1. Presented by China Advanced Research Center San Antonio, Texas, USA Investment & Trade Opportunities for Chinese Enterprises under NAFTA

2. What is NAFTA?

3. Preparietary Information Omega International Group, Inc. 3 NAFTA:  “North America Free Trade Agreement”  A trade agreement between the US, Canada and Mexico  Designed to reduce restrictions on trade and investment between the US, Canada and Mexico  Built on the Canada US Trade Agreement signed in 1989  Took effect on January 1, 1994  Scope of NAFTA:  All of North America  400 million population  US $8 trillion in goods and services

4. NAFTA Impact:

5. Preparietary Information Omega International Group, Inc. 5 NAFTA: 1994 – 1996: The First two years  A trade increase of $127 billion between the U.S., Canada and Mexico -- a 43 percent gain  U.S. exports to Mexico hit a record $57 billion -- an increase of 37 percent  In the fourth quarter of 1996 alone, the Department of Commerce reports U.S. exports to Mexico increased at an annual rate of $64 billion.  U.S. market share in Mexico increased from 69 percent to 76 percent of total Mexican imports.

6. Preparietary Information Omega International Group, Inc. 6 TRADE AMONG NAFTA COUNTRIES Longer term: 1985 – 2000 (Millions of 1996 USD)

7. Global View:

8. Preparietary Information Omega International Group, Inc. 8 Tri-lateral Collaboration for 21 st Century  Global economics is the wave of the 21 st Century.  With its entry to WTO, China is ready for global expansion.  Three driving forces: Culture, Management and Technology should be closely examined for this global collaboration.  Tri-lateral Collaboration among China / US / Mexico business can generate significant impact in Pan Pacific trade practices.  Chinese investments in the US can provide direct access to the North American investment and consumer markets via NAFTA

9. Global Trends:

10. Preparietary Information Omega International Group, Inc. 10 SHARE OF WORLD INCOME 19802000 U.S. 21%22% P. R. CHINA 4%12% MEXICO 2% Source: IMF

11. Preparietary Information Omega International Group, Inc. 11 Redistribution of Income brings Opportunity  China’s share of World Income is increasing dramatically  Cash available = Opportunity for Global Investments  US share of World Income has slowed down  Welcomes Global Investments and Trade for growth  Mexico’s share of World Income remains flat  Needs Trade and Investments for growth

12. Preparietary Information Omega International Group, Inc. 12 MEXICO: SHARE OF GDP (Share of Mexico’s Total) Population19932002 Northern States17%21%24% Southern States11%5%  On a per-capita basis, the North contributes three times as much to Mexico’s GDP;  Regional GDP is growing more than twice as fast in the North. Source: INEGI; CONAPO

13. Preparietary Information Omega International Group, Inc. 13 Cross Boarder Trends

14. Opportunities in NAFTA:

15. Preparietary Information Omega International Group, Inc. 15 Investment Opportunities/Benefits:  Direct Facilities ownership in US Foreign Trade Zone  Business alliances with US owned companies for import/export under NAFTA  Business partnerships with US owned companies for import/export under NAFTA  Light Manufacturing in US Foreign Trade Zone for import/export under NAFTA  Product distribution from US Foreign Trade Zone under NAFTA  Direct access to the Maquiladora Program  Local and federal tax advantages  Access to technology and markets  Joint development of products and services  Import/Export tax advantages  Import/Export tariff advantages  Teaming with Mexican cross boarder manufacturing Opportunities Benefits

16. NAFTA Connection: Why Texas? NAFTA Center, Business Environment

17. Preparietary Information Omega International Group, Inc. 17 TEXAS - NAFTA Center  By 2002, largest exporter among U.S. states  Its exports to Mexico and Canada doubled from 1993 to 2003, from $20 to $43 bn.  Channeled 46% of all U.S. exports to Mexico (2000)

18. Preparietary Information Omega International Group, Inc. 18 TEXAS - Business Environment: Highly ranked among all US states Texas’ largest export market is NAFTA Second in US for new job growth Sixth in the US “e-Government” index score Competitive Tax Structure Competitive Labor Force Innovative Business Environment Active Foreign Trade Zone

19. NAFTA Connection: San Antonio is Unique Location, Infrastructure

20. Preparietary Information Omega International Group, Inc. 20 San Antonio - Location: Gateway to Mexico’s fastest growing regions

21. Preparietary Information Omega International Group, Inc. 21 San Antonio -Infrastructure: In place and ready to serve growing markets Highway and Rail Air Travel

22. China vs Mexico in trading with US

23. Preparietary Information Omega International Group, Inc. 23 Table 1 U.S. imports from leading suppliers, 2000-2005 Supplier 2000 2001 2002 2003 2004 2005 Change 2000/05 Share in 2005 Billion U.S. dollarsPercent EU 152182192242422702973618 Canada2292172112242562882617 China10010212515219624314315 Mexico1351311341371551692510 Japan146126121118130138-58 All other3773383403774535274032 Total1,2051,1331,1551,2501,4601,66238100 Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

