Bureau of Economic and Business Affairs
July 31, 2013


The meeting was open to the public. The meeting room was at capacity with individuals from the membership, general public and media.

On July 31, 2013, Assistant Secretary of State for Economic and Business Affairs, Jose Fernandez, hosted the meeting of the Advisory Committee on International Economic Policy (ACIEP), which focused on the topic: “Mexico and the United States: Elevating and Deepening Economic Cooperation.” His Excellency Eduardo Medina Mora, the ambassador of Mexico to the United States; Eric Farnsworth, vice president Council of the Americas and Americas Society; and Michael Shifter, president of the Inter-American Dialogue, offered comments at the meeting.

Matters Discussed regarding the Thematic Topic:

The recent visits of high-ranking U.S. government officials and other U.S. engagement in the region underscore the importance the United States accords to Latin America and the Caribbean. U.S. companies strive to be the best employers, buyers and neighbors, and will continue to do so.

A U.S.-Mexico High Level Economic Dialogue (HLED) was recently created, meets annually at the cabinet level, and will focus on various issues, such as productivity, stakeholder outreach, and innovation. This dialogue is still evolving, with its first meeting projected for September 2013. The “Alliance of the Pacific,” which includes Mexico, Chile, Colombia and Peru, reflects the progressive rise of Latin America, especially Mexico, and the overall deepening of these four countries' economic relations. Topics for the Alliance of the Pacific’s discussion include: easing of visa requirements, stock share listing across countries, and inter-embassy collaboration. The United States joins as an observer to the Alliance.

NAFTA has provided the United States and Mexico today with the right framework for deepening these two countries' economic relationship. For example, U.S.-Mexico bilateral trade last year amounted to $494 billion; each billion of this amount has created new jobs in Mexico and the United States. The present is not necessarily a “Mexican Moment,” but rather a milestone in the country's macroeconomic stability. Undertaking effective reforms is still a major issue, but the outlook for doing so appears promising. The United States and Mexico should change their focus from “Made in Mexico” or “Made in USA” to “Made in North America.” At present, North America and the entire Western Hemisphere region is increasing its competitiveness. Lowering transaction costs between all the countries in the region, however, will be a key factor for sustaining this dynamic momentum.

Mexico is not just emerging as a leader economically, but also in trade agreement participation. In relation to BRICS and other important emerging economies, Mexico is very well positioned. Mexico has trade agreements and economic relations with many countries around the world, which is an important reality for the United States to recognize.

Mexico is beginning to play a more active role in throughout the Western Hemisphere. Mexico is now turning not only to the United States, but also looking southward, which is good for the U.S. relationship with Mexico, as well as for the Central American countries. South and Central America have important security, energy and economic relationships with the United States and Mexico. It is especially important that Mexico be more involved in Central America, given the societal violence in a number of Central America countries, which threatens stability and prosperity in the region, and which is having a substantial impact on security in North America. Mexico’s “shift toward the South” can be very beneficial for the U.S.-Mexico economic relationship.

Mexico is on the verge of an economic takeoff, and is well-positioned to take advantage of this moment of opportunity, especially with regard to innovation and intellectual property. Many observers have focused on the negative security issues related to Mexico, but have failed to be aware of “Mexico’s important economic success story,” including with regard to education, competition policy and labor code reforms. Thanks to sound economic management from past administrations, the current Mexican president’s aggressive pursuit of the reform agenda and inclusion of the opposition political parties in this process, there is momentum to move forward.

With the United States, Canada and Mexico, North America is an important global economic player. But as strong as U.S.-Mexico relations are currently, they cannot be taken for granted. The United States needs to actively continue focusing on and developing this relationship. It is encouraging that Canada and Mexico are also willing to develop the relationship.

NAFTA was a good framework for its time, but since 1994 when that accord went into force, the world has changed. There was no Facebook or many of the other innovations that we take for granted today at that time. Energy, healthcare and technology have changed. The trade agenda needs to keep pace with what the private sector is doing. Energy reform was excluded from NAFTA.

