Link Trade and Development in Mexico

There are a number of steps the United States, Canada, and Mexico can take to improve trade and promote development in Mexico.

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The United States, along with Mexico and Canada, need to redesign the North American Security and Prosperity Partnership. SPP working groups such as the Manufactured Goods and Sectoral and Regional Competitiveness working group, Movement of Goods working group, and Business Facilitation working group all have initiated some laudable efforts to improve infrastructure at the border and streamline regulations that make trade costly and difficult. Yet because the SPP effort only includes representatives of government and large corporations, it lacks the sweep of players needed to get the job done right. A redesigned and renamed SPP should include representatives of small- and medium-sized businesses and give priority to trade elements that allow these types of businesses to take advantage of trade opportunities. It should also include representatives of labor, environmental organizations, and other key stakeholders so that the SPP process is more fully representative for all stakeholders in an improved U.S.-Mexico trade.

In addition, the three countries should reopen a dialogue to share perspective on the North American Free Trade Agreement 15 years after it came into effect, including a discussion to strengthen the labor and environmental commissions. These two side agreements to NAFTA created commissions designed to oversee concerns on workers’ rights and the environment but have never had either sufficient funding or a sufficiently strong mandate to pursue their stated goals. The agreements should be renegotiated to give these commissions greater authority to resolve cases effectively in a way that elevates labor and environmental standards in Mexico, the United States, and Canada.

Critical to improving labor and environmental conditions in all three countries would be a new investment fund to promote development. The United States can begin discussions with the Mexican government—and ideally with the Canadian government—on the possibility of creating a joint investment fund to bring Mexico’s development closer to that of the United States and Canada. Ultimately, progress on achieving this would depend on a commitment by the Mexican government to make significant investments and to make progress on a series of domestic policies to promote development, including:

  • Competition policy to reduce monopolies.
  • Labor laws to democratize unions.
  • Energy policy to promote sound management, including access to credit and technology, of Pemex, the government-owned oil company.
  • Taxation policy to raise fiscal revenue to 18 percent of gross domestic product from current 11 percent levels.

If these conditions exist, then the U.S. government should consider one of several options for an investment fund that would make priority investments in human capital (education and training) and in infrastructure for roads, ports, and airports that link poorer regions to the global market.

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