Bottom lines up front
- The 2026 United States–Mexico–Canada Agreement review presents an opportunity to revisit its approach to foreign direct investment and broaden its scope after significant narrowing from NAFTA.
- Mexico’s current authority on investment screening has an economic mandate, rather than one based on national security, creating a gap with the United States and vulnerabilities for North America’s economic security.
- Increasing cooperation in this area can unlock opportunities for reduced trade barriers, including steel and aluminum tariffs and remaining inconsistencies in automotive rules of origin.
This issue brief was edited and compiled by Valeria Villarreal, coordinator of the US–Mexico Binational Task Force on Economic Security and Competitiveness, drawing on insights from its meetings. The task force focuses on strengthening supply chains and promoting long-term economic resilience across North America.
The United States–Mexico–Canada Agreement (USMCA), currently two months behind on its scheduled review, covers almost every relevant aspect of the three countries’ trade relationship, from agriculture to customs, financial services, labor, and rules of origin. One of its greatest blind spots, however, is the limited attention it gives to investment screening coordination among the parties. Regardless of its treatment of investment in Chapter 14 and restrictions on entering free trade agreements with nonmarket economies in Article 32.10, no chapter within the trade agreement currently compels the United States, Mexico, and Canada to establish a standardized mechanism to screen foreign direct investment (FDI), nor does it call for alignment among the domestic authorities that could handle such an undertaking. This insufficient treatment of capital in USMCA is incompatible with its comprehensive treatment of goods and represents a missed opportunity to further strengthen regional economic security.
A critical gap in USMCA
This gap and its implications became pronounced in the wake of the COVID-19 pandemic, which revealed the risks of vulnerabilities in global supply chains and North America’s reliance on third parties for specific goods. US officials have advanced efforts since 2023 to leverage the 2026 USMCA review to close this gap. A December 2023 memorandum of intent (MOI) was intended to establish a bilateral working group to further develop investment screening mechanisms. In 2025, the Protecting the USMCA from Harmful Chinese Investment Act and the CFIUSMCA Act were introduced in US Congress to push for “robust investment review mechanisms” to be enshrined in the USMCA.
During its third convening, the Binational Task Force on Economic Security and Competitiveness met in Mexico City to discuss viable avenues for incorporating investment screening provisions into the ongoing USMCA conversation.
While most modern trade agreements include substantial provisions related to foreign investment, USMCA, through Chapter 14, narrowed the protections foreign investors enjoyed under the North American Free Trade Agreement (NAFTA). Protections that once applied broadly to investors across sectors, including access to investor-state dispute settlement, are now limited under USMCA to investors with specific government contracts in sectors such as oil and natural gas, telecommunications, and transportation. Even as these protections have narrowed, intensifying geopolitical competition between the United States and China has led to greater scrutiny of foreign investment.
The United States has modernized its framework for reviewing foreign investment through the Committee on Foreign Investment in the United States (CFIUS), particularly via the 2018 Foreign Investment Risk Review Modernization Act (FIRRMA). Mexico’s framework remains anchored in the Foreign Investment Law (Ley de Inversión Extranjera, or LIE) its bylaws (reglamento), the National Commission on Foreign Investments (Comisión Nacional de Inversiones Extranjeras, or CNIE), the National Registry of Foreign Investments (Registro Nacional de Inversiones Extranjeras, or RNIE), and sector-specific constitutional and regulatory restrictions.
While CFIUS focuses on US national security, CNIE focuses on sectoral participation limits, ownership thresholds, reciprocity, and macroeconomic considerations, not national security risk assessment. The December 7, 2023, MOI between Treasury and Mexico’s Secretariat of Finance and Public Credit formally placed investment screening cooperation on the bilateral agenda; as of August 2026, the implementation of comprehensive reforms remains under discussion in the administration of Mexican President Claudia Sheinbaum and Mexican Congress. The current joint review of USMCA creates an opportunity to revisit the MOI and find ways for CFIUS and CNIE to cooperate smoothly.
