The USMCA has certainly been successful in increasing the volume of Mexico’s trade with the United States and Canada. According to the US Census Bureau, in April 2023, the United States imported more goods from Mexico than from any other country; in 2022, Mexico-US trade was almost 27 percent higher than in 2019, and Mexico-Canada trade grew 21.8 percent in these same years. Between 2020 and 2023, Mexico received fifty billion dollars in US and ten billion dollars in Canadian investments.

This increase in trade and investment flows is explained not only by the USMCA’s implementation, but also by the Biden administration’s decision to diversify supply chains, relocate production to North America, and “de-risk” from China. By seeking to reduce the vulnerability of supply chains in North America, the integration facilitated by the USMCA acquired greater relevance for companies, workers, governments, and societies.

Even though the agreement has spurred dynamism in trade and investment, its implementation has not gone without serious challenges and confrontations, which Mexico will need to address before the 2026 joint review. These include differences in the way the three countries have chosen to comply with the USMCA, heightened scrutiny on labor and environmental issues, and incomplete implementation of the agreement’s provisions.

Unsettled disputes

First, Mexico has faced difficulties on both sides of the USMCA’s dispute settlement mechanism, established in Chapter 31. Mexico’s use of this mechanism signals that it considers the agreement an effective instrument to defend its commercial and investment interests. Together with Canada, Mexico requested the establishment of a panel to settle its differences with the United States regarding the interpretation of the methodology to determine the regional value content of essential auto parts in cars manufactured in North America. The panel ruled in favor of Mexico, but there seems to be no interest in enforcing the ruling.

Mexico has also been the target of Chapter 31. Both the United States and Canada requested consultations regarding Mexico’s energy policy in July 2022 and restrictions on trade in genetically modified corn in June 2023. While both consultation processes could still lead to requests for the establishment of panels, the parties have been in conversation regarding the substance of their concerns.

Chapter 31 is of great value to the private sector in North America because it offers a legal tool to solve differences. The USMCA offers a dispute settlement mechanism that works, unlike the World Trade Organization Dispute Settlement Body, which is paralyzed. The USMCA’s panel reports are binding, and panel decisions are not affected by domestic political pressures.

However, it is the three governments’ responsibility to comply with the panels’ decisions, even if they are unfavorable, and to make sure that rulings are fully enforced. Not doing so undermines the value of the USMCA dispute settlement mechanism and the agreement itself.

High standards, heightened scrutiny

Second, Mexico has been subject to scrutiny on labor and environmental matters, reflecting US and Canadian national priorities and their need to respond to political pressure from their own domestic constituencies. Regarding labor, under the Rapid Response Labor Mechanism, the United States has initiated eleven cases against Mexico, and Canada has initiated one. Mexico’s labor authority has sought to address the concerns raised in each case, avoiding sanctions and prohibitions on exports.

On environmental matters, Mexico has faced questioning from its partners regarding compliance with its environmental legislation and its USMCA obligations. For example, in February 2022, the United States requested consultations with Mexico on the protection of the vaquita porpoise, which is associated with totoaba illegal fishing. In May 2023, the US Fish and Wildlife Service determined that Mexico has not done enough to prevent the illegal trafficking of totoaba, so later this month, US President Joe Biden could decide to impose an embargo on the trade of wildlife products from Mexico, in line with Mexico’s Convention on International Trade in Endangered Species of Wild Fauna and Flora obligations, which are also recognized in the USMCA. In labor and environmental affairs, the United States and Canada have used and may continue to use the USMCA mechanisms to pressure Mexico to comply with its obligations, since these issues are key to their own domestic political agendas.

Unfinished business

Third, Mexico has yet to fully implement several USMCA provisions. These include the Asia-Pacific Economic Cooperation Cross-Border Privacy Rules Framework, established in Chapter 19, which is already overdue. In addition, Mexico will have to become a signatory to the 1991 agreement of the International Union for the Protection of New Varieties of Plants as provided in Chapter 20. Likewise, the USMCA has a built-in agenda of future negotiations, such as the inclusion at the sub-federal level of provisions on state-owned companies and designated monopolies (Chapter 22), which should have been concluded in June 2023. Mexico needs to make sure that these provisions are enforced according to its USMCA commitments, since this will align its regulations and policies with those of its North American partners.

At the halfway point between USMCA’s entry into force and its first joint review, Mexico has seen a substantial increase in its trade and investment flows, which are key engines for its economic growth. However, Mexico still faces serious challenges in the full implementation of its commitments and in making sure that the United States also complies with a panel report favorable to Mexico. It is in Mexico’s interest to fully comply with the agreement while also requesting compliance from the United States, since that will provide certainty and predictability to investors in the region. This will facilitate the agreement’s extension at the six-year review in 2026 and will allow Mexico to promote opportunities for North American productive integration and the relocation of supply chains.

Luz María de la Mora is a nonresident senior fellow with the Atlantic Council’s Adrienne Arsht Latin America Center, where she supports the Center’s Mexico work. From December 2018 to October 2022, she served as undersecretary of foreign trade in the Mexican Secretariat of Economy, during which she helped implement the USMCA.

The post A midterm report card for Mexico’s USMCA progress appeared first on Atlantic Council.

This article was originally published in Spanish by El Heraldo de Mexico. An English translation of the article is included below.

As the war in Ukraine enters its second year and the cold war between the United States and China intensifies, it is interesting to see how other countries begin to adjust their security policies.

There are relative changes, often imperceptible when they occur in isolation, however, in concert and with context, these changes say a lot about the rearrangement of world geopolitics.

On April 4, Finland officially became the 31st member of the North Atlantic Treaty Organization (NATO). It is expected that the integration of the Finnish military forces into the NATO command and control system will be easy, thanks to the fact that Finland was part of the “Partnership Interoperability Initiative.”

That program establishes deep connections between NATO and non-member countries that allows them to establish systems and processes that facilitate cooperation. Countries like Australia, Georgia, Jordan, Ukraine, and Sweden are also members of that initiative.

Finland’s accession doubles Russia’s land border with NATO, but the military alliance not only gains territory from which to reinforce the alliance’s northeastern flank (and the Baltics), it also gains an ally with a significant military force, technologically advanced and with a historic grudge against Moscow.

Let’s remember that Finland was invaded by the Soviet Union in November 1939. At that time, Moscow feared that Finland would be used by Germany to attack the city of Leningrad (today Saint Petersburg).

At that time Finland was not a member of any alliance, but still managed to hold off the Soviet forces for months, in what was called the Winter War. In March 1940 Finland signed the Treaty of Moscow in which it ceded 11 percent of its territory to the USSR.

Together with Finland, Sweden applied to join NATO in May 2022, but remains waiting for Turkey to accept it. Under NATO rules, all member countries must approve the entry of new allies. Turkey requires Sweden to implement reforms to go after the funding networks of the Kurdistan Workers’ Party (PKK), an armed separatist movement branded as terrorist organization.

NATO’s Secretary General is confident that Sweden can be formally admitted to the alliance in July. This confidence emanates from the polls that put the main political rival of Turkish President Erdoğan, Kemal Kılıçdaroğlu (KK), 12 points ahead in the upcoming elections on May 14. KK announced that, if he wins the presidency of his country, he will lift the political veto on Sweden to join NATO.

