Towards a Regional Competiveness Agenda

First published in Spanish in Animal Politico on March 25, 2013

Until we know where we are going as a region and understand ourselves like a region, we will be left with an economic agenda that looks like little more than a to-do list. Our leaders will have a hard time describing advances in economic relations in an interesting way and explaining to their respective populations that we are no longer competitors but partners.

The election of a new administration is always an opening for new policies. In regards to the relationship between the United States and Mexico, last year’s presidential elections in each country present a major opportunity to reflect on and to revise the bilateral agenda.

Obviously the election of Enrique Peña Nieto and the PRI represents a much more drastic change than the re-election of President Obama. As a result, most changes in the bilateral agenda will be proposed by Mexico in the coming years.

The biggest change proposed by Enrique Peña Nieto’s administration is to put more emphasis on economic relations and, without forgetting the security issue, giving it less public attention.  

During a time of renewed optimism in the Mexican economy, and in the context of the fiscal and economic challenges that the United States continues to face, it makes a lot of sense to focus on ways in which the two countries can cooperate to make the region more competitive. Whether by design or by luck, the industrial sectors of Mexico, the United States and Canada are now so closely integrated that our economic futures are linked together.  In today’s global economy, our countries will either experience success or failure together.

Besides offering potential economic benefits, the change of focus proposed by Enrique Peña Nieto and accepted by the Obama administration can change the perception of Mexico in the U.S. and the tone of the bilateral relationship. For much of the public, speaking of Mexico in terms of illegal immigration or security issues is to speak about problems that need to be solved. On the other hand, speaking of Mexico’s growing middle class and increased competitiveness vis-à-vis China presents a picture of opportunities to seize.  This change of perspective, by the public and by the U.S. Congress, could facilitate the passage of politically difficult reforms, such as immigration reform.

While everyone agrees it is a good idea to change our focus and talk over economic issues, it is important to ask:  When we address these issues , what should we say?

There is a long list of bilateral issues that should be discussed within the rubric of regional competiveness: more efficient border management, bilateral cooperation in international trade negotiations such as the Trans-Pacific Partnership and a possible North America-EU agreement, regulatory harmonization, trade liberalization in services such as transportation and healthcare, the simplification of customs procedures, among others.

There are important advances that can be made on each of these topics—and each advance makes the region a more competitive— but so far this is nothing more than a to-do list.  The harmonization of regulations, for example, is quite important but rather uninteresting. In many cases, producers have to maintain separated production lines for the region: one that follows U.S. regulation, one for Mexico, another for Canada. Harmonizing regulation among the North American countries would reduce manufacturing costs, but it isn’t a very sexy topic for a presidential press conference.

After a White House meeting between Presidents Obama, Calderon, and Canadian Prime Minister, Stephen Harper, President Obama highlighted the progress of a commission appointed to harmonize the regulations of the U.S. and Mexico. You won’t be surprised to learn there was almost no news coverage of these remarks.

This is because we need common goals and a regional vision. Until we know where we are going as a region and understand ourselves like a region, we will be left with an economic agenda that looks like little more than a to-do list. Our leaders will have a hard time describing advances in economic relations in an interesting way and explaining to their respective populations that we are no longer competitors but partners.

A regional vision and regional goals will only be achieved if they are designed with input from the various levels of government, the private sector, and civil society. Still, to start the conversation I would put on the table a vision of North America as the most competitive economic region in the world. In terms of economic weight, there are three major regions—Europe, which represents about 28% of global GDP, Asia with 22%, and North America with 29%. This means we have two major competitors.

So, how can we measure our progress towards this goal? Like our vision, these measures should be created with the input from a wide range of partners; however, it is worth suggesting some options: We could seek to increase our regional exports significantly and, for a period, make them grow faster than our imports in order to reduce our collective trade deficit and balance our economy in a healthy manner. We could also take steps to ensure that everyone benefits from the wealth generated by increased trade by aiming lower inequality in Mexico and the United States, and at the same time continue on the long road to economic convergence between Mexico and USA.

When we seek to create jobs and wealth in the region it is important to remember that a product made in any country in the continent tends to incorporate parts and materials from other countries in the region. Hence, when a company establishes a plant in Mexico, jobs are created on both sides of the border.  In the global market, Mexico and U.S. are strategic partners. At the level of the presidents, I think they now understand this point. Next up is to flesh out the regional competitiveness agenda.