US President-elect Donald Trump’s campaign rhetoric denouncing free-trade deals, including the North American Free Trade Agreement (NAFTA), has created a climate of uncertainty for the global market. Instead, increased US trade links and collaboration with Mexico would be beneficial for both countries, a former member of the National Innovation and Competitiveness Strategy Advisory Board said at the Atlantic Council on November 15.

Robert Atkinson, who also serves as the president and founder of Information Technology and Innovation Foundation, while outlining trade policy prescriptions for the incoming Trump administration, said: “I think the best thing we could do with our country is [build] much tighter links with Mexico.”

Atkinson’s sentiments were echoed by Cliff Waldman, the director of economic studies at Manufacturers Alliance for Productivity and Innovation, who said: “a partnership with Mexico would be a source of tremendous collaborative value [for] the United States.”

“I absolutely hope that the policy is collaboration, not separation,” he added.

“Developing the country south of its border should be a strategic priority for the US,” said Manuel Molano, an economist and adjunct general director at the Mexican Institute for Competitiveness. “Trade could be a remedy for immigration,” he added.

On the campaign trail, Trump said he would build a wall on the US border with Mexico to control illegal immigration. He also focused a great deal of his campaign on a commitment to renegotiate trade deals, including NAFTA, which he referred to as “the worst trade deal ever.” NAFTA is free-trade agreement signed by Canada, Mexico, and the United States.

According to Molano, Trump should “renegotiate rather than repeal” NAFTA, leaving room for Mexico to achieve greater engagement in the side deals currently in place between the United States and Canada.

“There’s something [Mexicans] have become over the last twenty years and that’s free traders,” Molano said. “If it paid off for a tiny country like Mexico, then it could pay off for a larger country like the United States.”

Molano, Atkinson, and Waldman joined Fred Ni, vice president and general manager for automobile business in Latin America with BYD America, to discuss the importance of Chinese trade in Latin America for the region’s economy. The event was held at the Atlantic Council on November 15 in conjunction with the launch of Molano’s report: Industrial Development in Latin America: What is China’s Role? Andrea Murta, deputy director of the Atlantic Council’s Adrienne Arsht Latin America Center, moderated the panel.

In his introduction to the event, Peter Schechter, senior vice president for strategic initiatives and director of the Adrienne Arsht Latin America Center, said: “President-elect Donald Trump has promised a new look at trade, which could bring major changes to global commerce.” He added, “at a time when global trade seems to be diminishing, China will be an increasingly important player.”

In December, the World Trade Organization (WTO) will reopen negotiations to determine whether China should be granted market economy status, thereby shaping its means of interactions with other countries within the framework of the global economy.

Currently, according to Molano, “China is not a market country; China is a state capitalist country,” which should not immediately be granted market economy status. Chinese state and provincial governments recently allocated $160 billion for government subsidies of semi-conductor industries alone. Atkinson described how “China just doesn’t think of itself in the same way that other countries think of themselves.” He added: “they are trying to be good at everything.”

Molano described how, in its desire to acquire natural resources to bolster an economy built on commodities, China has increasingly subsidized natural resources from Latin America. Ni described China’s increasing involvement in Latin America, and said China has recently positioned itself as a “solution-provider” in the region. 

While China has become an important component of Latin America’s global economic relations, Schechter said, there has been a simultaneous decrease in the export of complex goods, and these industries, as well as the jobs associated with them, have been negatively affected. “The role of China is, of course, of huge importance,” Schechter said, warning that Latin America must consider the complexity of its relationship with China.

Ultimately, the means by which China has pursued its fundamental desire for growth and aim to produce higher-value exports have caused severe market distortions, Atkinson said.

“We haven’t seen anything like the Chinese phenomenon in the world,” Molano said. The internationalization of the renminbi, the Chinese currency, has caused the effects of subsidization to be magnified, eventually taking a greater toll on Latin American economies, according to Molano.

In order to achieve market economy status, “China needs to play by the rules,” said Waldman.

Molano said that countries throughout the region, “do badly to build the foundations of Latin American industries…on the slippery soil of Chinese subsidization.”

According to Fred Hochberg, the Chairman of the Export-Import Bank of the United States who delivered a keynote address at the outset of the event, China and the United States are engaged in fierce competition over trade in Latin America. “One thing is clear,” he said, “there’s certainly going to be a large battle for export sales in Latin America.”

Hochberg described the US relationship with not only Mexico, but the rest of Latin America as one defined by infrastructural investment in the region, which is both “critical for success in Latin America,” but also allows the United States to increase its stakes in the region. He cited tools of production, renewable power, and logistics in terms of transportation and communication as key areas of US interest in the trade relationship with Latin America.

China’s practice of immense government subsidies designed to bolster their industries “doesn’t leave space for Latin America’s natural competitive advantage…because Chinese distortions of the global marketplace are so large,” Atkinson said.

Hochberg described how, by creating the tools Latin America requires to move up the value chain, the United States would not extract the region’s natural resources, as China has done, but enable Latin America to produce greater quality exports that would then be traded with the United States.

According to Atkinson, the real issue at stake in international trade is not the trade balance, but who maintains competitive advantages in high-value-added sectors. In this way, a US relationship with Latin America would prove mutually beneficial. Additionally, Molano said that Mexico, as a trade partner, is more compatible with US democratic values than China.

However, the Export-Import Bank will “need to review where we are and what we need to do to prepare for President-elect Trump,” Hochberg said.

Rachel Ansley is an editorial assistant at the Atlantic Council. 

Image: From left: Andrea Murta, deputy director of the Atlantic Council’s Arienne Arsht Latin America center, moderated a discussion with Fred Ni, vice president and general manager for automobile business in Latin America with BYD America; Robert Atkinson, president and founder of Information Technology and Innovation Foundation and a former member of the National Innovation and Competitiveness Strategy Advisory Board; Manuel Molano, an economist and adjunct general director at the Mexican Institute for Competitiveness; and Cliff Waldman, the director of economic studies at Manufacturers Alliance for Productivity and Innovation. (Atlantic Council/JuanFelipe Celia)