On the other side of the world, in North America, Mexico, Canada and the United States carried out the NAMSI PACEX 2023 naval exercise off the coast of Manzanillo at the end of March. Fortunately, despite the current political rhetoric, the Secretary of the Navy (SEMAR) maintains a bond of cooperation with its partners, both of which are NATO members.

The spirit of these exercises serves to facilitate cooperation and interoperability between naval forces. It would be worthwhile for the Mexican armed forces to explore additional options to increase their interoperability capacity, so that when political resistance fades, Mexico has the option of formally and relatively easily integrate into the geopolitical camp of free democratic countries.

Fellow

Inigo Guevara Moyano

Nonresident Senior Fellow

Scowcroft Center for Strategy and Security Transatlantic Security Initiative

Americas Arms Control

The Transatlantic Security Initiative, in the Scowcroft Center for Strategy and Security, shapes and influences the debate on the greatest security challenges facing the North Atlantic Alliance and its key partners.

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This article was originally published in Spanish by El Heraldo de Mexico.

Russia’s war against Ukraine turned one year old on February 24. The conflict is generating a profound geopolitical realignment and, if it does not end soon, it is very possible that it will directly involve other powers and create an even deeper world division.

The world is now divided between countries that show solidarity with Kyiv, those that are indifferent—supposedly neutral [lukewarm]—and those that excuse or support Russia’s aggression. The latter are few.

Solidarity with Ukraine ranges from symbolic displays like lighting public buildings yellow and blue, to imposing economic sanctions on Russia, to direct aid in the form of financial resources, intelligence, and weapons.

The solidarity flowing to Ukraine constitutes the largest military mobilization in Europe since the Second World War. Support goes from countries like Canada and the US, to countries that were under threat and under the Soviet yoke during the Cold War, but also from countries that were until recently neutral. As an example, Morocco, broke its neutrality and announced in December that it would transfer its T-72 tanks to Ukraine.

It is estimated that Russia deploys 300,000 troops inside Ukraine. British intelligence estimates that Russia has lost 40 percent of its military strength and has already mobilized 97 percent of its deployable army, which has it very stressed. The Ukrainian counteroffensive, if well equipped, will make a significant change this Spring.

Countries willing to help Russia are attracting more and more international attention. Iran has agreed to receive 24 Russian Sukhoi Su-35 fighter jets in exchange for continuing to send drones and missiles. As a consequence, the EU announced sanctions against companies that trade with Iran, especially electronics. The most direct pressure came from the US, whose special forces intercepted a shipment of Iranian weapons destined for Yemen and forwarded them…to Ukraine.

Of all the countries that could support Russia, China is the only one that could drag out the conflict. Last week, the Chinese foreign minister met Putin in Moscow. Chinese military supplies—possibly drones and ammunition—would likely flow only with very favorable conditions for China—such as permits to exploit mineral areas in Siberia and/or the Arctic—but in the Russian perspective, these concessions will likely be acceptable to continue their war.

For China, having the option to support Russia is a strategic geopolitical opportunity, as it puts it in a position to 1) gain access to land and resources it longs for; 2) condition its support on a (violent) “reunification” of Taiwan; 3) prolonging the conflict could test the level of resolve and even the military capacity of the US and Europe, to intercede for Taiwan, although, on the other hand; 4) withholding it, could allow Russia to collapse, to later take over Siberia. There are many options, all very tempting for the Chinese Dragon.

Mexico continues in a supposedly neutral, lukewarm, position that does not benefit it in its relationship with Washington or with Europe. For countries with strong resistance to providing military aid there are also options: implement sanctions and donate humanitarian aid to relieve the Ukrainian civilian population. Unfortunately, it will be the people of Mexico, not just the current administration, who will go down in history as “lukewarm.”

Fellow

Inigo Guevara Moyano

Nonresident Senior Fellow

Scowcroft Center for Strategy and Security Transatlantic Security Initiative

Americas Arms Control

The Transatlantic Security Initiative, in the Scowcroft Center for Strategy and Security, shapes and influences the debate on the greatest security challenges facing the North Atlantic Alliance and its key partners.

Explore more

The post Guevara in El Heraldo de Mexico on the global divide on responding to the war in Ukraine (in Spanish) appeared first on Atlantic Council.

Taken together, their comments signal a broader recognition from the Biden administration of the power of local officials to help achieve national goals. But as Biden works to boost North American economic competitiveness vis à vis China, US governors and mayors are being left out of the conversation. They’re not the only ones: Local leaders across North America, from Mexico to Canada, are being left out of discussions geared toward improving the continent’s economic integration. Biden should tap into the economic and political power of local leaders, and he should start by including them in diplomatic summits such as the North American Leaders Summit (NALS).

Local leaders drive day-to-day collaboration throughout North America, yet they weren’t invited to the NALS last month. So while Biden, Mexican President Andrés Manuel López Obrador (known as AMLO), and Canadian Prime Minister Justin Trudeau met to “promote a common vision for North America,” that vision will be unachievable without the local officials who have built a regional web of economic integration capable of weathering national partisan shifts. Biden, AMLO, and Trudeau should embrace this web by encouraging local and national leaders to establish multi-level ties between their governments and to deepen subnational bonds across borders.

A web of economic integration

The North American countries have a crucial, yet also tense, relationship: That was evident at NALS, which took place amidst Washington and Ottawa’s ongoing disputes with Mexico City’s energy policies. The summit itself reflects this inconsistency in the North American relationship, as last month’s convening was the first in five years and was pushed back several times. The US-Mexico relationship has been complicated by national politics, including when former US President Donald Trump called for a border wall and when AMLO boycotted the US-hosted Summit of the Americas in 2022. The US-Canada relationship also experienced friction during the nineteen-month COVID-19 border closure, the longest border restriction the countries have shared in history.

But US mayors and governors routinely build a foundation of cooperation with their cross-border counterparts focused on practical priorities such as employment and economic growth. Mexico and Canada are the United States’ top trading partners, and the economic interlinkages are most obvious in border states. In 2021, Mexican foreign-owned enterprises in California provided nearly ten thousand jobs, while seven in every ten dollars invested in Baja California, Mexico, come from the United States. The same year, Mexican companies investing in Texas generated 5,364 jobs while Texan companies investing in Mexico created 9,110 jobs. The economic impacts are particularly clear in smaller states such as Vermont, where Canadian-owned businesses employed nearly three thousand people in 2021 and Canadian tourists have contributed two hundred million dollars annually to the state’s economy.

Such collaboration is bipartisan. In April 2021, North Dakota Governor Doug Burgum, a Republican, created the Essential Worker Cross-Border Vaccination Initiative with the Manitoba premier to vaccinate essential workers transporting goods and services across the border, ensuring that commercial flows between their communities remain ongoing. In April 2022, Texas Governor Greg Abbott, a Republican, signed memoranda of understanding with the governors of Mexico’s four border states to enhance border security and mitigate slowdowns in commercial border traffic. And in October 2022, California Governor Gavin Newsom, a Democrat, announced an agreement between Californian and Mexican border communities to support the construction of the Otay Mesa East Port of Entry at the San Diego-Tijuana border, which is being built as part of an effort to boost economic cooperation and trade.

