the economic advancement and success of the entire North American Continent.

For decades, the United States and Mexico have worked with Canada to strengthen our North American export platform for world markets.

Our two countries share this commitment to a competitive and sustainable North American economy that strengthens our businesses, workers, and families.

And now, as we all know, our governments are working on the renegotiation and modernization of NAFTA.

The United States wants an agreement that ensures fair trade and reciprocal market access, and one that will reinvigorate U.S. industry.

That’s why we are eager to complete the NAFTA renegotiations, to modernize the agreement to thrive in the 21st century economy.

We have an historic opportunity to update NAFTA to better account for the modern economy that drives prosperity for each of our countries.

Mexico, the United States, and Canada are all guided by a desire to create jobs, encourage economic growth, and expand opportunity for our own people and for the continent. That is our objective in revisiting NAFTA.

Many Americans have benefited from NAFTA. We now seek to build on those benefits to create a more economically vibrant United States and North America that better serves all of our citizens.

As you all know, we have just completed the fourth round of negotiations. Our negotiators have been working hard and have made a good deal of progress.

Importantly, last week we concluded negotiations on small and medium-sized enterprises and competition, effectively concluding negotiations on those chapters.

Despite this progress, a great deal of work remains ahead – work that will require flexibility and creativity from all parties in order for us to come to a mutually beneficial agreement.

As my friend Ambassador Lighthizer, our US Trade Representative, has said, the negotiators will take the time between now and our next round of negotiations to realistically assess what needs to be done as we continue to work toward a balanced, modern agreement.

Mexico will host a fifth round of talks in Mexico City November 17th through 21st, with additional rounds of negotiation to be scheduled through the first quarter of 2018. And as we press on, we must remember our ultimate goal throughout this process.

Our continent should be the number one place foreign investors and companies want to do business. We need to make sure that we are building an ecosystem here that supports that vision. Renegotiation of NAFTA is a vital part of that.

We will, therefore, continue to work hard toward a successful conclusion of the NAFTA renegotiations.

Now, looking beyond NAFTA, the US-Mexico economic ties are increasingly becoming an energy relationship as well. Every day, we rely more and more on each other to feed our growing energy needs and to fuel our economic growth.

Mexico is our second-largest energy-trading partner and last year, cross-border energy trade approached the $30 billion mark.

Mexico was the fourth-largest source of U.S. crude oil imports in 2016.

More than one-half of Mexico’s gasoline consumption is now exported from the United States, and in 2016, the U.S. exported over $2 billion in natural gas to Mexico.

Opening up the Mexican energy market is critical to the energy security of North America. It has presented a number of opportunities for U.S. businesses that will benefit both our countries.

Several U.S. companies are part of consortia that have won contracts in Mexico’s hydrocarbons and electricity auctions. We are pleased to see Mexico’s success and commitment to transparent hydrocarbon auctions.

For the people of Mexico, an open energy sector provides greater opportunities for investment, and equips Mexican energy producers with the technical know-how to expand production in the future.

We applaud Mexico for developing the vital regulations needed to implement these positive energy reforms, while also regulating a developing industry.

The U.S. and Mexico have been working to implement best practices in this field for the benefit of both of our countries.

For instance, as Mexico developed its regulatory regime after the 2013 and 2014 reforms, we facilitated regulator-to-regulator workshops between the U.S. Department of the Interior and Mexico's hydrocarbons and environment regulators.

In addition, we continue to provide technical assistance, in managing the wholesale energy market and the auctions that allow private sector participation in electrical transmission operations.

We look forward to greater collaboration between the public and private sectors in Mexico to continue the development of this vital natural resource for the benefit of both of our countries.

The United States understands that the economic and energy links between our two nations are vital – and we see no limit to our cooperation on either front.

But underpinning any economic agenda must be a conversation about the importance of security and stability. In order for economic prosperity to flourish, our countries must be safe and stable.

I am sure it goes without saying that it is impossible to address each nation’s security in a vacuum.

We do all have to share a lengthy common border. We have to understand the threats, the challenges, and the solutions to our security in a regional context.

That is why a trilateral approach to North American security is critical.

Threats to the continent and the hemisphere are increasingly complex and require a coordinated response.

The scope of our mutual challenges are daunting: managing migration across borders; ensuring the secure and efficient movement of people and goods across these borders; protecting the health of our citizens; and keeping our people safe – all of these are integral to promoting jobs and prosperity.

Terrorism and transnational organized crime – including human trafficking, human smuggling, illicit finance, and the trafficking of arms and illicit narcotics – also require a closely coordinated, comprehensive approach between our countries.

Our two nations continue to broaden security cooperation to confront these challenges.

For example, the United States and Mexico are working to dismantle transnational criminal organizations – so called TCOs – and combat drug traffickers and human traffickers.

At the May 18 U.S.-Mexico Strategic Dialogue on Disrupting TCOs, our Secretaries of State and Homeland Security advanced our shared goal of developing new ways to attack TCOs’ networks and business model. We have increased our joint efforts, including information sharing, to stem poppy cultivation, heroin production, and combat the movement of fentanyl and other illicit opioids.

On the subject of drugs in the United States, Secretary Tillerson has underscored that this is a shared responsibility. He said during the May 18 TCO dialogue, “we, in the United States, are the market”. This is a devastating problem in the United States.

In 2016, the CDC estimated that 64,000 Americans died from drug overdoses, over 20,000 of which were synthetic opioids, including fentanyl. But the overall problem is not ours alone. An estimated 100,000 Mexicans have died from drug-related violence since 2006.

