2017 Global Commerce Forum – Mexico’s Role in the World: North America and Beyond
Good morning everyone,
I would like to thank the Atlantic Council and Baker McKenzie for the kind invitation to participate in this forum. It is a privilege to be in front of you all today.
Mexico’s foreign policy is at a crossroads. Despite the challenges ahead, it is also true that new windows of opportunity have opened.
The alliance that we have constructed over the past decades with the United States, and on which we wagered our external relations, has unfortunately stalled. Although four months after Donald Trump took office it has become clear that many of his electoral promises and presidential decrees are far from viable, his discourse against Mexico has left a mark. The very idea of a wall spanning the entirety of our border has created a deep divide between our societies.
On one hand, these circumstances demand that Mexico direct all its efforts to repair a bilateral relationship that remains and will continue to be a priority. More than 34 million people of Mexican origin live in the United States. We cannot fail them.
In our country, internal challenges still prevail that halt the development of the economy and deprive our society of its great potential. Reaching new markets and consolidating relations with countries in new regions requires conquering geographic and cultural divides that cannot be bridged overnight.
In addition, the United States and Mexico’s neighborly relations cannot be forfeited. Our countries have an interlinked history, numerous cultural similarities, and tight social, business, political, and familial links facilitated by geographic proximity. Throughout the twenty-three years of NAFTA’s existence, an ample and complex framework has institutionalized our bilateral trade.
The implementation of the treaty has brought clear economic benefits to Mexico, the United States, and Canada, projecting North America as the most dynamic and competitive region in the world. NAFTA represents a market of more than 18 billion dollars. It has created a chain of production and value that is difficult to dismantle: its labor force, investments, innovation capacities, and industrial strengths are complementary, especially in the border states.
American imports from Mexico include approximately 40 percent of the content produced in the United States and vice-versa. The same percentage reflects the level of industrial trade of all bilateral trade (40 percent). Following NAFTA’s entry into force, reciprocal investment increased six times. This level of integration translates to mutual growth.
In the case of Canada, our third trading partner with NAFTA, the Mexican exports designated [for that country] increased almost seven times. The imports originating from Canada grew 8.5 times. More than 3,600 Canadian companies invest in the country.
And most importantly: The North American Free Trade Agreement has been the driving force of trilateral and bilateral cooperation prevailing over conflict, an element that has never remained at the margin of policy between the United States and Mexico. The political moment in which Mexico and the United States find themselves in is one we must get out of, in the same way our history freed itself from the end of the “special relationship” with the presidency of Richard Nixon.
From our end, we must recognize that the Mexican government has stopped doing as much as it can, taking for granted this alliance. Today we must intensify the dialogue on all levels with the United States and of course, also Canada. Moving beyond President Trump’s threats to withdraw the United States from NAFTA, on May 18 his government notified Congress that it expects to begin the renegotiation with Mexico and Canada.
In the American government’s notice, they made it explicit their intention to address digital trade, intellectual property rights, regulatory practices, services, sanitary measures, small and medium-sized firms, labor and environmental laws, trade with state-run firms, and other [issues]. These were chapters included in the negotiation of the Trans-Pacific Partnership, an agreement that the United States excluded itself from at the beginning of his administration.
As a Senator of the Republic I have insisted on the importance of actively participating in the renegotiation of NAFTA. With that, we can guarantee a modernization of the treaty that benefits Mexicans and that transcends the change of administrations, at the same time ensuring that its content embodies the premise of liberalization and economic integration that promotes the growth, productivity, and competitiveness of the country.
Having said that, the situation Mexico is experiencing in the face of the American administration’s new approach reminds us of the importance of undertaking a true commercial and political diversification, which we have not achieved. The renegotiation of NAFTA cannot veer off course, and we must continue to look forward.
To begin with, Mexico has a leadership role to retake in Latin America. Many have labeled us regional leaders due to the size of our economy, the fifteenth [largest] in the world. However, over the years, we have moved away from this. Our central focuses have been, almost exclusively, the United States and the integration with the North American region and have consequently created an ambivalent relationship with the rest of Latin America. Despite being a country with multiple identities, we have become disconnected with our southern neighbors.
Now is the time to renew our relationships with Latin American countries, taking advantage of our multiple similarities, convening and collaborating to confront, in a unified manner, the global challenges facing humanity.
Among these challenges, we should include the lack of confidence in government institutions, corruption and impunity, violence, inequality, slow economic growth, growing insecurity, and climate change. These factors undoubtedly influence trade and investment in Mexico and the region.
Mexico should prioritize reinforcing cooperation with Central America, where issues of migration, security, and development have become priorities. Requests for refugee status in our country are estimated to reach 20,000 this year alone.
At the same time, it is vital to continue to address the structural causes that force Central Americans to leave their homes. To do this, it is fundamental that we increase, and make more efficient, cooperation on development, with an emphasis on combatting poverty, preventing familial disasters, and reducing violence.
This cooperation should extend to Caribbean countries, with whom we maintain scarce relations. Mexico should promote a more substantial dialogue to achieve the United Nations Sustainable Development Goals.
In South America, our socio-cultural exchange continues to strengthen, as new commercial opportunities arise, particularly those in Argentina in Brazil. A few months ago, on a visit to Argentina, the Brazilian president expressed that Mercosur (Argentina, Brazil, Paraguay, Uruguay) must strengthen their commercial relations with Mexico, the second [largest] economy of Latin America, with the Pacific Alliance, the eighth [largest] economy in the world, composed of Mexico, Chile, Colombia, and Peru. Our country should take advantage of, and strengthen, this strategic alliance.
