Mexico – US: Let’s Talk About Trade

Enrique Peña Nieto, Mexico’s reformist leader, had an important phone call this week: it was with Barack Obama, and the conversation was to confirm that the US president would visit his southern neighbour during the first week of May.

The forthcoming trip, which Mexico’s foreign ministry has described as a working visit to cover everything from trade and competitiveness to security and education, is a big deal for both presidents, but in particular for Peña Nieto.

Not only will it add to political momentum at home, but the visit is also a chance for Peña Nieto to shift the discourse on the relationship between the two countries away from drug violence – and towards trade.

For the past six years, US-Mexico relations have pivoted on security issues. Mexico’s drug war has caused a spike in violence along the shared 2,000-mile border. The estimated 70,000 resulting deaths in Mexico have led to concerns in Washington, not least that some of the violence could spill over into the southwestern states.

All of that is understandable. But the security issue has hijacked what should be a much wider and richer agenda. Peña Nieto is acutely aware of this, and he has made clear that he wants to recast it along trade and economic lines.

Even before taking office, the 46-year-old former state governor said in a Washington Post opinion piece before visiting the White House in November: “It is a mistake to limit our bilateral relationship to drugs and security concerns…our mutual interests are too vast and complex to be restricted in this short-sighted way”.

In an insightful column recently, the FT’s Edward Luce highlighted some of that “vastness and complexity”. Bilateral trade in goods, which last year reached nearly US$500bn, is booming, he pointed out. But it is also increasingly intertwined: while about 80 per cent of all Mexican exports go to the US, it is also true that more than 40 per cent of the value of Mexican exports to the US are US-made content.

At the same time, Mexican companies have been investing heavily in the US in recent years, not just US companies in Mexico. Cemex is the largest cement maker in the US. Grupo Bimbo recently acquired Sara Lee for almost $1bn. Univision, which is partly owned by Televisa, the Mexican broadcaster, is now the fifth-largest television network in the US.

With Mexico able to provide US companies with young, skilled and cheap labour, and with the US able to play a potentially crucial role in the transfer of technology and know-how to its southern neighbour, there is clearly plenty of room for the two administrations to push ahead with further economic integration.

Immigration reform in the US could help harness some of Mexico’s advantages for its northern partner; an opening of Mexico’s highly protected oil sector, which is dominated by state behemoth Pemex, could provide untold opportunities for US oil companies as well as the sort of technology-transfer Mexico desperately needs.

For all the promise, there is a lot wrong, however. The booming trade between the two countries has occurred in spite of rather than thanks to border infrastructure. The hours-long wait that pedestrians, cars and trucks commonly have to endure as they cross from Mexico into the US at various check points is, from any perspective, an embarrassing reminder that the US has to do much more to smooth the flow of people and goods.

In light of the glaring potential for both countries, but also of the urgent need for better infrastructure and communication, it is particularly auspicious that both Obama and Peña Nieto have started their presidential terms at the same time – something that only happens between US and Mexican presidents every 12 years. They should not squander that opportunity.

Source: Financial Times


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