Is North America a region?

The T-MEC is a trade agreement between Mexico, Canada and the United States, in which at least two of the three countries seek a way to not fully comply. Fortunately, it is not in everything, but it is in crucial sectors. It is Mexico in energy and the United States in the rules of origin of the automotive industry.

Is North America a real region as the maps suggest, or is it a fantastical place like JRR Tolkien’s Middle-earth or García Márquez’s Macondo? It is one of the richest and most competitive economic regions in the world, with a trade of almost 125,000 million dollars per month. It could be more, how much more depends on the commitment of the leaders of the three countries to promote integration at this time when the world is talking about deglobalization. What is coming is a redefinition of the global factory, with new forms of competition and collaboration between regions.

Is North America a region or just three countries bound by a geographic spell? Almost 500 million people live in this part of the world and a little more than a quarter of the world’s GDP is produced. The T-MEC is a free trade agreement that came into force at a time when protectionism is back. This is expressed when the United States wants to twist the interpretation of the way in which the contents of automobiles are calculated to make vehicles produced in Mexico and Canada less competitive. Protectionism is also in the way in which the reforms to the Electricity Law in Mexico were drafted and in the way in which the energy regulatory bodies in Mexico operate to favor Pemex and CFE.

Will the USMCA partners be able to commit to more serious compliance and/or resolve their differences more effectively? This is one of the topics that will be discussed at the trinational meeting that begins in Mexico City next week. The spotlight will be on the three presidents and on the reactions to the capture of Ovidio Guzmán, but the economic agenda deserves attention. Intraregional trade has continued to grow, as have investments… and conflicts. For Mexico and Canada, it is key to take advantage of the decoupling of the United States with respect to China. What is missing to make it better/faster?

Canada and Mexico are the United States’ two largest trading partners, but China remains a very close third, according to data from the US Department of Commerce. This is an indication that the uncoupling of Uncle Sam with the Dragon is a complex and slow process. It is not something that happens in a straight line or fast track. To complicate the “narrative” it turns out that China has become Mexico’s main car supplier in 2022, above the United States. They are cars from Chinese brands like Baic and JMC, but also Aveos that GM brings from China.

The dilemmas of North American integration are here. It appears as one of the points on the agenda of the trinational meeting. There will be meetings dedicated to discussing strengthening value chains in North America. Raquel Buenrostro and the Economy team will take these issues on behalf of the Mexican government, accompanied by Marcelo Ebrard and his working group. They will have their counterparts in the United States and Canada as interlocutors. There will also be meetings with businessmen from the three countries. Perhaps the least political notes of this summit will come from businessmen and women: there is anger at the way in which some politically charged decisions have become stones in the shoe of trade integration.

There is also concern because issues continue to appear that could generate new controversies, without having resolved the current ones. From Mexico, the restrictions on corn purchases are revived. In the United States and Canada, the intention arises to support the production of electric batteries with public resources. If this is not resolved in the context of the T-MEC, imagine LitioMex competing with Superpesos against subsidized companies with resources from the coffers of the United States or Canada.

Is it the destiny of North America to be a more integrated region?, as suggested by Robert D Kaplan, in Journey to the Future of Empire. Is this region doomed to be an unfinished project? Is it one region or three countries caught by a spell of geography?

lmgonzalez@eleconomista.com.mx