Locally driven economic relationships pave the way for economic integration on a national level. Javier Martínez, founder and president of the Association of Mexican Entrepreneurs Los Angeles, told us that investment between California and Mexico drives the “incorporation of small and medium firms [into] the supply chains of the global firms,” strengthening national economic collaboration and opening opportunities for practices such as nearshoring. Local leaders are much more than implementers of national economic policies—they’re incentivized by the potential economic benefits to shape trade relationships from the bottom up. This was evident in 2017 and again in 2019, when Mexican and US mayors came together to support a modernized North America Free Trade Agreement and later urge the passage of the US-Mexico-Canada Agreement (USMCA). In 2022, US and Canadian mayors prepared a joint letter calling on their national governments to repeal the remaining COVID-19 border restrictions and hasten the return to pre-pandemic cross-border exchanges.

The collaboration spearheaded by local leaders is resilient to national partisan shifts. The aforementioned diplomatic disputes between the United States, Mexico, and Canada can impede cooperation and stall advancements in the North American relationship—yet these national-level tensions typically don’t stop cities and towns from promoting trade and tourism with their northern and southern neighbors. Initiatives by Biden, AMLO, and Trudeau to strengthen North American competitiveness may not outlast the national leaders’ terms if they don’t actively engage with the local leaders who have built the region’s economic integration and have a vested interest in its future.

A missed opportunity at NALS

At NALS, national leaders laid out their plans to mount a combined defense against China’s rising economic dominance by overhauling North American industrial capacity and integration. The gathered leaders announced steps to boost their roles in critical-mineral supply chains, which are currently dominated by China. They also pledged to organize the “first-ever trilateral semiconductor forum” as the next move in an escalating contest with China over control of the industry.

These policies aim to reverse a decline in US-based manufacturing that has led to a $382.9 billion US goods trade deficit with China and the US manufacturing workforce declining by more than a third. Because these local leaders have their communities in mind, they’re accustomed to reframing national-security objectives (such as semiconductor manufacturing) as priorities for their districts and constituents. Yet the roster for the trilateral semiconductor forum scheduled for early 2023 only includes “senior industry representatives” and “cabinet level participation” from the three countries. There is no mention of a role for mayors and governors who will play an essential role in forging the requisite economic and diplomatic cooperation from the bottom up.

How to implement this cooperation

North American national leaders should affirm local leaders’ role as trailblazers in their mission of advancing a closer economic alliance. They can do that by making space for local officials at the next NALS, whenever it takes place. The White House should work with US State Department’s Special Representative for Subnational Diplomacy Nina Hachigian to design parallel sessions at NALS that convene local leaders who represent communities that are part of critical-mineral and semiconductor supply chains to compare strategies and report out to national leaders. These sessions should focus on creating city- and state-specific NALS deliverables on economic cooperation and trade that resonate with communities in all three countries.

In contrast to the most recent NALS, mayors from across the Western Hemisphere will convene at this year’s inaugural Cities Summit of the Americas; it’s equally important to bring national leaders to spaces in which local leaders are gathering to ensure that neither perspective is siloed. The US State Department, White House, 24 Sussex, and the Palacio Nacional should ensure that cabinet-level officials and above are also represented at the Cities Summit so that they can get up to speed on their local leaders’ priorities and ideas.

In between the various summits, national leaders should support and expand bilateral initiatives led by cities and states. Many border communities have taken it upon themselves to set up economic commissions: For example, the Los Angeles Mayor’s Office, Mexico’s Foreign Ministry, and the Mexican Council of International Affairs launched the MEXLA commission to deepen ties including trade and energy collaboration. The Arizona-Mexico Commission created an economic development committee to strengthen development efforts, and the Texas Association of Business launched a Mexico Trade and Investment Policy Council to help companies navigate the Texas-Mexico business relationship. On the northern border, Michigan’s Economic Development Corporation established an international trade program that leads business delegations to Canada. Meanwhile, the Buffalo Niagara Partnership signed an agreement with two Ontario Chambers of Commerce to help local businesses take advantage of the cross-border economy and trade. Yet the landscape of bilateral cooperation across North America is made up of these sporadic examples that lack consistency and coordination. Hachigian should take stock of existing subnational initiatives to glean effective strategies and assess where more support is needed.  

To strengthen existing initiatives led by local leaders, Hachigian’s Unit for Subnational Diplomacy should assemble the knowledge of local leaders who have been fostering bilateral economic partnerships into a toolkit for all US states to use in building cross-border partnerships. Hachigian’s office can then work to disseminate these toolkits and trainings through existing subnational bodies, such as the National Governors Association and US Conference of Mayors.

The Unit for Subnational Diplomacy should also work with universities, research institutions, and local chambers of commerce to conduct a widespread review of state and city-level economic cooperation with Mexico and Canada to identify the benefits of advancing economic cooperation. This uncovered data can be shared with constituents to substantiate the value of maintaining international commissions, incentivize additional mayors and governors to deepen North American trade relationships, and plainly reveal the impact of local efforts to national leaders.

These steps will equip mayors and governors from all fifty states with the tools to champion economic integration initiatives, further strengthening their role as important advisors to national leaders and crucial players in future policy discussions.

North American local leaders are already getting the job done on the ground; they have earned a seat at the diplomatic table.

Willow Fortunoff is an assistant director at the Atlantic Council’s Adrienne Arsht Latin America Center.

Mary Ann Walker is a member of the Atlantic Council’s Adrienne Arsht Latin America Center Advisory Council.

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Atlantic Council research shows that a mere 10-minute reduction in wait times at the US-Mexico border can have increasingly positive effects on communities and economies on both sides of the border. The Adrienne Arsht Latin America Center, in collaboration with the Hunt Institute for Global Competitiveness and Colegio de la Frontera Norte, analyzed three major potential economic impacts of this reduction. The first, “The economic impact of a more efficient US-Mexico border: How reducing wait times at land ports of entry would promote commerce, resilience, and job creation,” looks at the impact of a 10-minute reduction for Mexico and the United States on a national level. The second, “The transformative power of reduced wait times at the US-Mexico border: Economic benefits for border states,” looks at the economic impact for the United States’ four and Mexico’s six border states. The third, and final report “US-Mexico commerce: Tracking the final destination and Mexico’s fiscal benefit with Greater Border Efficiency,” tracks the final destination and economic impact of commerce entering the United States via three key ports of entry. 

This interactive map summarizes the three reports’ findings. It separates the data into US national benefits, US border benefits, Mexico national benefits, and Mexico border benefits. The red dots analyze three specific ports of entry — San Diego, California; El Paso, Texas; and Laredo, Texas — tracking where cargo passing through each ends up in the United States.

Click along the map to find out more about the economic impact of a 10-minute reduction in wait times at the US-Mexico border. 

In-depth research and reports

Report Feb 17, 2023

The transformative power of reduced wait times at the US-Mexico border: Economic benefits for border states

By Alejandro Brugués Rodríguez, Noé Arón Fuentes Flores, David Gaytan, John Gibson, Mayra Maldonado, Jason Marczak, Jorge Eduardo Mendoza Cota, José Ángel Moreno, Roberto Ransom, and Ignacia Ulloa-Peters

Atlantic Council’s new data shows that a mere 10-minute reduction in wait times – without any additional action – can create thousands of Mexican jobs, grow the gross domestic product (GDP) of several Mexican states, and generate hundreds of thousands of dollars in new spending in the United States.

