Robert D. Hormats, US Under Secretary for Economic Growth, Energy, and the Environment, on the multi-faceted economic ties between Mexico and the US.
Despite the considerable turbulence and uncertainty that has clouded the global economy in recent years, the economic relationship between Mexico and the US achieved unprecedented success in 2011. Two-way trade reached a record high of $460 billion, making Mexico the US’ second largest export market and third largest trading partner. FDI also surged. US investors contributed more than half the value of new investment projects in Mexico, pushing the total stock of US FDI in Mexico to over $100 billion. These numbers speak to an economic relationship that has transformed in the last two decades. Trade is five times what it was 20 years ago. But more than just the level of trade, what has changed is the nature of trade between the US and Mexico. Intra-industry trade and intra-firm trade are more prevalent than ever before. Production chains and supply networks stretch through both countries, and goods and inputs cross back and forth multiple times. The US and Mexico do not merely trade with each other, we build things together. Mexican exports to the US comprise more than 40% US content.
The collaborative relationship between the US and Mexico shows that the US economy does not stop at the border. Regional integration in North America creates a common economic space that makes the US more globally competitive. Jobs in the US do not exist in isolation, but rather are connected to customers and suppliers worldwide. That type of mutually beneficial commercial linkage is particularly intense with Mexico.
The challenge for 2012 and the years ahead is to take advantage of those new opportunities by advancing a positive economic agenda that facilitates even more trade and investment, even more job creation, and even more prosperity in both countries.
Effective border management is a top priority. The US-Mexico border is one of the busiest, most commercially important borders in the world. One million travelers and more than $1 billion in trade cross it every day. The need to facilitate the efficient flow of legitimate commerce and travel is urgent, as of course is the need to impede the transit of illicit goods, funds, and persons. A special border steering committee is working to coordinate infrastructure projects, improve border crossing procedures, and shape regional planning, to ensure the border is friendly to business.
Our governments also seek to remove unnecessary regulatory differences that slow business growth and make it more complicated to protect consumers and the environment. A bilateral regulatory cooperation council is reducing overly burdensome red tape, streamlining processes, and aligning standards in key sectors such as food safety, transportation, nanotechnology, e-health, and offshore oil and gas development. Special benefits from these improvements should accrue to SMEs, a sector targeted for expanded exports to Mexico under President Obama’s National Export Initiative, which seeks to double US exports by 2014.
Mexico is a priority country in the SelectUSA initiative, a US government-wide effort to attract increased FDI into the US by letting foreign companies know we are open for business. Mexican investment in the US already exceeds $10 billion; and the potential for increased investment is high, which could create jobs, spur economic growth, and strengthen two-way trade.
Beyond the bilateral agenda, the US and Mexico share important regional and global interests. We are working together to increase educational opportunities and give our next generation the skills they will need to thrive in the 21st century. With Canada, our other North American partner, we are enhancing our region’s competitiveness in the global market.
In Central America, the US and Mexico are providing assistance to develop the capabilities of these countries to operate more effectively against drug-trafficking organizations and gangs, so as to reduce the constraints of violence and insecurity that hinder the economic development of this region. And throughout the Americas, Mexico and the US are working with other countries in the region through partnerships like Pathways to Prosperity and the Energy and Climate Partnership of the Americas (ECPA) to promote inclusive economic growth, energy security, and environmental sustainability.
On the global level, Mexico’s chairmanship of the G20 heightens its profile on the world stage. The US supports Mexico’s G20 goals of economic stability and jobs, strengthening of the global financial system, improvement of the international financial system architecture, global food security, and sustainable development. G20 finance ministers and central bank governors have echoed the commitments of leaders in offering frank appraisals of the global economic situation and reminding Europe of its responsibility to solve the Eurozone crisis.
The US looks forward to working with Mexico on this broad, multi-faceted agenda throughout 2012 and beyond.
© The Business Year