By Antonio O. Garza Jr. *
In his first 100 days, President Joe Biden set out rebuild vital economic and political relationships with our allies in the region and around the world. Mexico, a crucial ally and one of our leading trade partners, has been at the top of the list. As the Biden administration continues to engage south of the border, ally shoring offers an approach that would strengthen bilateral cooperation and support economic recovery.
On May 7th, Vice President Kamala Harris will meet virtually with President Andrés Manuel López Obrador to talk about immigration. The leaders will likely address March’s uptick in border apprehensions of Mexican single males, who left home due to the lack of jobs. This increase in crossings shows the urgent need to work together on short- and long-term economic issues.
To boost this bilateral collaboration, ally shoring offers the Biden administration a strategy to rebuild our economics with neighboring countries who share our values through further integration of our supply chains, sourcing, and production. The goal is to protect our collective economic and national security. A recent U.S.-Mexico Foundation report, The Case and Path of Development for Ally Shoring: Mexico, offers an insightful roadmap.
The first step would be for the U.S. to work with Mexico and Canada to build upon current efforts to coordinate during the pandemic on critical supplies, R&D, and vaccination trials, in order to ramp up regional capacity. Secondly, the U.S. could provide incentives for private industries to reroute supply chains and identify opportunities for co-production and sourcing in Mexico’s export and emerging sectors.
Thirdly, the U.S. could work with Mexico to develop modern and efficient border infrastructure to facilitate trade, by creating more effective logistics, risk management, and security mechanisms. Finally, to enhance rule of law, bilateral collaboration could focus on adopting additional measures that ensure transparency and carve out clear rules for institutions.
The U.S. and Mexico would build on an already robust foundation of supply chain integration and strong relationships made over the past three decades. The new United States-Mexico-Canada agreement (USMCA) lays out additional groundwork for strengthening commercial ties and synchronizing regulations.
The Covid-19 pandemic revealed weaknesses in critical U.S. supply chains—notably an overreliance on China–– that led to disruptions and lay-offs. In February, Biden called for a review of supply chains in order to mitigate future risks. To build greater supply chain resilience, the administration could enhance cross-border production, trade, and innovation with Mexico.
Ally shoring could also further boost economic recovery. The U.S. economy is already on the upswing, driving economic expansion in Mexico. Remittances to Mexico reached a record high in 2020 and U.S. demand for goods has led to a spike in Mexican exports. Ramping up the co-production of critical supplies and investing in emerging sectors would create new jobs and promote economic growth.
However, ally shoring faces obstacles in Mexico’s current political climate.
For starters, it may be challenging to get Mexico’s buy-in. López Obrador is known for his inward-looking leadership approach. He has been hesitant to collaborate with the U.S., particularly on issues related to investment and security.
At the moment, Mexico does not appear to be positioning itself as the U.S.’ ideal counterpart to mitigate supply chain risks. Since his election in 2018, López Obrador’s uneven stance on private contracts has hampered investor confidence.
On the energy sector, López Obrador has pushed Congress to instate regulatory changes that give preference to state-owned oil companies over private renewable plants. This approach has not only led to legal disputes with investors but may also be at odds with Mexico’s USMCA obligations.
Institution building could present an even greater challenge. In the past few months, security cooperation reached an all-time low. Amid rising tensions, Mexico’s Congress recently passed a law to limit U.S. enforcement operations. The current distrust will make it extremely difficult to collaborate on measures to confront corruption and Mexico’s weak rule of law.
López Obrador continues to pursue an agenda that is widely characterized as anti-business ahead of June’s crucial midterm elections, which will set the tone for the remainder of his presidency. Despite criticism that his administration mismanaged the pandemic and the economy, no real opposition has emerged and his coalition remains ahead in the polls.
López Obrador’s ongoing quest for vaccines creates a diplomatic opportunity. The Biden administration sent 2.7 million AstraZeneca doses to Mexico in March but could now offer a bigger supply to garner additional goodwill and lay the basis for broader partnership.
While it faces hurdles in the short run, ally shoring offers a clear path forward for long-term U.S.-Mexico bilateral collaboration that would make both countries safer and more prosperous. Biden must continue to look for ways to incentivize Mexico to work more closely together on pandemic coordination, supply chains, sourcing, and institution building.
