On November 18, U.S. President Joe Biden welcomed President Andrés Manuel López Obrador of Mexico and Prime Justin Minister Trudeau of Canada to the White House for the first North American Leaders’ Summit since 2016.
The summit followed a U.S.-Mexico High-Level Economic Dialogue in September, and virtual and real-world meetings earlier this year with Canadian and Mexican leaders by U.S. Secretary of State Antony Blinken and U.S. Vice President Kamala Harris. It’s clear that President Biden and his administration are prioritizing the resuscitation of bilateral relationships with U.S. neighbors and to the broader Northern American relationship.
For North American businesspeople, this is nothing but good news. At the High-Level Economic Dialogue, the U.S. and Mexico launched a bilateral supply chain working group, the first for both nations. This month’s Leaders’ Summit yielded plans to establish a North American supply chain working group that will aim to define essential industries in order to minimize future disruptions, including in areas such as critical minerals.
Following the Summit, President Biden and Prime Minister Trudeau delivered remarks that were fairly characteristic of the genre, but President López Obrador was refreshingly candid about the Summit’s purpose.
President Biden neatly summarized the event, saying, “So, today, it’s about what we can do in partnership and mutual respect to strengthen our region and prove democracies can deliver in the second quarter of the 21st century, including by increasing supply chain resilience and reliance, worker protections, improving cybersecurity, and helping small and medium businesses thrive in the Northern Hemisphere.”
Then after Prime Minister Trudeau delivered his remarks in both English and French, it was President López Obrador’s turn, and he got right to it:
Economic integration, in full respect for our sovereignty, is the best instrument to face the competition stemming from growth in other regions of the world, especially the productive and commercial expansion of China.
We must not forget that while Canada, United States, and Mexico account for 13 percent of the world market, China [accounts for] 14.4 percent. And this imbalance started out only 30 years ago. In 1990, China’s share was 1.7 percent and North America’s was 16 percent.
If the trend seen in the last decade should prevail for the next 30 years, by 2051 China would account for 42 percent of the world market and United States, Mexico, and Canada would remain with 12 percent, which … would put us all in danger.
This is why the best, the most convenient thing is to strengthen our economies, to strengthen our trade operations throughout North America and the entire continent — because there are several advantages. Among them, we have the workforce; we have a young and creative workforce with technological development and with a wealth of natural resources. The distance between our countries allows us to make savings in terms of transportation. And there is sufficient demand within our markets. The per capita consumption of the [North American] continent is $18,000 on an annual basis, whereas it is $4,000 in Asia. Nonetheless, currently, consumers within our region have to wait in line to get home appliances or a car because we do not have semiconductor chips or because the maritime transportation prices went up.
The deepest issue is that we are not producing enough, and we are forced to import merchandise from other countries. It is a paradox that so much money circulates throughout North America and the ports of the Pacific are overwhelmed with merchandise from Asia. To which we must add the impact of inflation.
Why can we not produce in North America what we consume? Well, of course we can. It is a matter of defining a regional economic strategy. We need to jointly plan our development, and we should foster a productive investment program to replace the imports. Finally, we must jointly define specific objectives and leave myths and prejudice aside.
We started writing about companies “nearshoring” their manufacturing from China to Mexico in 2019, and since then our drumbeat has picked up (including in relation to the cannabis industry). There are plenty of reasons for this (and not every company is concerned), including increased operational and shipping costs, as well as increased political risk.
So what were the main takeaways from the North American Leaders’ Summit? The three leaders reached agreement on (and left to the technocrats to implement) a number of issues, including:
- Reiterating their intention to shore up medical supply chains by exploring ways to make the components of vaccines and other public health supplies in North America.
- Strengthening North American supply chains by creating a trilateral supply chain coordination mechanism, with a goal of defining essential industries to minimize future disruptions, recognizing that North America needs resilient, sustainable, diverse, and secure supply chains to ensure economic prosperity and security.
- Strengthening Small and Medium Enterprise (SME) linkages by connecting SME centers across North America (i.e. across borders) and to promote women’s entrepreneurship through expert exchanges focused on economic recovery. The leaders also committed to promoting innovation by supporting creators and reducing counterfeit and pirated goods in trade.
- Supporting strong labor rights protection and underscoring trilateral commitment to implementing the prohibition under the U.S.-Mexico-Canada Agreement (USMCA) on the import of goods produced with forced labor.
- Exploring opportunities with the private sector and universities to ensure that U.S., Mexican and Canadian citizens are equipped with the education and training that will ensure workforce leadership through the 21st century.
- Collaborating to accelerate renewable energy deployment across North America, including sharing technical assistance, best practices, and efforts to catalyze finance and technology.
- Accelerating the transition to sustainable transportation, including more rapid deployment of electric vehicles, efforts toward net-zero greenhouse gas emissions from aviation by 2050, and cleaner fuels in the rail, aviation, and marine transportation sectors.
- Protecting LGBTQI+ human rights by pledging trilateral commitment to the Global Equality Fund to support frontline activists, and supporting and increasing membership from the Americas in the United Nations LGBTQI Core Group and the Equal Rights Coalition, which coordinates diplomacy in support of human rights.
- Promoting pathways to labor mobility by committing to promote temporary seasonal worker visas, increasing industry education about the programs and their regulations, and expanding centralized migration resource centers in Central America. The leaders also committed to developing additional programs and assuring funding to create jobs in Latin America and the Caribbean.
Though at first glance the North American Leaders’ Summit may have looked like a feel-good exercise, President López Obrador’s remarks made clear the three leaders’ no-longer-hidden agenda: they believe that not only is China an economic rival, but also a geopolitical threat. Chinese dominance in rare earths production, its stranglehold on the supply of many other goods, plus its menacing stance toward Taiwan, which supplies the majority of the world’s semiconductors, create the potential for crippling disruptions to North American (and world) economies. The leaders of the U.S., Mexico and Canada are taking steps to prevent these disruptions, or at least mitigate their impact.
For North American businesses, and for companies elsewhere doing business in North America, stronger intra-continental economic ties should provide stronger foundations for the manufacture and distribution of products and services within the region, and it should help to increase the economic significance of North America as a whole.