The U.S.-Mexico border is the locus of a chaotic influx of migrants from across the Americas that shows no signs of abating. The American opioid crisis is fueled by cheap pharmaceuticals smuggled north by Mexico’s drug cartels.
Yet at the same time economic cooperation among North America’s three increasingly intertwined countries is setting the stage for an era of growth and rising prosperity, many experts say. Post-pandemic, the global economy is shifting increasingly from globalization to what economists have dubbed “regionalization,” and the North American trade area is ideally positioned to capitalize.
Why We Wrote This
The three North American leaders meeting in Mexico next week are well positioned, in theory, to take advantage of shifts in global trade. But they have pressing short-term crises to overcome first.
It is this mix of regional crises against a promising economic backdrop that President Joe Biden will confront as he meets with the leaders of Mexico and Canada next week.
“There are good things going on that over the long term can deliver growth and prosperity across North America, especially if the leaders can enhance existing regional cooperation,” says Earl Anthony Wayne, a former U.S. ambassador to Mexico.
But those positive trends could end up “obscured” at the summit. “Migration and border management are the really big issues, but no one is coming up with good solutions,” he adds. “The shortcomings in handling these critical border issues affect how all our peoples perceive the prospects for the North American community.”
As Joe Biden visits Mexico City Monday – the first foray by a U.S. president to the southern neighbor in nearly a decade – the prevailing perception of the U.S.-Mexico relationship is one of crisis, dysfunction, and danger.
The U.S.-Mexico border is the locus of a chaotic influx of migrants from across the Americas that shows no signs of abating. The opioid crisis that led to more than 100,000 American deaths last year is fueled by cheap pharmaceuticals like fentanyl smuggled north by Mexico’s drug cartels. Communities on the north side of the border complain that lax enforcement of environmental regulations to the south is fouling the region’s air and scarce water.
Yet at the same time, the U.S.-Mexico border and economic cooperation more broadly among North America’s three increasingly intertwined countries – the United States, Mexico, and Canada – are also setting the stage for an era of growth and rising prosperity, many international economists and regional experts say.
Why We Wrote This
The three North American leaders meeting in Mexico next week are well positioned, in theory, to take advantage of shifts in global trade. But they have pressing short-term crises to overcome first.
Post-pandemic, the global economy is shifting increasingly from globalization to what economists have dubbed “regionalization” – a tendency toward regional poles of production and investment, driven by everything from the disruption of supply chains to the U.S.-China trade war and environmental concerns.
The North American trade area is ideally positioned to capitalize, analysts say.
Decades of cooperation first formalized in the 1994 North American Free Trade Agreement (NAFTA) and updated in 2018 in the U.S.-Mexico-Canada Agreement (USMCA) laid the groundwork for the three economic partners to take advantage of that trend as well as the so-called near-shoring of manufacturing jobs from China.
It is this mix of the everyday perception of regional crisis against a promising economic backdrop that President Biden will confront as he meets with the leaders of Mexico and Canada next week.
Crisis “obscuring” opportunity
“There are good things going on that over the long term can deliver growth and prosperity across North America, especially if the leaders can enhance existing regional cooperation in ways that will allow for taking greater advantage of global trends,” says Earl Anthony Wayne, a former U.S. ambassador to Mexico and now U.S.-Mexico public policy fellow at the Wilson Center.
But those positive trends could end up “obscured” by the alarming events and pressing “short-term problems” taking center stage as the North American leaders meet in Mexico City, he says.
“In the short term, migration and border management are the really big issues, but no one is coming up with good solutions and we are struggling to manage all the people coming up through Mexico,” Ambassador Wayne adds. “There are no easy solutions … but the shortcomings in handling these critical border issues affect how all our peoples perceive the prospects for the North American community.”
Over their two days together, the three leaders will meet bilaterally, and then together for the traditional “tres amigos” summit. It’s at his bilateral sit-down with Mexican President Andrés Manuel López Obrador that President Biden will take up what Ambassador Wayne describes as the “difficult short-term issues” – migration, crime, and the influx of fentanyl – centered on the border. The more long-term questions such as how to build a mutually beneficial environment for economic growth and what actions can help the three trade and investment partners benefit from the regionalization trend will fall to the trilateral summit.