Economy & Business Inclusive Growth

Report Sep 27, 2022

The economic impact of a more efficient US-Mexico border: How reducing wait times at land ports of entry would promote commerce, resilience, and job creation

By Alejandro Brugués Rodríguez, John Byrd, Noé Arón Fuentes Flores, David Gaytan, John Gibson, Camila Hernández, Mayra Maldonado, Jason Marczak, Jorge Eduardo Mendoza Cota, Roberto Ransom, and Ignacia Ulloa

Improvements in border management and the adoption of new technologies at the US-Mexico border have the potential to enhance border security and generate economic benefits for the United States and Mexico through expedited flows of goods and people.

Economy & Business Latin America

Issue Brief Feb 27, 2023

Beyond the US-Mexico border: Destination of final goods, environmental impact, and future scenarios for border relations

By Atlantic Council

Three complementary analyses on the value and final destination of northbound commercial trade flows; the environmental impact of idling vehicles at the US-Mexico border; and three potential scenarion for the future of US-Mexico relations.

Economy & Business Energy & Environment

The post Ten minutes at the border: Revving the US and Mexican economies appeared first on Atlantic Council.

A joint analysis by the Atlantic Council’s Adrienne Arsht Latin America Center, the University of Texas at El Paso’s Hunt Institute for Global Competitiveness, and El Colegio de la Frontera Norte.

US-Mexico commerce: Tracking the final destination and Mexico’s fiscal benefit with greater border efficiency

By Edgar David Gaytán Alfaro, John Gibson, Mayra Maldonado, Jason Marczak, Roberto Ransom, and Ignacia Ulloa-Peters

This report determines the value and final destination of northbound commercial trade flows. Based on limited data, it finds that 45 percent of trade entering the United States remains in border states (Arizona, California, New Mexico, or Texas), while 55 percent is distributed to other regions across the United States. It also evaluates the tax revenue collected by Mexico’s six border states (Baja California, Chihuahua, Coahuila, Nuevo León, Sonora, Tamaulipas) stemming from increased efficiencies at the border. Read our report to find out more about the top 5 receiving states, as well as the economic impact that different regions across the United States would experience following a 10-minute reduction in wait times.

Our border environment, water, and air pollution

By The Hunt Institute for Global Competitiveness, University of Texas at El Paso

This environmental impact analysis evaluates the impact idling vehicles have on water and air pollution across the US-Mexico border. Reduced wait times can significantly reduce particulates in the air and water, which currently pose a significant threat to the health of people living in border communities. To find out more about the potential reduction in pollution following decreased wait times, read our report or view our infographic.

Border 2033: Three scenarios for the United States and Mexico

By Peter Engelke, Deputy Director of Foresight, Scowcroft Strategy Initiative; and Nonresident Senior Fellow, Global Energy Center, Atlantic Council

Foresight scenarios help us tell stories about how the future might unfold and are intended to stir imaginative thinking. In this report, we portray three scenarios of a world that might exist ten years from now in 2023 based upon uncertainties in the United States and Mexico’s relationship today. More specifically, we hypothesize what the US-Mexico relationship would look like if 1) there is little to no change in the manners that the United States and Mexico engage, 2) fears over border security leads to an increasingly hardened border, and 3) Mexico and the United States increase collaboration on border issues. Find the full report below.

Report Sep 27, 2022

The economic impact of a more efficient US-Mexico border: How reducing wait times at land ports of entry would promote commerce, resilience, and job creation

By Alejandro Brugués Rodríguez, John Byrd, Noé Arón Fuentes Flores, David Gaytan, John Gibson, Camila Hernández, Mayra Maldonado, Jason Marczak, Jorge Eduardo Mendoza Cota, Roberto Ransom, and Ignacia Ulloa

Improvements in border management and the adoption of new technologies at the US-Mexico border have the potential to enhance border security and generate economic benefits for the United States and Mexico through expedited flows of goods and people.

Economy & Business Latin America

Report Feb 17, 2023

The transformative power of reduced wait times at the US-Mexico border: Economic benefits for border states

By Alejandro Brugués Rodríguez, Noé Arón Fuentes Flores, David Gaytan, John Gibson, Mayra Maldonado, Jason Marczak, Jorge Eduardo Mendoza Cota, José Ángel Moreno, Roberto Ransom, and Ignacia Ulloa-Peters

Atlantic Council’s new data shows that a mere 10-minute reduction in wait times – without any additional action – can create thousands of Mexican jobs, grow the gross domestic product (GDP) of several Mexican states, and generate hundreds of thousands of dollars in new spending in the United States.

Economy & Business Inclusive Growth

Made possible by

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

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The post Beyond the US-Mexico border: Destination of final goods, environmental impact, and future scenarios for border relations appeared first on Atlantic Council.

​​​​​What you should know

• Nicaragua: On February 9, the Ortega-Murillo regime released and expelled 222 political leaders, priests, students, and other dissidents to the United States.
• US-Brazil relations: Presidents Biden and Lula da Silva met on February 10, during which they underscored the importance of strengthening democracy, promoting respect for human rights, and addressing the climate crisis.
• Ecuador: Ecuadorians rejected all eight items on a constitutional referendum backed by President Lasso, signaling anti-incumbent sentiments and the clout of pro-Correísmo opposition political forces.

Monitoring economic headwinds and tailwinds in the region

• Argentina: Annual inflation reached 98.8 percent, while activities in the construction and manufacturing sectors continued to decline.  
• Brazil: The government met with Mexico, Germany, Colombia, Chile, the World Bank, and the Inter-American Development Bank (IDB) to explore issuing green bonds this year. 
• Belize: The government launched two new projects in cooperation with Taiwan, a business support program focused on women and micro, small, medium-sized enterprises (MSMEs), and a flood warning system for disaster prevention.  
• Colombia: 2022 GDP growth is estimated to be 7.9 percent, down from 2021’s 10.8 percent growth. In 2023, growth is expected to further decline to 1.05 percent. 
• Peru: Continuing protests and supply shortages have led several mines to suspend or reduce operations, threatening copper production.  
• Suriname: President Santokhi expressed willingness to collaborate with neighboring Guyana on oil and gas exploration and development to position the Caribbean as an energy hub. 

In focus: Inflation and infighting

As regional inflation continues, political pressures are leading to criticism of central bank policy in Brazil and Colombia. Recently-elected presidents Lula and Petro have both questioned rate hikes as a method to tackle inflation, suggesting more flexible targets and alternative policies. The governor of Colombia’s Central Bank, Leonardo Villar, expects the region to require continuing tight monetary policy, which critics argue may complicate other policy goals such as growth. Roberto Campos Neto, president of the Central Bank of Brazil, has expressed his willingness to coordinate with the Lula administration to achieve growth and control inflation. 

Despite the public clashes, central bank policy in both countries remains independent. In Brazil, a 2021 law protects central bank autonomy and is unlikely to be repealed. In Colombia, the central bank has maintained a course independent of presidential advice for two decades. 