Stopping the cross-border flow of drugs is a necessary step in putting an end to widespread addiction and drug-related violence. Far too many families in both of our countries have been devastated by this scourge.

By aggressively confronting the cartels operating in the United States and in Mexico, we are doing all we can to stop the criminals who have already caused unspeakable pain to so many.

Together with the Government of Mexico, the United States co-hosted the Conference on Prosperity and Security in Central America in June. A secure and stable Central America contributes to a safer and more prosperous United States by helping to secure our borders, protect U.S. citizens, and increase opportunities for U.S. and other businesses.

In Mexico City just last week, at the U.S.-Mexico Security Cooperation Group meeting, we discussed our common approach to target the production and distribution of illicit narcotics, and our continued efforts to enhance border security. We are also working on ways to deny transnational criminals revenue, and to combat money laundering, human smuggling, and human trafficking.

And in the North American Drug Dialogue, the United States, Mexico and Canada are coordinating a further, trilateral response to the illicit drug problem.

This Dialogue – the only trilateral venue for cooperation on combatting drugs – is focused on confronting the heroin and fentanyl epidemics, including developing mechanisms to share samples of seized illegal drugs and improve information-sharing on how drugs move across our borders.

More rigorous, collaborative efforts to confront the threat posed by the production and distribution of heroin and fentanyl is a priority for the United States.

We are committed to working with our Mexican counterparts to keep our people safe from lawlessness, drugs, and criminal violence.

Fortunately, bilateral cooperation among our law enforcement agencies has never been stronger, even as our militaries continue to recognize the importance of improving communication and cooperation.

At the North American Defense Minister’s Meeting on May 22, Secretary Mattis underscored the need for our three countries to work together to confront broader security challenges.

Our economic success is dependent upon our success in securing our continent.

The United States understands that we share these security challenges of our neighbors. For the prosperity of the United States – and the region – we have ample reason to grow this coordination wherever possible.

In conclusion, allow me to observe that although the Hemisphere faces considerable challenges, we are certainly up to the test – especially with the strengthened commitment of our business communities to engage, and a strong and growing partnership between the United States and Mexico.

For the United States and Mexico to thrive economically, we need to work together, side-by-side, and in close coordination with our friends in the Hemisphere.

Today, we have ample opportunity to boost North America’s economic competitiveness, and to promote a safer, more secure environment for our citizens.

We must continue our collaborative efforts to accomplish that goal for the benefit of all.

Thank you, again, for the privilege of speaking with you today. I look forward to taking your questions.

GARCIA CACHO: In the interest of time, we have collected from the audience a couple of questions. First, to the state of the relationship between our two countries. Reading the headlines in recent weeks, one could easily assume the state of the U.S.-Mexico relationship is at an all-time low. Is that how you see it? And where do you see relations between our two countries going from here?

DEPUTY SECRETARY SULLIVAN: Well, I would say, in fact, that our relationship is not at a low point. It’s impossible to have a relationship that’s as troubled as the United States has with some other countries. Our bonds with Mexico, from our heritage, our culture, our history, our shared border – we are inseparable. We’re neighbors. We’re allies. We’re partners. All of the people in this room, all of the conversations that are going on, yesterday and today, where women and men from our two countries are discussing business transactions, their common interest in our societies – the number of Americans, such as my family, that have family members in Mexico and vice versa the number of Mexican families who have relatives who live in the United States -- we are inseparable. That doesn’t mean we don’t have challenges in our relationship. As any husband and wife or siblings can attest: the closer that two people are the more often there are points of disagreement and friction.

We are engaged now in a NAFTA renegotiations which are taking up a lot of space in our newspapers and on our newscasts. I recall from more than 25 years ago there was similar anxiety, distress, news reports. We had a presidential candidate talking about a giant sucking sound that was going to be coming from Mexico. All the anxiety, that jobs were going to be lost, and so fourth. But we ultimately saw our way through to getting NAFTA passed. It’s benefitted us over the last 25 years it’s time for it to be updated, to be renegotiated. That’s what president Trump is focused on. We’re not looking to in any way sabotage our economic relationship with Mexico. It’s too deep and profound for us to do that. NAFTA is one part of that, but our relationship is much broader. So, no, we’re not in a trough or a low point in our relationship. I think there’s a lot we have to look forward to.

GARCIA CACHO: Let me switch topics and go to Energy. Given Mexico's historic energy reforms and North American energy ‎resources, how do you view the future of North American energy security?

DEPUTY SECRETARY SULLIVAN: Well I think the developments, as I mentioned in my remarks, in Mexico’s energy markets over the last few years, have been profound and have had a substantial effect – a positive effect – in the United States on the relationship between the United States and Mexico on the development, the resilience, the security of our energy resources. It was not that long ago that we in the United States were concerned about our vulnerability to energy supplies from other parts of the world. That situation has changed. Our relationship with Mexico has a great deal to do with that - our energy relationship. As I discussed in my remarks: it’s a two way street. We are importing substantial amounts of crude oil from the United States.

We’re exporting refined products to Mexico. I think our energy markets are growing – are flourishing. And will continue to do so. We hope to encourage the developments that started under the current administration in Mexico with the opening of the energy markets. We hope to encourage that, and build our energy markets – our connections – even closer.

GARCIA CACHO: Well Mr. Deputy Secretary, unfortunately, this is the top of the time have. As you know, we have a few more sessions. And then we will be welcoming President Peña Nieto. We thank you again be being with us and sharing your thoughts. Please join me in a round of applause.