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Three Amigos, Many Speedbumps | The Heritage Foundation

Three Amigos, Many Speedbumps | The Heritage Foundation
Written by Publishing Team

During the North American Leaders Summit last November, leaders agreed on several ambitious goals. However, there are still many challenges looming, which US President Joe Biden, Canadian Prime Minister Justin Trudeau, and Mexican President Andres Manuel Lopez Obrador have been unable to resolve.

The so-called Three Amigos Summit in November marked a turning point in a tripartite relationship previously strained by finger-pointing rhetoric that led to threats to withdraw from the North Atlantic Free Trade Agreement, or NAFTA. Summit participants reiterated the importance of regional cooperation to offset rising Chinese influence. They also pledged to further integrate their economies, strengthen supply chains, tackle illegal immigration, and prepare for the next pandemic.

But the positive messages from the summit should not obscure the fact that relations between the United States and Mexico still face profound obstacles. If the tripartite partnership is to succeed, the Biden administration must invest in new and innovative ways to reform the US-Mexico part of the tripartite seat.

Not everything is bleak in bilateral relations. There are good reasons to be optimistic about US-Mexico relations. Our two countries are more interconnected than ever. Americans live in Mexico more than any other foreign country, while a quarter of immigrants living in the United States were born in Mexico. The San Ysidro Checkpoint, which reopened to non-essential travel on November 8, is the busiest land crossing in the Western Hemisphere.

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We are also each other’s largest business partners. Mexico accounted for nearly 15% of all US trade in 2021 through November. Trade volumes are expected to increase as the United States, Mexico and Canada Agreement (USMCA) negotiated during the Trump administration is fully implemented. The USMCA has already helped North America recover more quickly from the COVID-19 pandemic. With the updated trade agreement, we have a framework for strengthening supply chains on the continent.

No country is likely to back down from the new trade agreement, which is widely seen as more favorable to the United States than NAFTA was. Meanwhile, AMLO relies on regional trade and financial flows to ensure its privileged infrastructure and social programs known as the Fourth Transformation.

The two countries talk a lot, too. US Vice President Kamala Harris visited Mexico City in June. The US-Mexico High-Level Economic Dialogue and the High-Level Security Dialogue were held in September and October, respectively. Although bilateral engagement continues, many problems remain unresolved, and some disagreements are widening.

At the November summit, tensions escalated over the consumer tax credit for US-made electric vehicles subject to the Build Better Act. Mexico and Canada argued that the tax credit would harm their auto industries by incentivizing manufacturers to relocate to the United States, and said this would violate the USMCA and WTO rules against subsidizing import substitutions. Hopefully, tensions have eased now that “Build Back Better” has failed in the US Senate.

Meanwhile, Washington is watching with increasing concern AMLO’s attempts to curb private investment, this time in the Mexican energy sector. In what amounts to asset confiscation, the Anti-Money Laundering Administration (AMLO) has mandated the closure of at least 23 fuel facilities and the partial closure of another 17, often without reasonable cause. Mexico’s weak legal system offers few remedies. The Mexican government is also outsmarting US companies by arbitrarily suspending and denying permits and passing laws favoring the state-owned energy entities PetrĂ³leos Mexicanos (PEMEX) and the Federal Electricity Commission (CFE).

In September, AMLO escalated tensions with the United States by proposing three constitutional amendments to nationalize the electricity sector, forcing private companies to sell to the CFE at prices set by the Commission itself. This would guarantee CFE a market share of 54% and crowd out renewable energy producers. If the Mexican Congress approves the amendments in April, Mexico will be in flagrant violation of the USMCA and other international trade agreements.

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Washington and Mexico City are also at odds over how to curb record levels of illegal immigration along the US-Mexico border. Both countries agree on the need for a regional approach to migration and some progress is being made with regard to post-summit commitments to eliminate transnational crime and contribute additional development funds to Latin America. But the Biden administration has not developed a coherent border strategy. This impairs its ability to work with or respond to its southern neighbor on immigration issues.

AMLO called on the United States to ease immigration restrictions, in large part because remittances from Mexican immigrants play an important role in supporting Mexico’s economy. Remittances exceeded $40 billion in 2020 and are on track to cross $50 billion this year. Meanwhile, Biden’s advisers are reported to be divided over the broad direction of US immigration policy, with some wanting to focus on deterring immigrants and others seeking to speed up asylum procedures. In August, a federal court ordered the administration to reinstate Trump’s “Stay in Mexico” programme, forcing asylum seekers to remain in Mexico until their asylum court dates are set.

The North American Leaders Summit was a welcome step in promoting greater regional cooperation. But the work does not end there, and the unresolved conflict undermines the alliance. It is time for President Biden to develop a coherent strategy for dealing with the new and continuing tensions between the United States and Mexico.

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