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Barriers to the North American Era

By Pedro Casas Alatriste - AmCham Mexico
Executive Vice President and Director General


Pedro Casas Alatriste By Pedro Casas Alatriste | Director General - Tue, 06/27/2023 - 12:00

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In 2000, North American exports accounted for a significant portion of global trade, with Mexico, the US, and Canada contributing one-fifth of all exports. Intraregional trade also saw notable growth in the first NAFTA decade, increasing from 35% to 40%. However, the following two decades brought about a different story.

North America's share in global trade and intraregional trade experienced a consistent decline, while East Asia's global trade share rose from 23% in 2000 to 31% in 2021. In contrast, North America's share plummeted from its peak of 20% to a mediocre 13% in 2021. In 2000, the disparity between North America's share of global exports and China's was more than 18 percentage points, but this gap disappeared over two decades. Unlike Europe and East Asia, where intraregional trade accounted for 70% and over 50% of international trade, North America's intraregional trade steadily declined to a mere 30% in 2021.

Rather than viewing this as a bleak outlook, I see it as a vast realm of opportunities. Geopolitical tensions, supply chain disruptions, US industrial reforms, and the complementarity within the region have made "nearshoring" the hottest topic among companies and North American governments.

While nearshoring is often seen as a short-term investment trend, the North American Era represents a long-term vision for regional growth, shared prosperity, and global leadership. 

However, three potential obstacles could hinder the realization of North America as the world's economic powerhouse: inadequate implementation of the USMCA,  non-economical political policies impacting the free movement of people, and a slow transition toward sustainable energy sources.

More than a year has passed since the US and Canada initiated dispute settlement talks on Mexico's energy sector. Last year, a USMCA panel ruled against the US in auto rules of origin disputes. Yet, no significant progress has been made. The USMCA serves as a framework to guide the region toward a more efficient market, but its effectiveness diminishes when its rules are not adhered to.

The US economy is currently underperforming, with two job vacancies for every unemployed person. Canada is also facing historically low unemployment-to-job vacancy ratios. On the other hand, Mexico sees over 3.5 million young individuals becoming of working age annually, but only 2.2 million actively seek jobs in the formal economy. With Mexico's population being significantly younger than the US and Canada, there is a historic opportunity for demographic complementarity to enhance regional competitiveness. Unfortunately, politics and policies do not always align with economic rationality.

During this Mexican administration, constructing an oil refinery was one of the most substantial public investments. In contrast, Tesla's announcement of a giga-factory in Mexico for producing gasoline-free cars represented a major private investment. However, the lack of a coordinated and coherent energy plan between governments and the private sector undermines our regional economic potential. Dependence on unreliable energy sources and countries poses a significant threat to regional security, as exemplified by Europe. North America must continue betting on deeper, clean-energy integration.

In summary, North America has experienced a consistent decline in its global and intraregional trade shares over the past two decades. Nevertheless, geopolitical tensions, supply chain disruptions, and complementarity in production factors present a historic opportunity to regain that position and ensure economic growth and shared prosperity in the coming years. To achieve this, we must respect our regional economic rules (USMCA), nurture and share our talented and highly qualified human resources, and secure sustainable energy sources that will not destroy our planet.

Photo by:   Pedro Casas Alatriste

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