Commerce in Latin America and the Caribbean continues to lag in respect to other regions. It represents barely 44 percent of the regional GDP, and only 15 percent of total exports destined for outside of the region. However, openness to trade is comparable with the global average. This achievement, is due to a lack of protectionist policies and a dependency on primary materials, or a lack of commercial diversification.
Mexico should be the bridge to facilitate the participation of Latin American and Caribbean countries in global value chains, and a source of investment for infrastructure and development projects, with the goal of catalyzing regional growth.
At the same time, Mexico should increase its presence in forums and regional organizations such as the Organization of American States (OAS) and the Community of Latin American and Caribbean States (CELAC). Likewise, now is the time for Mexico to reposition itself as a Latin American voice in international organizations, capable of placing issues the region views as important on the political agenda.
While our country promotes rapprochement with Latin America, we should unfold a new foreign policy in other regions. Carrying out the forty-six free trade agreements ratified by the Mexican state, implies a substantial improvement in our connectivity with the rest of the world, just as much as it implies a push by the commercial sector, so that they may reach other continents. To achieve this, political, social, and cultural rapprochement is key.
In the diplomatic and government environment, there is a movement to bring Mexican society closer to other societies around the world, so different from our own. It is necessary to continue to emphasize academic exchange, tourism and scientific and technological cooperation, trade fairs, corporate missions, and the search for new economic opportunities.
Mexico should approach certain strategic regions, especially those like Southeast Asia, a region characterized by its dynamic economy, its competitiveness, its high level of technology, and an education system appropriate for the 21st century. In collaboration with countries like these, Mexico should look for a more appropriate industrial policy, for productivity based in innovation, for education based on creativity, and for more inclusive and sustainable development.
The possibility to achieve these goals does not stop at the Trans-Pacific Partnership, which has brought us closer with ten countries of the Asia Pacific region throughout the negotiations. And despite the withdrawal of the United States from the treaty, the multilateral dialogue is seen to have strengthened in the last months, reflected by a recent meeting that included the eleven member countries of the TPP, held during the meeting of commerce ministers from the forum of the Asia-Pacific Economic Cooperation (APEC).
Among countries of Latin America and the Asian Pacific region, as well as among countries of the European Union, to the Middle East, Central Asia, and -even though with more obstacles- Africa, Mexico has the potential to position itself at the center. We are the primary exporter of flat screens in the world, the fourth largest exporter of cars and computers, and the eighth of cellphones. Our total exports place our economy in tenth place at the global level.
As an economy with access to a market of more than a billion consumers, due to its forty-six free trade agreements, Mexico considers itself a supplier of the global economy and an important bridge to global value chains. At the same time, it has its own market of 120 million inhabitants, with a growing middle class and a young, expanding population.
Furthermore, creativity is our fifth strategic industry. We are the eighteenth global exporter of creative goods in the world and the ninth global talent center for informational technology. Every day we become a bigger hub of innovation and knowledge. We are among the six most attractive countries for foreign direct investment (FDI) in the world. Mexico is starting to experiment with transforming its education system, business and investment environment, and its infrastructure, telecommunication, and energy sectors.
In this new climate of innovation, the essence of the “Ley de Transición Energética” of 2015 has Mexico looking toward 2024, when 35 percent of all energy will be generated by renewable sources. In 2012, this percentage was 24 percent. This change signifies a great opportunity for the development of clean energy projects, which generates jobs and encourage a sustainable development of the country.
Meanwhile, Mexico, in the age of international organizations, continues to be a promoter of democracy, human rights, international law, openness, free trade, integration, multilateralism, cooperation, and global peace. Of course, to increase ones’ credibility, these values must be congruent with one’s own reality, and to take advantage of our potential, we cannot continue to hold back the development of the interior of our country.
Around 57 percent of the jobs in Mexico are in the informal sector. There is still much that must be done to empower women, who could enormously advance our economy. In the formal sector, we have only 36.6 percent employment. We are the second most unequal (by income distribution) country in the OECD, after Chile. Within this group, unfortunately, Mexico continues to lead with the highest levels of perceived corruption in the public sector.
Despite the advances in deregulation to better facilitate trade in the country, a principal obstacle is a lack of adequate infrastructure. Finally, another fundamental obstacle to the Mexican economy is, obviously, violence and insecurity. In the first trimester of 2016, extortion and kidnapping increased 20 percent, and again in the same period in 2017. New forms of crimes have appeared, such as fuel theft, which hurts one of Mexico’s main industries.
There are several remaining tasks to accomplish; tasks that do not depend entirely on who represents the Mexican state, but on who demands the collective action of other actors, such as the private sector, academic and civil society, the cultural sector, and the scientific and community. It is clear that the challenges will never end, but neither will the Mexican people’s hopes and efforts for achieving a unified country, something we all seek.
Tyson, Laura. “The Truth About NAFTA” (April 2017). Project Syndicate. https://www.project-syndicate.org/commentary/trump-mexico-renegotiate-nafta-by-laura-tyson-2017-04. Citado de Wilson, Christopher (2011), “Working Together. Economic Ties Between the U.S. and Mexico.” Woodrow Wilson
“Ampliar las oportunidades comerciales en América Latina y el Caribe” (Abril 2017). FMI. https://blog-dialogoafondo.imf.org/?p=7331
Luévano, Claudia (30/08/16). El potencial de México en energías renovables. Milenio. http://www.milenio.com/negocios/Milenio_Noticias-Symposium_Realidad_Energetica_2016-energias_renovables_0_802119908.html
OCDE. “Reforms are paying off” (Jul 2017). https://www.slideshare.net/oecdeconomy/mexico-2017-oecd-economic-survey-reforms-are-paying-off/1
30% (where 100 is the country the least corrupt and 0 the most), considering a 70% average of the OECD.