Building bridges: Milestones and cooperative endeavors shaping North America’s future

Railroad tracks meet
Editor's note:

This viewpoint is part of USMCA Forward 2024.

The North American region is currently experiencing a unique and promising opportunity as diplomatic relations between Mexico, the United States, and Canada have never been stronger. Despite the longstanding history of relations between Mexico and the U.S. dating back to 1822 and between Mexico and Canada since 1944, recent years have seen a significant strengthening of ties and exchanges. In 2022, trade between Mexico and the U.S. amounted to $863 billion, while the total commercial exchange between Mexico and Canada reached around $40 billion.

The trilateral relationship was institutionalized in 1994 with the North American Free Trade Agreement (NAFTA), transforming Mexico’s commercial ties with the U.S. and Canada. This agreement positioned Mexico as a key trading partner for our northern neighbors, consolidating our country as an export platform to world markets. However, in 2017, the modernization of our free trade agreement began, leading to the United States-Mexico-Canada Agreement (USMCA), which took effect on July 1, 2020, replacing NAFTA. The USMCA aims to create a fairer and more reciprocal trade environment, generating high-paying jobs and promoting economic growth in North America.

Furthermore, the benefits derived from the above are already visible in the trade patterns between our countries. Canada and the U.S. are among Mexico’s largest trading partners and largest investors in the country. From January to September 2023, Mexico registered a total of $13.5 billion in foreign direct investment (FDI) from the U.S., representing 41% of the total FDI received by Mexico up to that date. This trend positioned the United States as the number one investor while Canada was responsible for $2.2 billion in FDI, equivalent to 7% of the FDI Mexico received as of the third quarter of 2023.

It is crucial to emphasize additional initiatives running simultaneously with the aforementioned agreement. Since 2005, Mexico, Canada, and the U.S. have enhanced their economic and social ties through the North American Leaders’ Summit (NALS). Through this platform, the trilateral agenda for all regionally significant topics is set by establishing frameworks for collaborative initiatives among the three governments, covering diverse aspects such as inclusion, environment, competitiveness, migration, health, and security.

As an example of our trilateral work, the first North America Semiconductor Conference (NASC) was realized to address the global semiconductor shortage and create a unified region for semiconductor development and production, leveraging each country’s strengths. This collaboration aligns with the $52 billion CHIPS and Science Act’s goals, emphasizing U.S.-based chip production. The initiative focuses on workforce development, research and development, government incentives, and environmental sustainability, holding promise for rebalancing the global semiconductor supply chain in North America.

Additionally, Mexico and the U.S. work together in the High-Level Economic Dialogue (HLED), which aims to promote economic growth and competitiveness in both countries. Among this dialogue’s achievements is the recognition by both governments of the importance of joint efforts to modernize border infrastructure and promote sustainable and inclusive social development in southern Mexico and Central America, underscoring the significance of creating short, medium, and long-term employment and opportunities in such regions.

Another example of close collaboration between Mexico and the U.S. are the efforts made through the North American Development Bank (NADBank)–a bilateral financial institution founded and funded by the Governments of Mexico and the U.S.–NADBank seeks to offer financial support to states from both sides of the border for the development and implementation of environmental infrastructure projects. Currently, NADBank is formulating a new strategic plan that centers on prioritizing water as a key investment. This involves financing projects focused on water supply and distribution, wastewater treatment, water conservation, and supporting infrastructure development in drinking water areas. Additional efforts are directed towards encouraging investments in air quality, addressing solid waste, as well as evaluating projects in the clean energy sector, especially those related to storage and transmission.

Despite the progress made by Mexico, and the U.S. and Canada in strengthening and institutionalizing relations in North America, maintaining these achievements requires a lot of organization and political will from the three countries.

We should not overlook the fact that 2024 will be a year of change in Mexico and the U.S., with both countries having major elections ahead that will dictate the direction of many aspects of the bilateral relation. However, as we enter this new period of change, we must remember that the relationships we have among our countries are a vital axis for our economies, our people, and for the competitiveness of the region as a whole. The ties we have established over the years have made North America the most competitive region in the world. While the upcoming political changes may significantly influence our path forward, the accomplishments we have collectively achieved demonstrate the significance and potential that our relations and region hold for the future.