In the past 20 years since NAFTA came into force, the United States has been negotiating free trade agreements that contain much stronger labor and environment provisions than those contained in NAFTA. TPP and TTIP will probably proceed forward with stronger labor and environmental provisions than those in NAFTA. However, others believe that NAFTA's effect has improved the standard of living in Mexico because it has opened the economy and strengthened opportunities to export. This has resulted in lower prices for Mexicans that are more favorable than for citizens of its Latin American neighbors.

One could argue that Mexico has not taken full advantage of the opportunities presented by NAFTA. NAFTA was originally envisioned as a tool to enhance Mexico’s economic development. Mexico lagged behind the other NAFTA partners due to its own domestic political obstacles, including the need for social and related institutional reforms, despite the opening of its markets. Consequently, growth in Mexico has been disappointing. However, at the moment there is a window of opportunity for getting beyond the previous limitations.

The United States and Mexico now share an integrated economic space, which will continue to evolve. Mexico is now a near-sourcing high opportunity country. Given the enormous volume of trade between the two countries, the U.S.-Mexico relationship is primarily an economic one, and not merely one based on security, and there needs to be a “re-balancing” of the two countries' relations to recognize this reality. Rebalancing would involve reshaping the security aspect of the relationship into one based on mutual law enforcement, which would permit trusted shippers to move across the border more expeditiously. There have been improvements in this area, but more needs to be done.

The U.S.-Mexico border is the area most in need of improvement in the bilateral relationship. The border is the “windpipe” of the economy and can be a substantial impediment to economic activity with regard to timeliness and costs of production in North America. Border delays serve no purpose and are a waste of energy and resources. There is a need to find ways to enable the border to be a mechanism to bring the United States and Mexico together rather to divide the two countries, to improve border coordination, and not allow the immigration issue to undermine economic development.

Both the United States and Mexico seek more investment and Mexico is now investing in the United States more than ever before. However, NAFTA continues to contain certain impediments to investment. Much U.S. investment that would otherwise go to China is going to Mexico due to the integrated supply chains between the United States and Mexico. China has taken note of this situation. Due to labor and transportation costs, at this moment it is more advantageous for goods to be manufactured in Mexico and exported to the United States, than in China. The United States is no longer competing, but rather partnering, with Mexico and Canada, and all three are competing against China and other Asian players. But to remain globally competitive in the future, the United States, Canada and Mexico need to coordinate more, not just at the executive branch, but also at the legislative branch of their three countries at the front end of the economic integration process.

Subcommittees:

On July 10, 2013, the Sanctions Subcommittee met with Ambassador Daniel Fried, the Department of State's new Coordinator for Sanctions Policy, and Deputy Assistant Secretary of State Peter Harrell to discuss recent developments in sanctions against Iran, including a new executive order that went into effect on July 1. Related issues discussed included addressing tensions arising from ensuring that U.N-led, U.S.-led and other sanctions are effective against Iran, while not preventing important food and medicines from getting to the Iranian population. The subcommittee will likely meet again in the autumn. The Investment Subcommittee has changed its name to “Trade and Investment Subcommittee,” given that trade drives so much of the investment agenda. The subcommittee will hold its next meeting at a yet-to-be determined date to follow-up on trade issues discussed at the May 30, 2013 ACIEP meeting.

The Stakeholder Advisory Board (SAB) for the U.S National Contact Point (U.S. NCP) for the Organization for Economic Cooperation and Development Guidelines for Multinational Enterprises has had substantial member participation at its recent meetings during which the SAB discussed the drafting of its advisory report regarding the core activities of the U.S. NCP: outreach and promotion, the specific instance (complaint) process and the proactive agenda. The SAB plans to submit its report to the ACIEP within the next few months. There was a request that interested parties submit more specific instance cases to the Office of the U.S. NCP.

Following a question-and-answer period about the subcommittees, Assistant Secretary Fernandez noted that the next ACIEP meeting would be held on October 30. There was also a discussion on possible topics for future ACIEP meetings. The Assistant Secretary and Chairman Kassinger then concluded the meeting, with the concurrence of Gregory Maggio, the Designated Federal Officer.