The United States’ relationship with Mexico is critical to our shared security and economic interests. The deep cultural ties between our peoples, our cooperation on security issues, and the strong economic partnerships we have maintained will always necessitate close coordination between our governments.
Such a close relationship has led to significant diplomatic achievements in recent history. The Trump administration’s work with Mexican President Andrés Manuel López Obrador to negotiate and later ratify the U.S.-Mexico-Canada Agreement, or USMCA, was a critical step to protect American workers. The landmark trade deal rebalanced some of our nation’s economic activity with Mexico and Canada. While it was not perfect, the deal reaffirmed the importance of multilateral commitments and diplomatic leadership. By combating some trade abuses and building up North American manufacturing, the USMCA has already proven a potent tool for strengthening our continent’s workforce. It has also helped counter China’s growing economic threat and Beijing’s predatory practices in our region.
The USMCA’s success is contingent on all three signatory nations following its rules. While it takes a team to deliver results, I am concerned that certain steps taken by the Mexican government risk breaching elements of an otherwise productive, forward-looking agreement among our three countries. Specifically, Mexico’s government is favoring state-owned entities and pushing to eliminate domestic regulatory agencies.
The USMCA is not a temporary political arrangement that can be left unheeded when it seems politically convenient. It is a binding economic contract that stands to benefit all three nations. Potentially noncompliant actions could derail that progress and ultimately harm Mexican workers and consumers.
For example, the USMCA bans governments from granting state-owned utilities preference over private entities, a basic provision meant to make our nations’ bilateral commerce fairer and to avoid disadvantaging market competitors. Unfortunately, President López Obrador in February introduced a bill that would grant the state-owned Federal Electricity Commission priority over private power companies.
Earlier this year, the Mexican government was reportedly considering abolishing the Federal Telecommunications Institute and many other independent regulatory agencies. The USMCA, however, requires Mexico to keep impartial regulatory practices for a level playing field.
The agreement has an October 2021 deadline to field new labor inspectors and establish new labor tribunals. Worryingly, local governments in Mexico have shown no ability to adhere to this timeline. Last year, Mexican officials approved a request by domestic automakers to push back a deadline to meet a North American components requirement – a move that will harm auto manufacturers across the globe looking to move their manufacturing to Mexico.
Delays and noncompliance with the USMCA will hurt Mexico. Deeper industrial development and tighter relations with the United States and Canada will mean greater prosperity for the Mexican people, and each setback in implementing the agreement chips away at such gains.
More generally, politicization of the Mexican regulatory system risks causing a chilling effect on foreign business investment and harming Mexico’s overall economy. If the government fails to abide by labor reforms and obligations required under the USMCA, it is Mexican workers who will be affected.
In 2020, the Mexican economy suffered its largest contraction since the Great Depression, due to the COVID-19 pandemic. Officials within the López Obrador administration have recently signaled that they hope to use the USMCA as an instrument for economic recovery and to fortify supply chains against potential future risks. This only underscores the importance of acting in accordance with the agreement’s rules and deepening coordination with Washington and Ottawa.
There are many opportunities for Mexico and the United States to work together. As the Biden administration engages with President López Obrador over key issues in the U.S.-Mexico relationship – including the Mexican government’s request for U.S. coronavirus vaccines and Mexico’s dumping of seasonal produce, which directly harms Florida – they should use the occasion to communicate the importance of fully implementing and complying with the USMCA. The trade deal is one of the most powerful tools we have to deepen our nations’ ties and benefit our workers, and to let it slip away would be a missed opportunity for Mexicans, Canadians, and Americans alike.
This article was originally posted on Worrying signs from Mexico on trade