Mexico's Nearshoring Potential Likely to Be Discussed in Bilateral Meeting, Panelists Say
Although tensions over Mexico's discouragement of foreign investment in its energy sector and the perennial problem of migration are likely to be front and center, panelists at a Wilson Center Mexico Institute program previewing the Mexican president's visit to Washington said nearshoring ought to be a focus as well.
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Martha Barcena, a former Mexican ambassador to the U.S., said that if they do talk about it, President Joe Biden can explain to President Andres Manuel Lopez Obrador that businesses are making less investment in China, and that they should talk about how to bring that investment to North America.
"This is a golden opportunity that we are missing," she said during the July 11 webinar. "On a scale from zero to 100, we should receive investment around 80 and we are receiving investment around 40." She said the bureaucracies in both countries should be speaking to their business sectors and finding out what the obstacles are to bringing supply chains to North America.
Luis Rubio, a global fellow at the Mexico Institute and former chairman of the Mexico Council on Foreign Relations, said that this issue is critical, along with Buy America policies the U.S. might implement that would undermine regional supply chains, but said it's not the type of problem the two presidents are likely to tackle.
He expressed concern about the proposal to offer subsidies to buy electric vehicles only if they're built in the U.S., because autos are 50% of all Mexican exports, and if the Mexican industry does not gain a share of EV production, then it will be out of the picture, he believes.
But he said that the U.S. trade representative would rather discuss energy investment than this issue.
Barcena agreed that if there is no agreement between Mexico and the U.S. on auto rules of origin and the transition to electric vehicles, then it could "break the backbone of the [trade] agreement. With all of its problems and challenges, because there are many, it is a legal framework that has allowed trade to grow exponentially and investment to also grow exponentially."
Rubio said the electric vehicle tax credit is an exception, and that most of the power to seize the moment on nearshoring lies with Mexico, not with the U.S. "Unless Mexico addresses its core problems like security and being anti-foreign investment or anti-investment in general, there is going to be no opportunity," he said.
Barcena said that while Lopez Obrador is always torn between his idealism and pragmatism, she believes there will be a solution to the energy investment issues. She said he has been meeting with U.S. energy companies and trying to find an accommodation.