Health + Innovation

• Colombia: President Petro presented a health reform to Congress that seeks to improve primary care, expand access to treatment, raise healthcare worker salaries, and fight corruption by eliminating private sector management of payments.
• Brazil: Nearly three years since COVID-19 claimed the life of its first victim, the country has for the first time registered zero pandemic-related deaths in a day on February 12.
• Jamaica: The Bureau of Standards launched the Jamaican Standard Specification for Telemedicine, which provides the framework through which telemedicine may be safely practiced while upholding the integrity of the medical profession.

Geopolitics of vaccine donations: US vs. China

• The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

The post Aviso LatAm: February 18, 2023 appeared first on Atlantic Council.

A joint report by the Atlantic Council’s Adrienne Arsht Latin America Center, the University of Texas at El Paso’s Hunt Institute for Global Competitiveness, and El Colegio de la Frontera Norte.

Executive summary

The announcements and commitments made at the North American Leaders Summit in January 2023 reiterated the importance of North American competitiveness, inclusive growth and prosperity, and the fight against drugs and arms trafficking.¹ To achieve the goals and deliverables established during the summit, it is critical that the US-Mexico border be managed and perceived as an essential contributor to national, binational, and regional security and economic development.

A more efficient US-Mexico border has the potential to reduce border crossing times for commercial and noncommercial vehicles, generating positive externalities for the United States and Mexico including enhanced security and economic growth.² This report – the second in a two-part series – outlines the economic impact of reduced wait times at the border, focusing on the costs and benefits for border states in both countries.³

This report shows that a mere 10-minute reduction in wait times – without any additional action – can create thousands of Mexican jobs, grow the gross domestic product (GDP) of several Mexican states, and generate hundreds of thousands of dollars in new spending in the United States. Ten minutes is then hopefully the starting point for even shorter wait times and even greater economic gains and job creation.

More precisely, increasing border efficiency by 10 minutes can result in more than 3,000 additional jobs across Mexico’s six border states while increasing their combined GDP by 1.34 percent.⁴ Additionally, this reduction would allow for an additional $25.9 million worth of goods to enter the United States every month and lead to $547,000 in extra spending across the United States’ four border states.⁵ A forthcoming standalone short report will evaluate the final destination of traded goods and the economic benefits for states beyond the border.

In terms of Mexico’s border states, Tamaulipas would see the greatest growth in GDP (1.9 percent), followed by Baja California (1.6 percent) and Chihuahua (1.5 percent). Overall, this would generate a $2.2 billion increase in GDP and a $167 million increase in intermediate demand and a $3.2 million increase in labor income across Mexico’s six border states.

A 10-minute reduction in wait times would also lead to an average of 388 new loaded containers entering the United States from Mexico monthly. This translates to $25.9 million worth of cargo crossing through the United States’ four border states (Arizona, California, New Mexico, and Texas), a figure identified in the part-one of this study.⁶ New research shows that approximately 222 (57.2 percent) of these containers would enter via Texas ports of entry, carrying $17 million in cargo every month.

Separately, the 10-minute reduction in wait times would lead to 5,020 additional noncommercial monthly crossings, resulting in $547,000 in extra monthly spending by families and individuals traveling from Mexico to the four US-border states every month. The model estimates that these individuals would spend an additional $256,000 in California alone, representing nearly 50 percent of the total increase in spending. The clothing retail industry would experience the greatest gains across the board, with $132,000 in additional annual revenue from streamlined noncommercial crossings.

Results were informed by engaging local and regional stakeholders in roundtables, focus groups, and one-on-one interviews to identify areas for practical improvement in border management. These include investing in technologies, infrastructure, management, staffing, and supply chains. For instance, deploying high-tech screening technologies further away from ports of entry would facilitate a greater and faster flow of cargo and passenger information. Similarly, a collaboration between the United States and Mexico to develop joint, decentralized tools for border management and processing could ensure a more efficient flow of legitimate cross-border traffic while detecting illegal activity. Improvements in infrastructure and an increase in personnel staffing ports of entry would prevent bottlenecks and decongest queues that regularly spill over onto interstate highways and local roads.

While this report outlines the potential economic impact of a more efficient US-Mexico border for the border region, it also identifies new spaces for growth and new questions to be asked, studied, and addressed. For example, a lack of data in non-border Mexican states makes it difficult to estimate what the impact of enhanced efficiency in non-border inspection points would be for overall binational commerce and within each individual state. Similarly, limited US data exists to determine the final beneficiaries of new economic activity. New, reliable data is essential to understand the greater implications of streamlined border processes and tools in the United States and Mexico.

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The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

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Issue Brief Dec 15, 2022

Road to the tenth North American Leaders’ Summit: Spotlight on competitiveness and supply chains

By María Fernanda Bozmoski, Jacob Kaufhold, and Isabel Chiriboga

North American competitiveness and supply chains are at an inflection point. The three leaders must take the momentum of the last meeting and continue to advance key priorities. In an increasingly complicated global context, close collaboration and partnership on all fronts is key.

Report Sep 27, 2022

The economic impact of a more efficient US-Mexico border: How reducing wait times at land ports of entry would promote commerce, resilience, and job creation

By Alejandro Brugués Rodríguez, John Byrd, Noé Arón Fuentes Flores, David Gaytan, John Gibson, Camila Hernández, Mayra Maldonado, Jason Marczak, Jorge Eduardo Mendoza Cota, Roberto Ransom, and Ignacia Ulloa

Improvements in border management and the adoption of new technologies at the US-Mexico border have the potential to enhance border security and generate economic benefits for the United States and Mexico through expedited flows of goods and people.

Economy & Business Latin America

The post The transformative power of reduced wait times at the US-Mexico border: Economic benefits for border states appeared first on Atlantic Council.

The post Goldwyn in The Hill: How to address vulnerability at our ‘third border’ appeared first on Atlantic Council.

​​​​​What you should know

• PAHO: Dr. Jarbas Barbosa took office on February 1 as the health organization’s new director, pledging to work in partnership with member states to end the pandemic and ensure that the region’s health systems recover stronger than before.
• IMF: The organization raised its global growth forecast to 2.9 percent, up from its original 2.7 percent. The outlook is also better for the region’s two major economies: up 0.2 percent for Brazil, to 1.2 percent, and a half point for Mexico, to 1.7 percent.
• Migration: The 250,000 migrants that irregularly crossed into Panama through the Darien Gap in 2022 represents a record high that is nearly double the 133,000 entries recorded in 2021.

Monitoring economic headwinds and tailwinds in the region

• Mexico: The national statistics agency reported that the economy grew 0.4 percent in Q4 of 2022 compared to the previous quarter.
• Argentina: The government will leverage new gas exports to Chile, and potentially Brazil, to improve its trade balance and pay down debt.  
• Brazil: Alongside Argentina, the government is floating the development of a common currency linking the two countries to facilitate trade. 
• Colombia: The Minister of Mines and Energy Irene Velez announced at Davos that the country will no longer approve new oil and gas exploration contracts.
• Jamaica: Third-quarter GDP grew by 5.9 percent over 2022 due to a resurgent tourism sector, which has boosted hotels, restaurants, and services, among other sectors.  
• Peru: Ongoing protests and road blockades have cost the country $550 million since the ousting of President Pedro Castillo last December. 
• Transatlantic ties: German Chancellor Olaf Scholz visited Argentina, Brazil, and Chile, to discuss the EU-Mercosur trade agreement and support for Ukraine. 