Figure 1: Comparing the US and Mexican frameworks for reviewing foreign investment
| Issue | Mexico (CNIE) | United States (CFIUS) |
|---|---|---|
| Primary objective | Foreign investment regulation | National security review |
| Legal basis | LIE | Defense Production Act and FIRRMA |
| Scope | Sectoral participation restrictions | Broad review of controlling and certain noncontrolling transactions |
| Focus | Ownership limits and approvals | Economic and national security |
| Critical technologies | Limited framework | Core area of review, plus special scrutiny of investments in certain technology, infrastructure, and data businesses |
| Sensitive data / noncontrolling investments | Minimal coverage | Explicitly covered under FIRRMA |
| Real estate review | Very limited | Explicit authority |
| Mitigation / unwind authority | Limited | Common practice; strong authority |
| China-related scrutiny | Indirect | Central strategic concern |
| Institutional capacity | Relatively limited | Highly developed interagency process |
Mexico’s Comisión Nacional de Inversiones Extranjeras, or CNIE, is charged with reviewing foreign investment. Its US counterpart is the Committee on Foreign Investment in the United States. FIRRMA is the United States’ Foreign Investment Risk Review Modernization Act, signed into law in 2018.
The central conceptual distinction between CFIUS and CNIE is that CNIE asks whether foreign capital may participate in a given sector and CFIUS asks whether a transaction could create a national security vulnerability. Closing this gap requires building national security review as a distinct, additional function within the CNIE framework, without dismantling CNIE’s existing role.
Mexico is already taking steps in this direction. On August 28, 2026, President Sheinbaum sent the Senate an initiative to reform the LIE that would establish a national security review framework for certain foreign investment operations. If approved, the reform would give CNIE authority to review covered transactions in strategic sectors, including the ability to approve, condition, or block a transaction on national security grounds.
Modernizing Mexico’s foreign investment screening: Achieving functional convergence
Mexico can adapt the functional core of CFIUS: an interagency body with an explicit national security mandate; covered transaction definitions built around critical technology and infrastructure and sensitive personal data; a mix of mandatory and voluntary filings; defined timelines; mitigation agreements; post-closing monitoring; and authority to block or unwind transactions.
What is not directly transplantable is FIRRMA’s specific intelligence community integration, which reflects US institutional architecture. Mexico could instead begin with a small, specialized unit within the Secretariat of the Economy, funded through the Inter-American Development Bank and bilateral technical assistance. The unit would clear routine cases through a published checklist, conduct enhanced reviews, and refer only the most sensitive cases to an interagency panel.
Mexico would likely need to amend the LIE to establish an explicit national security review mandate and would need to publish a predictable list of covered sectors, such as semiconductors, artificial intelligence, quantum, telecommunications, ports and logistics, energy infrastructure, aerospace, satellites, critical minerals, sensitive personal and industrial data, and defense-adjacent manufacturing.
The Mexican private sector could play a key role in ensuring compliance is feasible and adaptable to its production realities to keep the regime calibrated to commercial reality and avoid slowing legitimate investment.
The United States and Mexico share significant strategic priorities: semiconductors, telecommunications, critical minerals, energy infrastructure, ports, biotechnology, advanced manufacturing, and dual-use technology. Their approach, however, differs. The United States applies a granular, technology-driven framework; Mexico applies broader sectoral-cap rules under the LIE. Bridging the gap requires translating LIE sectoral categories into transaction-type triggers analogous to FIRRMA’s framework.
The CNIE and CFIUS-supporting agencies could jointly design a secure platform that harmonizes transaction reporting, stripped of confidential information, including beneficial ownership, sector classification, value, technology category, and counterparty risk indicators. The platform could integrate supply chain traceability, rules-of-origin verification, and beneficial ownership analytics, with strong confidentiality protections and clear legal safeguards.
The objective is functional convergence, not full harmonization. Functional convergence means Mexico and the United States apply similar national security triggers and risk criteria—including critical technology, infrastructure, sensitive data, opaque ownership, and state-linked investors—so comparable transactions receive comparable scrutiny. Recognizing equivalent review outcomes, rather than identical procedures, prevents regulatory arbitrage while respecting sovereignty and reducing uncertainty for investors operating regionally.
Mexico’s comparative advantages could remain its openness, geographic proximity, manufacturing ecosystem, and USMCA integration.
China, technology, and rules of origin
Mexico has maintained a cautious posture toward Chinese investment for decades. Nevertheless, US concerns persist that Chinese companies, capital, and technology could expand their presence in Mexico and use North American production platforms to reach the US market. The actual scale of Chinese investment in Mexico—and in the United States—remains contested because both sides lack methodologically compatible data. Significant tensions also exist within the United States on the treatment of Chinese investment.
