Late yesterday, President Joe Biden hosted President Andres Manuel López Obrador and Prime Minister Justin Trudeau at the White House for the North American Leaders’ Summit (NALS). As you might imagine, here at White & Case Mexico City we were monitoring the meetings closely to gauge the impacts on our clients and friends.
This was the first time the three leaders met together in person and the first so-called Three Amigos summit since the end of President Barack Obama’s second term. Overall, it appeared to be a constructive dialogue on a variety of issues but there were no big takeaways or announcements. For additional details, you might be interested in the readout from the White House’s background press call that you can find here.
The summit was pulled together amid a variety of pressing challenges surrounding the economy and trade, the COVID-19 pandemic, and regional migration, and it represented another step in Biden’s goal to re-institutionalize relations abroad and more fully integrate North America as a counterbalance to China.
The first item on the agenda was competitiveness and equitable growth, and following the summit, the three countries plan to create a working group to further integrate the continent’s supply chain. The atmosphere creating urgency for the summit included the ballooning rate of U.S. inflation, which recently hit a 31-year high as employers continue to face labor shortages and supply chain-related challenges.
The impact of these challenges are reverberating throughout the region. This quarter, the Mexican economy shrank 0.2 percent from the previous quarter, marking the first contraction since recovery from the pandemic began. Due to US consumer price inflation and the Bank of Mexico’s increase in interest rates, the Mexican peso sank and is now expected to continue to erode in 2022.
There were several sources of tension going into the summit. Most notably, the leaders discussed Biden administration’s proposal to offer consumers tax credit for U.S.-produced electric cars, which has created ripples in the trilateral relationship. Mexico and Canada are concerned that the credit would incentivize automakers to move their factories to the U.S.and allege that this move could violate the terms of USCMA. Canada’s Finance Minister said the proposal risks becoming “the dominant issue in our bilateral relationship” and Mexico’s Economy Minister rebuked the U.S. for pursuing protectionist policies. Other trade irritants between the leaders included the Michigan-Canada pipeline, a lumber dispute, and Canada’s dairy industry.
Tension has also run high over López Obrador’s proposed energy bill that reverses Mexico’s 2013 energy reform that increased private sector participation and would give the state-owned electricity company more than 50 percent of the market share. Taking a proactive approach to one of the thorniest bilateral issues, U.S. Ambassador to Mexico Ken Salazar recently met with the Mexican government to express “serious concerns”. Additionally, U.S. lawmakers urged Biden to address this issue in the summit. While the energy bill was not addressed publicly, it was most certainly discussed yesterday.
The three leaders also addressed strategies to combat climate change, including a North American pledge to reduce methane emissions from the oil and gas sector and technical cooperation on renewables. The summit came on the heels of COP26 in Glasgow, where the U.S. and Canada took centerstage in their commitments and declarations. While López Obrador recently declared Mexico an ally for the US on climate change, his rhetoric on the issue has not always matched his actions.
The leaders’ second priority was collaboration on the COVID-19 pandemic, and Mexico and Canada pledged to share millions of vaccine doses with other countries. Earlier this month, the Biden administration lifted air and land border restrictions for travelers vaccinated with doses approved by the World Health Organization (WHO). While 1 out of every 2 Mexicans is fully vaccinated, not all of the vaccines used in Mexico are WHO-approved. In Washington, the Mexican government pushed for the universal recognition of vaccines and for the U.S. to loosen testing requirements.
The third item on the summit agenda was a regional strategy on migration. Discussions focused on proposals to expand work visas, refugee resettlement, and other legal pathways, including for individuals displaced by climate and victims of trafficking.
Officials said that border policies were not on the agenda, largely because the administration has struggled to lay out a coherent vision for its immigration policy. Reports indicate that Biden’s uncertain approach stems primarily from disagreements at the highest levels within his administration over an appropriate path forward. Earlier this week, the administration said that it will reimplement the Trump-era Migrant Protection Protocols (MPP) that it suspended earlier this year within “the coming weeks” due to pending litigation.
On the foreign policy front, in the days leading up to the summit, it appeared that Biden intended to ask Trudeau and Lopez Obrador to join him in demanding the Cuban government respect its citizens pushing for greater freedom on the island. However, it’s not clear if Biden followed through with the request during the meeting. Such an ask would not have been favorably received by Lopez Obrador who has repeatedly stated his support for the Cuban government.
As has been the case with all previous North American Leaders’ Summits, its success depends on post-summit follow through and continued dialogue. However, it is important to note that Mexico has already announced it will host the next summit in 2022.
Lastly, you might be interested in a recent publication by White & Case’s Latin America team. Our work in the region during the first three quarters of 2021 received numerous accolades, including #1 U.S.-based law firms in Latin America and #1 in value for M&A.
To all of you in the U.S., I wish you and your families a very happy Thanksgiving. And, to those of you not celebrating this uniquely American holiday, simply know that I’m grateful for your friendship.