In focus: Energy expansion in Trinidad and Tobago

On January 24, the United States licensed Trinidad and Tobago to develop a natural gas project off the coast of Venezuela in the Dragon field region. The project will support overall Caribbean energy security, with a requirement that some of the produced gas must be exported to Jamaica and the Dominican Republic. To comply with US sanctions, Trinidad will pay for the gas with humanitarian aid. 

Atlantic Council experts reacted immediately, emphasizing the importance of this move towards meeting Caribbean energy demand. You can read more here. 

Health + Innovation

• Haiti: As of January 17, the Ministry of Public Health and Population has reported over 24,400 suspected cholera cases.
• Education: A World Bank study shows that by 2045, nearly 5 million people across LAC would fall into poverty due to pandemic-induced learning losses.
• Brazil: The Health Ministry announced that it will roll out bivalent COVID-19 booster shots as early as February 27.

Geopolitics of vaccine donations: US vs. China

• The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

The post Aviso LatAm: February 6, 2023 appeared first on Atlantic Council.

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Inigo Guevara Moyano

Nonresident Senior Fellow

Scowcroft Center for Strategy and Security Transatlantic Security Initiative

Americas Arms Control

This article was originally published in Spanish by El Heraldo de Mexico.

Last week, Germany and the United States took the decision to authorize the export of Leopard 2 and M1 Abrams main battle tanks to Ukraine, thereby changing the profile of Western military assistance.

This is significant since both countries have very restrictive policies for the export of military equipment since they impose on their clients the condition of requiring their authorization to re-export the material. That is, Germany must approve the shipment of Polish or Canadian Leopard tanks to Ukraine, even after they have been sold to these countries. The reasons range from ethical to political, economic, and technological, as they seek to prevent their clients from reselling material, they consider to be a kind of intellectual property to third parties.

Countries that buy weapons from Germany and the US must accept these conditions and do so largely because of the quality of the equipment, the after-sales service, and the reliability of their supply chains. There will be those who have had isolated bad experiences, but the data is clear, the United States is the largest arms exporter in the world, it controls 40 percent of the market, while Germany is in the top 10, controlling 5 percent.

The German authorization came after weeks of deliberation and was tied to the US agreeing to deliver the M1 Abrams. The amounts do not seem significant (Germany will donate 14 and the United States 31) but pledges from many other countries have been added to this authorization, at such a rate that Ukraine expects to receive 321 good quality tanks in the coming months.

The quality of these tanks will give Ukraine a competitive advantage: the Leopard 2 is a 60-tonne beast, considered by many analysts to be the best tank in the world, while the M1 Abrams is so powerful that it uses jet fuel instead of diesel. This qualitative change will take months to take effect as Ukrainian troops must receive adequate training and there is a necessary industrialization process, so Ukraine needs to continue receiving military aid including Soviet or Russian-made equipment.

The head of the US Southern Command, General Laura Richardson, announced during an event hosted by the Atlantic Council last week that the US was encouraging countries in the region to donate or sell their Russian/Soviet-sourced military equipment to help Ukraine.

In Mexico, the Navy, Air Force and National Guard have some 40 Mi-17 helicopters, 30 BTR-60 amphibious armored vehicles, a couple of dozen Ural heavy trucks and Igla anti-aircraft missiles. They were all opportunity purchases between 1994 and 2011: the Berlin wall had just fallen, and ex-Soviet equipment was offered at very low prices in those years. Over the years they have proven their use, but many are out of service, and what is certain is that most of them will have to be decommissioned in a few years, as purchasing spare parts is going to be a nightmare in the international market.

The Mexican armed forces began processes to replace them with Western equipment several years ago, but these projects are frozen under this administration. The Mexican government has a great opportunity—both political and commercial—to get rid of the Russian equipment, offering it at market price, in exchange for credits to continue its modernization processes. In plain terms, transfer this equipment to the US in exchange for credit to buy new equipment. Otherwise, all that equipment will remain in disuse and convert to junk, instead of becoming an asset both for the finances of the people of Mexico, and for the defense of an outraged country.

The Transatlantic Security Initiative, in the Scowcroft Center for Strategy and Security, shapes and influences the debate on the greatest security challenges facing the North Atlantic Alliance and its key partners.

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The post Guevara in Heraldo de Mexico on sending Soviet-era weapons from Mexico to Ukraine (in Spanish) appeared first on Atlantic Council.

​​​​​What you should know

• Brazil: The Supreme Court will investigate whether former President Jair Bolsonaro incited the January 8 attack on Congress and other government buildings in Brasilia.
• Peru: People—mainly from remote Andean regions—descended on the nation’s capital to protest against President Dina Boluarte in support of her predecessor and demand elections and structural change in the country.
• Trade: The value of goods exported from Latin America and the Caribbean (LAC) increased at an estimated rate of 18.8 percent in 2022, a downward trend from 27.8 percent in 2021, due to higher prices and low volumes.

Monitoring economic headwinds and tailwinds in the region

• Argentina: The government will buy back overseas bonds equivalent to over $1 billion to improve its debt profile, looking to send a positive signal to markets despite low reserves levels.
• Brazil: Vice President Alckmin said that Lula’s administration wants to remove a key tax on manufacturing and importing, the IPI, as part of a broader tax reform package. 
• Guyana: The government announced $43.4 billion in funding for a new natural gas power plant, alongside distribution infrastructure improvements, to promote business and development. 
• Multilaterals: During his inauguration, new Inter-American Development Bank (IDB) president Ilan Goldfajn announced three key priorities for the bank: social issues, climate change, and sustainable infrastructure. 
• Mexico: The 2023 North American Leaders Summit concluded with new agreements to promote sustainability, strengthen supply chains, and respond to migration. 
• Peru: The national statistics institute (INEI) said the economy expanded 1.7 percent year-on-year in November, marking a slight slowdown from the rise of 2.0 percent in October.

In focus: LAC in Davos

Latin American and Caribbean public- and private-sector leaders gathered alongside their counterparts from across the world in Davos, Switzerland, for this year’s Global Economic Forum. Colombia’s finance minister Jose Antonio Ocampo used the opportunity to push for a stronger agreement on minimum taxes for multinational companies. Brazil’s finance minister, Fernando Haddad, and environmental minister, Marina Silva, discussed Brazil’s positive economic outlook, environmental stewardship, and desire for regional integration. 

Spanish prime minister Pedro Sánchez also delivered a speech, in which he emphasized Spain’s role in building ties between Europe and Latin America, as Spain prepares to take over the Presidency of the Council of the European Union later this year. 

Health + Innovation

• Vaccines: The Canadian government will donate $33.4 million to the Pan American Health Organization (PAHO) to increase access to COVID-19 immunizations for populations across the region. This donation is in addition to a prior contribution of $40 million in 2021.
• Belize: The country will celebrate 34 years of relations with Taiwan through the construction of a new general hospital in San Pedro.
• Nutrition: A new United Nations report found that 22.5 percent—or 131.3 million people—of the region’s population cannot afford a healthy diet, citing a country’s income level, the incidence of poverty, and level of inequality as contributing factors.