Mr. Biden is no stranger to border and hemispheric immigration issues, having served as President Barack Obama’s point man on those topics when he was vice president. But as president he has shown little interest in the border, regional experts say, even as the numbers of asylum-seekers crossing the border from Mexico has skyrocketed over the last year. As recently as last month, during a trip to Arizona, Mr. Biden said he would not be visiting the border because he had “more important things going on.”
In an apparent effort to correct that misstep, the president will stop Sunday in El Paso, Texas, on the border on his way to Mexico City. In a speech Thursday focused on immigration, he called the country’s immigration system “broken” – a characterization that became a Republican mantra during the midterm elections.
AMLO’s ideological bent
President López Obrador – widely known simply as AMLO for his initials – has not been averse to steps in Mexico to discourage the rising flow north of migrants from Central America, Venezuela, and Haiti, Mexican analysts say.
But where the leftist and socialist leader differs starkly from his North American partners is in his overt antagonism toward private enterprise and foreign direct investment, those analysts add. That orientation from the top has discouraged U.S. companies and limited Mexico’s potential as a rich beneficiary of the near-shoring of manufacturing from China to industrial parks closer to the U.S. market.
“López Obrador is a return to the old way in Mexico before the mid-1980s of seeing the proximity of the United States and the border not as an advantage to be exploited for the economic potential but as a burden,” says Luis Rubio, chair of the Mexico Evalua consultancy in Mexico City and an expert in U.S.-Mexico economic relations.
Marco Ugarte/AP/File
Despite AMLO’s ideological bent and actions discouraging private investment – reversing, for example, past administrations’ opening up of the state-run oil industry to foreign investment – he is nevertheless reaping some benefits from the global shift to near-shoring, Mr. Rubio says.
“The odd consequence is that he is benefiting from the regional cooperation and NAFTA/USMCA, which have as a main objective to separate political decisions from economic ones,” Mr. Rubio adds, “even as everything he is doing aims to discourage private investments and growth from foreign companies coming here.”
Global trade analysts had predicted a bonanza for Mexico as U.S. and other international companies shifted manufacturing out of China, beginning with President Donald Trump’s trade war with China and then as the pandemic’s impact on global supply chains deepened.
But the gold rush has yet to materialize. Mexico’s share of all manufactured goods imported to the U.S. between 2018 and 2021 remained nearly flat, according to a report from the international consulting firm Kearney. Countries benefiting from the U.S.-China trade war and near-shoring were mostly China’s low-cost competitors in Asia, including Vietnam, Taiwan, and increasingly India.
Shifting U.S. investment
At the same time, there are recent signs that the regionalization trend is building steam in North America.
In 2021 there was more U.S. investment in Mexico than in China, according to a McKinsey Global Institute report. Anecdotal evidence from Monterrey, Ciudad Juárez, Nuevo Laredo, and other northern Mexico cities underscores U.S. companies’ keen interest in locating there.
Ambassador Wayne notes that over the last year, Mexico and Canada’s share of total U.S. foreign trade rose by about 1%. U.S. government statistics last fall showed that “trade with our North American neighbors rose to $3 million a minute,” he says. “And we should remember that around 12 million U.S. jobs are supported by trade with our two neighbors.”
But even with that, no one should expect any measures from AMLO at next week’s summit suggesting that he aims to encourage near-shoring of manufacturing jobs to Mexico, Mr. Rubio of Mexico Evalua says. That’s especially true, he adds, since, like Mr. Biden, the Mexican president is gearing up to seek reelection in 2024.
Still, Ambassador Wayne says that “on the positive side” the two countries have revived “a whole series of processes and mechanisms for maintaining dialogue and cooperation” that fell off during the Trump years.
“We’ve learned sometimes the hard way that both countries are better served when we are cooperating on so many issues of mutual interest,” he says. “So the fact people are back talking to each other again is a plus.”