24. Preparietary Information Omega International Group, Inc. 24 Table 2 U.S. producers’ shipments of manufactured goods, total U.S. imports from China, 2000-2005 Category 2000 2001 2002 2003 2004 2005 Change 2000/05 (percent) U.S. producers’ shipments of manufactured goods (billion U.S. dollars) 4,20 9 3,970 3,89 2 3,99 9 4,37 4 4,681 11 Total imports from China (billions dollars)100102125152196243143 Ratio of total U.S. imports from China to U.S. producers shipments of manufactured goods (percent) 2.4 2.6 3.2 3.8 4.5 5.2 n.a. Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

25. Preparietary Information Omega International Group, Inc. 25

26. Preparietary Information Omega International Group, Inc. 26 Table Apparel: U.S. imports from selected trading partners, 2000-2005 Country 2000 2001 2002 2003 2004 2005 Change, 2000/05 Share of total in 2005 Billion U.S. dollarsPercent China8.58.99.611.413.620.013526 Mexico8.78.17.77.26.96.3-288 Canada1.91.8 1.7 1.5-212 Japan0.10.2 0.3 0.10* All other45.145.044.647.749.948.7864 Total64.464.063.968.372.476.519100 * Less than 0.5 percent. Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

27. Preparietary Information Omega International Group, Inc. 27 Table Computer hardware: U.S. imports from selected trading partners, 2000-2005 Country 2000 2001 2002 2003 2004 2005 Change, 2000/05 Share of total in 2005 Billion U.S. dollarsPercent China10.710.514.922.133.940.327743 Mexico9.010.48.97.67.87.2-208 Japan14.510.28.77.06.86.5-557 Canada3.72.81.71.51.71.8-512 All other52.440.641.538.639.138.2-2741 Total90.474.575.876.989.394.04100 Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

28. Preparietary Information Omega International Group, Inc. 28 Table Telephone equipment: U.S. imports from selected trading partners, 2000-2005 Country 2000 2001 2002 2003 2004 2005 Change, 2000/05 Share of total in 2005 Billion U.S. dollarsPercent China2.93.24.75.99.614.439729 Mexico4.64.44.24.75.95.62211 Canada9.23.93.02.52.73.3-647 Japan3.92.51.81.51.61.9-514 All other11.513.214.316.419.524.010949 Total32.127.227.931.039.349.253100 Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

29. Preparietary Information Omega International Group, Inc. 29 Table 7 Household appliances: U.S. imports from selected trading partners, 2000-2005 Countr y 2000 2001 2002 2003 2004 2005 Chang e, 2000/0 5 Share of total in 2005 Billion U.S. dollarsPercent China2.42.83.44.14.95.713839 Mexico1.51.82.02.12.32.78019 Canada0.90.80.91.0 117 Japan0.2 0.3502 All other 2.72.63.14.04.14.87833 Total7.78.49.611.612.514.588100 Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

30. Preparietary Information Omega International Group, Inc. 30 Table 8 Consumer electronics (except televisions): U.S. imports from selected trading partners, 2000-2005 Countr y 2000 2001 2002 2003 2004 2005 Change, 2000/05 Share of total in 2005 Billion U.S. dollarsPercent China6.3 8.28.811.613.611653 Japan5.84.24.5 4.3-2617 Mexico3.02.82.52.3 2.2-278 Canada0.1 0.21001 All other6.76.2 5.95.6-1622 Total22.019.521.5 24.425.918100 Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

31. Preparietary Information Omega International Group, Inc. 31 Table 9 Furniture: U.S. imports from selected trading partners, 2000-2005 Count ry 2000 2001 2002 2003 2004 2005 Chang e, 2000/0 5 Share of total in 2005 Billion U.S. dollarsPercent China4.14.66.48.09.811.718548 Canad a 4.23.9383.84.04.1-217 Mexico1.00.91.0 1.2 205 Japan0.1*** 0* All other 5.85.45.86.16.77.22430 Total15.214.817.019.021.824.360100 * Denotes less than $50 million or less than 0.5 percent. Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

32. Preparietary Information Omega International Group, Inc. 32 Table 10 Motor vehicles: U.S. imports from selected trading partners, 2000-2005 Country 2000 2001 2002 2003 2004 2005 Change, 2000/05 Share of total in 2005 Billion U.S. dollarsPercent Canada45.741.241.641.046.748.5633 Japan34.533.035.233.133.235.9425 Mexico21.021.320.819.319.118.5-1213 China*****0** All other28.431,835.741.043.843.35230 Total129.6127.3133.3134.4142.8146.213100 * Denotes less than $50 million or less than 0.5 percent. Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

33. Preparietary Information Omega International Group, Inc. 33 Table 11 Auto parts: U.S. imports from selected trading partners, 2000-2005 Country 2000 2001 2002 2003 2004 2005 Change, 2000/05 Share of total in 2005 Billion U.S. dollarsPercent Mexico14.614.016.017.319.421.04427 Canada14.512.914.215.516.918.12524 Japan11.911.112.513.315.016.13521 China0.80.91.31.72.43.23004 All other11.010.512.214.015.818.46724 Total52.849.456.261.869.576.845100 Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