Geopolitics of vaccine donations: US vs. China

• The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

The post Aviso LatAm: January 21, 2023 appeared first on Atlantic Council.

​​​​​What you should know

• Brazil: On January 1, Luiz Inácio Lula da Silva was sworn in as president for a third term after defeating incumbent Jair Bolsonaro.
• Outlook: According to the Economic Commission for Latin America and the Caribbean (ECLAC), economic growth will continue to slow in 2023 and reach 1.3 percent.
• Venezuela: The opposition-led legislature dissolved the interim government led by Juan Guaidó. The vote signaled that members of the opposition had lost faith in Guaidó’s ability to oust Maduro. The United States will continue recognizing the 2015 National Assembly as the last remaining democratic institution in Venezuela.

Monitoring economic headwinds and tailwinds in the region

•  Brazil: In 2022, trade surplus reached a record high of $62.3 billion. Total exports also reached a 335 billion high, helped by a boost in prices in the agriculture and livestock sector.
• Argentina: The IMF disbursed a tranche of $6 billion from its $44 billion program with Argentina, citing positive indicators including falling inflation, a better trade balance, and foreign reserves. 
• Colombia: Minimum wage will increase by 16 percent this year, to $242.7 per month. President Petro said the move would boost an economy slowed by inflation. 
• Dominican Republic: The S&P upgraded the country’s credit rating from “BB-“ to “BB,” highlighting its strong recovery from the pandemic and long-term growth potential. 
• El Salvador: The government will receive a $150 million loan from the CAF development bank, designed to strengthen its education system in the wake of the pandemic.  
• Peru: The government launched a $1.6 billion plan to increase welfare and investment in regions gripped by protests following the ouster of former president Pedro Castillo. 

In focus: Nearshoring opportunities in the Americas

With the next North American Leaders Summit (NALS) set for this incoming week (January 9 and 10), nearshoring – the relocation of supply chains closer to the United States – is rising in importance.

Rising costs of and delays during shipping, coupled with the pandemic, have made businesses in the United States wary of relying on supply chains across the Pacific. As a result, some 400 companies explored reshoring to Mexico from Asia in 2022. Mexico’s manufacturing sector is now larger than it was before the pandemic, and Mexican exports to the United States have rapidly increased. Firms such as Walmart have already relocated some business to Mexico, while Tesla is planning a new factory in northern Mexico. NALS will pay particular attention to the electric vehicle production chain in North America.

Health + Innovation

• Chile: In an effort to curb the spread of the BF.7 COVID-19 subvariant, travelers coming from China are now required to show a negative PCR test.
• Haiti: Over 14,700 suspected cholera cases have been reported since December. Nine in every ten cases are from areas hit hard by food insecurity.
• PAHO: Most countries in LAC invest less than the minimum 6 percent of GDP in health and allocate less than 30 percent of the health budget to the first level of care as recommended by the regional health organization.

Geopolitics of vaccine donations: US vs. China

• The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

The post Aviso LatAm: January 7, 2022 appeared first on Atlantic Council.

1. Why did Biden expand the parole program to Cuba, Nicaragua, and Haiti?

Putting in place the tools for a more orderly asylum process at the US-Mexico border is pivotal with the surge in encounters. Today’s announcement of an expansion of the Venezuela parole program to Cubans, Nicaraguans, and Haitians will hopefully help to dissuade asylum seekers from risking their lives to make the trek north. 

In October and November 2022, more Cubans (sixty-five thousand) and Nicaraguans (fifty-five thousand) arrived at the southwest border than in fiscal years 2020 and 2021 combined. The twelve thousand Haitian arrivals in those two months amount to one fifth of their total fiscal 2022 arrivals. 

But people won’t stop leaving while they have little hope for a better life in their own countries. That is the case in Cuba (where inflation is soaring and repression escalating), Daniel Ortega’s Nicaragua (where democratic freedoms no longer exist), Nicolás Maduro’s Venezuela (with its own soaring inflation and repression), and gang-controlled Haiti. So border policies must be accompanied by new US and partner country strategies to improve livelihoods in these migrants’ countries of origin. And the United States must hold those like Ortega accountable for his actions to weaponize migration by doing things such as lifting the visa requirement for Cubans in order to more easily facilitate passage to the United States. 

But the border is about more than migration. It is a vital source of commerce that promotes the creation of US jobs. Our recent work shows that just a ten-minute reduction in border wait times could have a $5.4 million annual impact on the US economy and create nearly nineteen thousand jobs in Mexico. Greater commerce translates into greater security as well. Economic growth creates jobs, making it less desirable to leave home. It is absolutely achievable to have a border that is more secure and more efficiently promotes commerce. That should be the goal.

—Jason Marczak is the senior director of the Adrienne Arsht Latin America Center.

2. What impact will this have at the border?

Biden’s visit to the border ahead of the North American Leaders Summit next week is an important step toward the amelioration of a crisis that has long afflicted the US-Mexico border. Smart border policies that streamline crossing processes not only benefit issues around migration, but also help decongest communities that are regularly choked by vehicular and pedestrian traffic.

Initiatives such as the New Migration Enforcement Process for Venezuelans have already decreased the percentage of attempted migrant crossings by nearly 90 percent. The expansion of such programs to additional groups could have similar effects, thus alleviating burdens on the health care and sanitation industries, among others.

Additionally, as border agencies utilize their resources to confront surges in pedestrian traffic, wait times for vehicles exponentially increase. Subsequent carbon emissions deteriorate the air quality around ports of entry, directly affecting the health outcomes of local communities. Further, vehicles waiting in line for miles constrict local mobility, hindering residents’ ability to travel back and forth between school, work, hospitals, and more.

It is important to keep people at the center of border policy, and initiatives that aim to enhance secure and efficient crossings should be celebrated by not only the United States and Mexico but the region as a whole.

—Ignacia Ulloa Peters is an assistant director at the Adrienne Arsht Latin America Center.

3. Will Biden’s plan work?

The Biden administration’s announcement that it will surge resources to the southwest US border and speed up processing for asylum applicants is a most welcome response to the extraordinary surge of people from troubled countries such as Cuba, Nicaragua, and Venezuela. Nothing will satisfy some critics, but those who support security, economic prosperity, values, and the US history of welcoming refugees from troubled lands should see today’s announcement as good news.

One absolute essential is the need for additional resources and personnel to make this plan work. The administration needs to send Congress an urgent supplemental budget request and to invoke some of the president’s extraordinary authorities to get additional personnel at the border to achieve the goal of making definitive, binding determinations of asylum eligibility in days, not weeks. The administration needs additional resources to (1) integrate legitimate asylees and their families to make important social and economic contributions to US society or (2) return ineligible people to a place of safety under existing laws. The administration and Congress now need to put forward the resources needed to satisfy US values, security, and prosperity. This would be historic, and it is achievable.

—Thomas Warrick is a nonresident senior fellow at the Scowcroft Center for Strategy and Security’s Forward Defense practice and a former deputy assistant secretary for counterterrorism policy at the US Department of Homeland Security.

