Herfried Wöss
Director General and Partner
Wöss & Partners
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View from the Top

Fre Trade Agreements Beneficial for Mexico and the US

Tue, 09/01/2015 - 16:22

Q: What have been the main highlights of Wöss & Partners’ involvement in the Mexican automotive industry?

A: As one of the pioneering law firms in the sector, we have been supporting the Mexican automotive industry for more than 20 years. The firm has made every effort, from setting up companies and getting them registered in foreign trade programs, organizing their risk management process, to solving tax issues and major arbitrations. The automotive sector represents a significant part of our client base, covering companies from Tier 1 to Tier 3. Recently we intervened in a conflict regarding the distribution market of a major Mexican-Asian company in a Latin American country, and we have even defended the automotive industry against anti-dumping duties on hot and cold rolled steel used by automotive companies.

About 50% of our firm is dedicated to general corporate law, which encapsulates everything related to business and company law, with an emphasis on international business. The other 50% is directed toward special areas in which we are international leaders, such as in arbitration, trade, and infrastructure. Approximately 50% of our clients in the corporate segment are related to automotive.

Q: When certain policy changes are implemented, how do you advise your automotive clients about preparing for them?

A: Normally, automotive clients are well-organized. With the trade cases we had in the 1990s with hot and cold rolled steel, we got exclusion for the automotive industry because the domestic industry could not provide materials with sufficient quality. There were some issues, but they were quickly solved, resulting in a mutually beneficial situation, because the more the industry grows, the more Mexico expands in the international market.

In oil and gas, you have the traditional factor of the industry’s privatization. You need to consider how stringent the regulations will be and how well-adapted industry players will be under new market conditions. There are many variables, from regulations to contract models. Previously, projects were based on administrative contracts, but now we are seeing international contracts and the state has to reduce uncertainties in the legal environment in response. In the automotive industry on the other hand, we know how the process works and Mexico continues to help companies to develop a strong industry.

Q: What advice would you give state governments about changes in their current regulations, in order to attract further investment from foreign companies?

A: The OEMs are concentrating only on a couple of states, so the real question is what these states do differently from others. Communication networks are vital, so any state with transport facilities to the US has an advantage. These states have governments with fairly conservative policies, and they have planned ahead. There are a couple of fundamental issues to resolve with respect to organization and political maturity on how to manage a state. However, these do not only relate to the automotive industry, since a well-managed state will always attract major investments.

Q: Some NAFTA regulations boosted the industry, but others have been detrimental, particularly the entrance of used vehicles. How challenging would it be to close these loopholes created by NAFTA?

A: These imports would happen with or without NAFTA, and they respond to a specific market need. These vehicles are targeted toward people who cannot afford new cars, especially for areas where public transportation is not available. We saw a similar scenario in the pharmaceutical industry. Once performance requirements were abolished, at least two or three of the largest companies moved to Brazil for production. Instead of closing the border to used car imports, it is essential to come up with solutions to produce good quality vehicles at affordable prices for the local population, making sure that technical standards are being met. Import restrictions may only be a temporary solution, but technical standards to ensure safety are likely to be the better solution. The harmonization standards in the Comprehensive and Economic Trade Agreement between the European Union and Canada will hopefully also be adopted in the Trans-Pacific Partnership (TPP) and become the international standard which will lead to further growth of the Mexican automotive industry.