PEMEX and the new Mexico trade deal - What's Your Point?

PEMEX which ordered the $229 million worth of equipment, refuses to pay the cost of construction. 

Joining Greg Groogan on "What's Your Point?" this week: Jessica Colon,- Republican strategist, Tomaro Bell - super neighborhood leader, commentator, Steve Toth -  former Republican State Representative, Laura Moser - former Democratic Congressional candidate, Bill King - columnist and former Kemah mayor, and Tony Diaz - educator and Chicano activist.


Custom made for the national oil company of Mexico, the offshore drilling rig rises 20 stories off the ground. The structure and another just like it have never been used.

That's because Pemex, which ordered the $229 million worth of equipment, refuses to pay the cost of construction, leaving dozens of American companies in dire financial condition.

"They are owned by the government of Mexico and because they are owned by the government they feel like they can do whatever they want without consequences," said Joe Ditta of Southcoast Manufacturing in Galena Park.

Ditta says getting stiffed on his part of the Pemex project triggered heavy layoffs and quite nearly drove him out of business.

"There was absolutely zero reason for Pemex to back out of this. When it went south we lost almost everything. We lost our life savings. We leveraged our homes. They are in jeopardy now," said Ditta.

In Channelview, a massive pile of rusty mast sections at Owens Specialty Company serve as a painful, daily reminder of the broken Pemex deal.

"A lot of people who did the work are no longer here, unfortunately," said Brandt Owens.

"Everybody has had to take cuts. We have lost so many of our guys," said Luke Owens, the firm's General Manager.

The Owens brothers say the breach of faith by Mexico did deep and lasting damage to the business their grandfather built from scratch 44 years ago.

They and many others are now calling on our nation's leaders to set things right.

"This is not just a few companies. This is the livelihood of lots of people," said Luke Owens.

Documents reviewed by FOX 26 indicate the two rigs were approximately 80 percent complete and fully approved by inspectors when Pemex revealed it would not pay for the equipment.

Calls and emails to Pemex seeking comment have not been returned.

PEMEX responded to FOX 26 late Thursday night saying, “During the execution of the works, it was detected that the modular units did not meet the basic specifications requested, so in the exercise of the contractual rights that the consortium knew and accepted since the signing of the contract, the trust terminated the contracts.”

PEMEX goes on to say, “Pemex considers that the termination of the contracts was in accordance with the applicable regulations, and the causes for which the contracts had to be terminated are attributable to the consortium. Furthermore, prior to the termination of the contracts, the consortium was allowed to submit viable projects to correct the deficiencies, however, it did not do so.”

WASHINGTON (AP) - When President Donald Trump celebrated on Monday the workings of a new deal with Mexico that would replace the North American Free Trade Agreement, numerous questions were left unsettled.

No full text has yet been provided. On Friday, the Trump administration plans to send Congress a formal notice of the trade agreement. Not until 30 days after that would lawmakers likely receive a text of the deal.

But based on what is already known, here is a snapshot of key changes in the agreement so far:



Trump, ever focused on branding, considers the popular name for the North American Free Trade Agreement to be toxic. For Trump and other critics of NAFTA, the 1994 landmark deal might have helped companies trade more freely across national borders, but it also caused the gutting of the industrial Midwest.

Many economists and historians argue that the reality is more nuanced. They point out that the industrial Midwest was already struggling with closures before NAFTA was signed. They also note that while certain sectors of U.S. manufacturing were hurt by NAFTA, American consumers and companies - and workers in some industries, like agriculture - benefited from it.

But Trump wants to end that debate and scrap a name he says is tainted.

"I like to call this deal the United States-Mexico Trade Agreement," he said Monday. "I think it's an elegant name."

Of course, there are a few problems with this particular name. Most obviously, it excludes Canada, the third member country in NAFTA. Second, it gives the United States top billing, which could be interpreted as an affront to Mexicans and Canadians.



This is the wild card. The proposed deal between Mexico and the United States intensifies pressure on Canada to agree to the same terms.

That said, the Trump administration had pursued the negotiations to update NAFTA with the assumption that Canada would be included. So it's unclear whether a U.S. deal with Mexico alone would clear Congress' requirements. Chrystia Freeland, Canada's minister of foreign affairs, came to Washington on Tuesday in hopes of reaching an agreement.

Losing Canada would be a problem for the United States.

Trump on Monday seemed to suggest that trade with Canada was a "smaller segment," while Mexico is a "very large trading partner." It's not quite clear if Trump was referring to the state of the negotiating process or to the flow of imports and exports among these countries.

But Canada is a dominant exporter of crude oil to the United States: It accounts for 47 percent of the barrels imported to the United States, according to the U.S. Census Bureau.

Canada was the United States' second largest trading partner in 2017, ranking just below China. Mexico is the third largest U.S. trading partner.



Of the $149 billion worth of auto parts imported into the United States last year, 48 percent came from Mexico and Canada, according to the U.S. International Trade Administration. The proposed deal between the United States and Mexico would likely increase that figure.

It would require that 75 percent of autos contain parts made in North America, up from 62.5 percent now required by NAFTA. And 70 percent of the steel, aluminum and glass used to make a vehicle must also originate in North America. These requirements could possibly lead to fewer imports from Asia, Europe and South America.



A major wage gap separates autoworkers in the United States and Mexico, and this new provision aims to narrow it. An average Mexican autoworker earned $5.21 an hour, and auto parts workers make even less than that, according to a 2016 analysis by the Center for Automotive Research. That is about one-fourth the average hourly earnings of $21.68 for a U.S. autoworker, according to the Bureau of Labor Statistics.

Trump can say that the wage requirement will preserve factory jobs in the United States, while the Mexican government can say it will boost incomes in that country.

"There is no doubt this agreement creates incentives for the salaries in the auto industry grow over time," Foreign Minister Luis Videgaray Caso of Mexico told The Associated Press. "A percentage of the value of the vehicle must be made in areas with high salaries. This generates a clear incentive for the salaries in Mexico eventually reach a higher level."



The agreement would force countries to update the trade pact. One of the criticisms of the 24 year-old North American Free Trade Agreement was that it no longer applies to the economy as it exists today. It was forged before the internet, smartphones, social media or China's entrance into the World Trade Organization - transformations that leave parts of NAFTA woefully outdated.

This new clause could create two forms of pressure: Countries would feel obligated to update the agreement in order to preserve it. But businesses could also face tremendous uncertainty if the agreement was on the verge of ending.


AP writer Luis Alonso Lugo contributed to this report.