by Oscar Ocampo *
It is a truism that resuming the North American Leaders’ Summit (NALS) after a five-year hiatus is positive news. Beyond collaboration and information exchange among U.S., Canadian and Mexican bureaucracies, along with bilateral high-level level dialogues, the regional perspective matters.
Despite the clear differences in specific thorny issues such as the U.S. interpretation of the automotive rules of origin provisions in the United States-Mexico-Canada Agreement (USMCA) and ”Buy American” policies, Mexico’s energy bill that attempts to close energy markets to privates or Canada’s complaints due to the cancellation of permits for the Keystone XL pipeline project by the Biden Administration, the trilateral summit opens the door for a renewal of what the late Robert Pastor labeled the North American idea.
It would be a mistake to let the political momentum pass without capitalizing it to develop a blueprint to strengthen regional competitiveness vis-à-vis Asian competition within the USCMA framework and beyond.
To build back together as North America and promote a more profound integration of supply chains that enables the region to attract and retain investment in the industries of the future (semiconductors, artificial intelligence, digital economy, automated vehicles, electric mobility, among others) it is indispensable to rethink logistics and energy markets from a regional perspective. Excellence in logistics and energy infrastructure requires a common vision and aligning priorities in Mexico City, Washington, and Ottawa.
Lower renewable generation costs, the shale oil and gas revolution, as well as expanded pipeline networks have positioned North America as one of the world’s most competitive regions regarding energy. The USMCA’s United States-Canada side letter on energy offers a useful framework for regulatory cooperation and transparency specifically regarding access to transmission facilities and pipeline networks. An eventual adherence of Mexico to these provisions would represent a stepping stone towards an integrated energy market.
The latter requires trilateral mechanisms to finance regional energy projects. One option is to increase the capitalization of the North American Development Bank (Nadbank) and expand its mandate –which covers environmental projects in the U.S.-Mexico border– to allow the institution to finance energy and transportation infrastructure at a North American level.
The U.S.-Mexico border has limited room for more crossings; hence it is urgent to streamline binational transit with technological upgrades to facilitate the flow of goods between the two countries. Furthermore, it is possible to open a “new” border in the Gulf of Mexico. The Jones Act of 1920 bans cabotage of foreign vessels in U.S. ports. An exception to Mexican ships has the potential to increase the competitiveness of the Gulf states, both in Mexico and the U.S. and thereby increase Mexico’s market share in the U.S. East Coast, which remains comparatively low compared to Southwestern or Midwestern states. This would be especially relevant for energy markets due to the large footprint of the hydrocarbons sector in the Gulf region (oil & gas fields, refineries, and petrochemical complexes). Likewise, this would enable Mexico’s South-Southeast region to become part of the North American supply chain by lowering the costs to access the U.S. market.
Critically, it would be a strategic error to sideline the Central American question from the North American agenda. Competitive energy and logistics infrastructure are potentially the best recipes for development in the Central American countries. Sending Mexico’s National Guard to the Suchiate river will not solve migration flows from the Northern Triangle composed by Guatemala, Honduras, and El Salvador.
Last but not least, a fundamental pillar for a competitive North America is rule of law. Strengthening regional competitiveness requires the explicit commitment of all parties to the rules-based system that governs international trade and investment within the region and in global markets. All three North American partners must ascertain that they have more to win if they respect the spirit and letter of the brand-new trade deal.
Failure to do so would severely undermine the region’s appeal for trade and investment, missing a historic opportunity to harness aversion to Chinese risk and lagging behind other exporting powerhouses. Mexico has the most to gain from this opportunity and should act accordingly. The idea of North America is well worth it.