The Trump administration has at times signaled openness to Chinese investment that creates jobs and manufacturing capacity in the United States, while viewing Chinese investment in Mexico with considerably greater suspicion. Before committing to major policy shifts, both governments would benefit from a rigorous assessment of supply chain dependencies, technological vulnerabilities, and substitution capabilities. The feasibility of replacing Chinese inputs across sectors differs and requires continuous information sharing and joint assessment.
Both countries could deepen cooperation on industrial policy objectives and implementation mechanisms. Greater transparency on strategic sectors, incentives, technological priorities, and supply chain goals would help ensure that the ends and means of industrial policy remain broadly compatible. Such discussions would also clarify where, under what conditions, and in which sectors Chinese investment, technology, or components might remain acceptable within a North American framework.
Linking screening coordination to lowering internal barriers
As bilateral cooperation on FDI screening deepens—particularly regarding China—internal barriers to North American trade and investment could correspondingly decrease. The political case for shared external discipline depends on visible reduction of intraregional friction: persistent Section 232 tariffs on Mexican steel and aluminum, asymmetric treatment in automotive rules of origin, and the fifty-four nontariff barriers identified in US–Mexico bilateral discussions. A package linking stronger screening alignment to lower internal barriers would make both sides of the bargain politically durable and reinforce North American competitiveness.
Regulatory pathways: Recommendations from the task force
Beyond the limited protections provided to foreign investors in Chapter 14, investment screening mechanisms are not currently directly subject to USMCA provisions. However, the fourth negotiation round in September 2026 between the United States and Mexico presents an opportunity to incorporate investment screening into the agenda.
The following recommendations from the task force present potential next steps to find operational synergies between CFIUS and CNIE.
1. Create a multiagency investment screening mechanism in Mexico based on the existing framework.
The Mexican Secretariats of Economy and of Finance and Public Credit can leverage the growing consensus on the need for greater US–Mexico coordination on investment screening to expand CNIE’s mandate. This would encompass screening critical technologies, beneficial ownership transparency, and supply chain security to strengthen North American competitiveness, and build on US interest in Mexico updating its investment screening framework as first acknowledged in the 2023 MOI. US support for capacity building through Treasury (CFIUS), Commerce (the Bureau of Industry and Security), Homeland Security, the State Department, and the US Trade Representative would be crucial.
2. Establish a shared US–Mexico database on Chinese investment in both countries.
The urgency of such a database is underscored by the lack of consensus between the United States and Mexico on the full scope and nature of Chinese investment activity. A shared US–Mexico database on Chinese investment, linking Mexico’s RNIE and CFIUS’s Case Management System, could be a foundational tool, as the true extent of Chinese investment is likely underreported on both sides.
3. Establish a coherent bilateral approach toward China.
Different USMCA chapters have already created relevant bodies for continued discussions and information exchanges, such as the Chapters 4 and 5 Committee on Rules of Origin and Origin Procedures and its Subcommittee on Origin Verification. Based on this model, Chapter 14 could establish a working group on investment screening and security, which, in coordination with these bodies, could annually assess Chinese investment in North America and its implications for Mexico–US economic relations, supply chain security, technology, and regional value creation.
Conclusion
Foreign direct investment into Mexico and the United States has implications beyond the economic, generating potential weak links in the North American economic and national security architecture. There is ample room to reconsider the domestic investment screening mechanisms currently in operation in the United States and Mexico through the ongoing joint review of USMCA. Mexico is already working to bridge these realms through reforming its LIE and in turn expanding the scope of CNIE. This is a significant step to expand US–Mexico cooperation and functional convergence with CFIUS for a more economically secure North America.
Although USMCA only partially covers foreign investment screening, FDI in the United States and Mexico plays an essential role in competitive industrial policy, adaptable supply chains, and increased regional economic security. Addressing capital flows through USMCA more directly, utilizing and expanding relevant USMCA working groups, and establishing a more coherent bilateral approach towards China and Chinese investment can present an avenue to make USMCA a more comprehensive encapsulation and guide to the US–Mexico commercial relationship.
about the task force
The US–Mexico Binational Task Force on Economic Security and Competitiveness focuses on strengthening supply chains and promoting long-term economic resilience across North America.
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Image: A BYD electric car in Mexico City, Mexico on November 12, 2024. (Photo by Bénédicte Desrus/Sipa USA)
