This month, I’m sending along the following piece I wrote on a clear path forward for North America amid rising geopolitical tensions. The item was picked up by several publications including the America Society/Council of the Americas. You can find it below and here.
As always, I look forward to hearing from you here at White & Case Mexico City. I hope you’ll call on me or reach out via Facebook, Twitter, or LinkedIn.
Sincerely,
“Geopolitical tensions, North American opportunity.”
The Covid-19 pandemic led to massive disruptions in our economy, revealing fundamental weaknesses in many of our trade relationships. In January of this year, it appeared like the global economy just might be back on track, but weeks later, Russia’s invasion of Ukraine sent new shockwaves through the economy, impacting supply chains and energy markets worldwide.
The U.S. and European allies quickly banded together to impose economic sanctions on Russia. That action made it clear that trade can often be just as much about geopolitics as it is about economics. It also put into focus how urgent it is that we broaden and deepen our relationships with our allies and trading partners closer to home.
Amid continued geopolitical tensions, one way to position the region is “ally-shoring”, rebuilding supply chains to source products and services at home and from trusted allies. The approach aims to ensure that the flow of essential goods can readily adapt to future challenges caused by political conflicts, climate-related events, and global health crises.
To facilitate ally-shoring, President Biden will need to reassert U.S. leadership with skeptical allies. The president will also have to make the case for globalization, which during the period from 1990 to 2015 lifted over a billion people out of extreme poverty but left many people, including millions in this country, feeling left out.
In addition to securing support at home and abroad, the Biden administration must position the U.S. to counter China’s economic aggressions. This summer, Biden must decide whether to keep in place Trump-era tariffs on China that are popular with his base of labor unions and domestic industries, but contribute to the high inflation hitting the pocketbooks of consumers across the U.S. Last week, Treasury Secretary Janet Yellen asserted that the best strategy to confront China’s unfair trade practices is for the U.S. and European allies to create a united front.
The administration will also have to contend with China’s increasing presence in key regions throughout the world. A few short days ago, the Biden administration hosted the annual U.S.-ASEAN Special Summit, aiming to increase cooperation with Southeast Asia, a focal point of U.S.-China competition. At the summit, Biden committed $150 million in infrastructure, pledging to strengthen engagement on trade through the Indo-Pacific Economic Framework launched during the president’s first trip to Asia.
In our own hemisphere, over the last year, the Biden administration has failed to provide a clear agenda to reinvigorate relations in the region and counter China’s inroads to Latin America. However, in the past few days, the administration took decisive measures to ease travel restrictions and remittance limits on Cuba and to ease some energy sanctions on Venezuela in order to further its political interests with the two countries.
Yet, experts are speculating that the Ninth Summit of the Americas hosted by the administration in Los Angeles in June could signal the massive decline of U.S. influence in the region. Mexican President Andres Manuel Lopez Obrador and an increasing number of leaders in the region have said they will skip the high-profile event if invitations are not extended to Cuba, Venezuela and Nicaragua.
While the Biden administration should have managed potential summit fallout well in advance, Lopez Obrador’s blindsiding of the U.S. was uncalled for. And a few days later, Lopez Obrador doubled down by calling the U.S. embargo towards Cuba a genocidal policy. This very public posturing suggests a lack of synchronicity in bilateral communications, which we can ill afford if we are going to leverage the opportunity to deal with some very real geopolitical and economic challenges.
In addition to complex bilateral relations, Lopez Obrador’s initiatives related to energy, investment and the country’s competitiveness are a very real concern, leaving questions about his commitment to the rule of law. Also, in the past few weeks, the number of journalists killed this year reached 11, and Mexico just surpassed the official tally of 100,000 disappeared and missing persons. And videos recently circulated showing armed cartel members brazenly chasing a military convoy out of town in the state of Michoacan.
While it is critical that Mexico address its security and competitiveness head-on, let’s not lose sight of the opportunity that this moment presents. Despite the challenges, ally-shoring with our southern neighbor remains our best option to foster resilient trade relationships and protect our national interests. Our two countries can build upon a robust foundation of supply chain integration and cross-border relationships created over the last thirty years, which have been further strengthened by the new United States-Mexico-Canada agreement (USMCA).
Ally-shoring with our neighbors provides a viable alternative to the immense logistical hurdles with China. In 2021, the cost of sending a forty-foot container from China to the U.S. spiked to over $20,000, a 500 percent annual increase. In the past few weeks, congestion at ports and shipping delays worsened as China instituted new COVID-19 lockdown measures including for Shanghai, the busiest container port in the world.
Our nearly 2,000-mile shared border with Mexico makes it the prime location for U.S. manufacturing. Shipping a forty-foot container on a truck two hours from Monterrey, Mexico to Texas only costs $600. Moving production both south of the border and back to the U.S. will create more certainty and reduce costs on everything from critical products such as pharmaceuticals to chips to other items that U.S. consumers enjoy on a daily basis.
There’s a clear path forward for North America, one that would make the U.S. and Mexico safer, more secure, and more prosperous. It’s not an easy road, yet the question remains: do our countries have the vision and commitment to go down that path together?”