34. Preparietary Information Omega International Group, Inc. 34 Table 12 Television receivers and video monitors: U.S. imports from selected trading partners, 2000-2005 Country 2000 2001 2002 2003 2004 2005 Change, 2000/05 Share of total in 2005 Billion U.S. dollarsPercent Mexico4.95.15.25.57.710.010444 China0.20.30.81.52.45.12,25022 Japan0.71.31.72.23.02.627111 Canada******** All other1.92.02.93.44.45.016322 Total7.78.610.612.717.522.7195100 * Denotes less than $50 million or less than 0.5 percent. Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

35. Preparietary Information Omega International Group, Inc. 35 Table 13 Measuring, testing, and controlling instruments: U.S. imports from selected trading partners, 2000-2005 Countr y 2000 2001 2002 2003 2004 2005 Chang e, 2000/05 Share of total in 2005 Billion U.S. dollarsPercent Mexico2.6 2.83.12.9 1219 Japan2.32.11.92.02.4 416 Canada1.1 1.01.21.3188 China0.40.6 0.81.21.32258 All other 5.45.55.15.66.77.53949 Total11.711.811.612.614.415.432100 Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

36. Preparietary Information Omega International Group, Inc. 36 Table 14 Electric motors, generators, and related equipment: U.S. imports from selected trading partners, 2000-2005 Country 2000 2001 2002 2003 2004 2005 Change, 2000/05 Share of total in 2005 Billion U.S. dollarsPercent Mexico2.01.92.12.2 2.42028 Japan1.21.61.41.01.11.3815 China0.4 0.60.70.91.117513 Canada0.50.60.5 0.6207 All other2.43.12.62.42.33.12936 Total6.57.67.26.87.08.531100 Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

37. Preparietary Information Omega International Group, Inc. 37 Table 15 Medical goods: U.S. imports from selected trading partners, 2000-2005 Country 2000 2001 2002 2003 2004 2005 Change, 2000/05 Share of total in 2005 Billion U.S. dollarsPercent Mexico1.31.52.02.32.63.013115 Japan1.3 1.51.7318 China0.40.5 0.60.70.91254 Canada0.3 0.40.5 0.61003 All other5.97.39.011.413.714.314269 Total9.210.913.216.119.020.5123100 Source: Compiled by the U.S. International Trade Commission from official statistics of the U.S. Department of Commerce.

38. Preparietary Information Omega International Group, Inc. 38

39. Preparietary Information Omega International Group, Inc. 39 Products for which Mexico is an important supplier to the U.S. market, but China is not: 1.See tables 10, 11, 13, 14, and 15: Motor vehicles Auto parts Measuring, testing, and controlling instruments Electric motors, generators, and related equipment Medical goods 2.For these categories, Mexico supplied 18 percent of U.S. imports in 2005 and China supplied 2 percent. 3.Mexico is most competitive relative to China in products with the following characteristics a.High ratio of weight to value (1) Motor vehicles (2)Large screen televisions (3) Major household appliances b.Quality (rather than price) intensive (1) Medical goods (2) Process control instruments c.Are inputs for industries that require just-in-time delivery, customized production, or require frequent design changes (1)Auto parts d.Protection in intellectual property is important

40. Preparietary Information Omega International Group, Inc. 40 Products for which China supplied over one half of U.S. imports in 2005 1 Table 16Toys, dolls, games, sporting goods, and bicycles Leather goods, including footwear, luggage, & handbags Lamps and lighting fittings Umbrellas, brooms, & brushes Consumer electronics & portable electric hand tools 2.For these categories, Mexico supplied 6 percent of U.S. imports in 2005 and China supplied 66 percent. 3.These products are: (1) Labor intensive (many require sewing) (2)Have long production runs (3)Require few style changes

41. Preparietary Information Omega International Group, Inc. 41 Products where competition between Mexico and China is most intense: 1.See tables 4-9, & 12 Computer hardware Product life cycle: Mexico at the start up phase and end (customization) China during mature phase with long production runs ApparelChina—light weight & labor intensive Mexico—heavier items, quick turn around, less sewing Telephone and telegraph equipmentChina—hand sets & cell phones Mexico—switch gear & other equip. for phone companies Consumer electronics (except televisions)—all China FurnitureChina—wood household furniture (lathe work) Mexico—furniture for the Southern California market Household appliancesChina—counter top appliance Mexico—major appliances (washers, dryers, refrigerators) Televisions & computer monitors: Mexico—larger screen televisions China—computer monitors and smaller televisions Motors and generators:Mexico leads China in all categories, especially medium/larger sizes China—competitive only in the smaller-sized motors

42. Preparietary Information Omega International Group, Inc. 42 Opportunities for cooperation between China and Mexico A. Follow the Japanese and Korean models for investment in manufacturing facilities in Mexico to supply to U.S. market, using North America suppliers for materials and components, as well as suppliers in Asia 1.Household Appliance 2.Fabricated Metals 3.Auto Parts B.Invest in textile knitting and weaving mills to supply fabrics for the North American production of apparel and textile goods rather than shipping final goods from China.

43. China Advanced Research Center Thank You