4. What should happen next?

The American people have a right to expect secure borders. Crucial to this is a fair, orderly, and efficient process for those seeking to come and for determining who may stay. Unfortunately, the United States’ current system is utterly broken, and this is particularly true of the asylum system—weighed down by a 1.6 million-case backlog, with each case taking years to resolve. This has encouraged thousands with marginal claims to make dangerous journeys to the US border every month, expecting that the United States will not only let them in but also allow them to stay and work during the years it will take for their asylum claims to be resolved.

The measures announced today by Biden are the latest in a series of efforts aimed at gaining control over this untenable situation—establishing orderly processes for those with legitimate asylum claims; providing opportunity for those desiring to escape repressive or criminal regimes in Venezuela, Cuba, Nicaragua, or Haiti; and working with Mexico and other nations to strengthen enforcement against those choosing not to use these legal processes and, instead, trying to sneak in.  

These are excellent steps, but band-aids. Congress needs to get involved—not only to provide the resources and legal fixes needed to expedite the resolution of asylum claims and better secure the border, but also to reform the immigration system more broadly, giving lawful status to those who have been here a while, expanding lawful channels for those wanting to come, and creating more efficient mechanisms for employers to hire the workers the US economy needs. Biden and Department of Homeland Security Secretary Alejandro Mayorkas deserve great credit for muddling through with the limited tools they have, but to truly get control of the border, Congress needs to put politics aside and fix the broken system.

—Seth Stodder is a nonresident senior fellow in the Scowcroft Center’s Forward Defense practice and a former assistant US secretary of homeland security for borders, immigration, and trade policy.

The post Biden just tightened US migration policy. Can he calm the surge at the border? appeared first on Atlantic Council.

While many countries are still on the rebound from the COVID-19 pandemic, new crises—and their effects—are emerging, and are expected to continue into the next year. From global inflation to a costly energy crisis, and from food insecurity to new political shifts, how can the region meet changing dynamics head-on? And how might risks turn into opportunities as we enter a highly consequential 2023?

Join the Adrienne Arsht Latin America Center as we look at some of the key questions that may shape the year ahead for Latin America and the Caribbean, then take our signature annual poll to see how your opinions shape up against our predictions.

How might new regional collaboration take shape across Latin America and the Caribbean with a wave of new leaders? What decision points might shape government policy? Will Bitcoin continue to see the light of day in El Salvador? Are the harmful economic effects of Russia’s war in Ukraine in the rearview mirror for the region, or is the worse yet to come? Will China’s new foreign policy ambition translate to closer relations with LAC?

Take our ten-question poll in less than five minutes!

Related content

Report Sep 27, 2022

The economic impact of a more efficient US-Mexico border: How reducing wait times at land ports of entry would promote commerce, resilience, and job creation

By Alejandro Brugués Rodríguez, John Byrd, Noé Arón Fuentes Flores, David Gaytan, John Gibson, Camila Hernández, Mayra Maldonado, Jason Marczak, Jorge Eduardo Mendoza Cota, Roberto Ransom, and Ignacia Ulloa

Improvements in border management and the adoption of new technologies at the US-Mexico border have the potential to enhance border security and generate economic benefits for the United States and Mexico through expedited flows of goods and people.

Economy & Business Latin America

Issue Brief Sep 20, 2022

PACC2030: Quick wins for a US-Caribbean partnership on climate and energy resilience

By Wazim Mowla, Riyad Insanally

PACC2030’s success is crucial for CARICOM countries and the United States, and it needs to deliver in the short term to generate confidence that the United States is committed to a sustainable partnership.

Caribbean Economy & Business

Experts react Nov 27, 2022

Experts react: As the US eases oil sanctions, is Venezuela coming in from the cold?

By Atlantic Council experts

With Chevron expanding operations and talks ongoing between the government and the opposition, what’s next for Venezuela? Our experts drill down on the details.

Economic Sanctions Economy & Business

The post What might be ahead for Latin America and the Caribbean in 2023? Take our ten-question poll and see how your answers stack up appeared first on Atlantic Council.

​​​​​What you should know

• Peru: President Castillo was ousted by lawmakers after he sought to dissolve Congress ahead of an impeachment vote.
• Brazil: The Economy Ministry rejected assertions by President-elect Lula’s transition team that Bolsonaro’s outgoing administration was leaving government finances “bankrupt.”
• Social outlook: A recent Economic Commission for Latin America and the Caribbean (ECLAC) report projects that by the end of 2022, LAC will have 201 million people living in poverty – an increase of 15 million compared to the pre-pandemic situation.
• ICYMI: On December 7, the Atlantic Council launched a paper on improving tax policy in LAC. Read it here.

Monitoring economic headwinds and tailwinds in the region

• Argentina: signed a new information-sharing agreement with the US designed to root out tax evasion. It could increase tax revenue for Argentina by $1 billion US.
• Barbados: concluded new funding arrangements with the IMF, $113 million US to continue its fiscal reform package and $189 million US towards its climate change response.
• Brazil: President-elect Lula announced that Fernando Haddad, former minister of education and mayor of São Paulo, would be his finance minister.
• Mexico: announced that additional consultations on the USMCA energy dispute would be held through early January, to ensure continued investment and confidence.
• Peru: was placed under a state of emergency after protests gripped the country. Political upheaval led S&P to lower the country’s economic outlook to “negative.”
• Transatlantic relations: Argentina called for reviewing the potential EU-Mercosur trade agreement, highlighting threats to local auto industry and barriers to agricultural exports.
• Uruguay: criticized Mercosur’s inaction on trade agreements with large economies, drawing criticism for its own independent negotiations with China and to join the TPP.

In focus: Guyana’s carbon credits

Guyana is the first country to issue carbon credits designed to prevent forest loss and the first under the ART’s REDD+ Environmental Excellence Standard to ensure integrity and independent verification. The Hess Corporation, which is a partner in an oil consortium led by ExxonMobil that operates in Guyana, will purchase $750 million US of these credits. This move reflects how resilient growth, balancing between the opportunities in the energy sector and protecting its valuable environment, has become a priority in light of climate change and stresses like the COVID-19 pandemic.

These credits will support Guyana’s Low Carbon Development Strategy, with 15 percent of the revenues set aside for indigenous communities. With some 18 million hectares of forest, Guyana is a major carbon sink, and has previously worked with Norway to protect this resource. The new credits reflect Guyana’s status as a “High Forest, Low Deforestation” country, another first.

Health + Innovation

• Argentina: Transport Ministry officials recommended all passengers travelling on public transportation to return to wearing face-masks amid a spike in COVID-19 cases.
• Universal Health Day: The Pan American Health Organization (PAHO) director called on the region to redouble efforts towards achieving universal health as they begin to rebuild from the pandemic.
• Mexico: The state of Nuevo Leon reintroduced the mandatory use of face masks in closed public spaces as the number of COVID-19 infections and other respiratory diseases rise.

Geopolitics of vaccine donations: US vs. China

• The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

The post Aviso LatAm: December 17, 2022 appeared first on Atlantic Council.

Fellow

Inigo Guevara Moyano

Nonresident Senior Fellow

Scowcroft Center for Strategy and Security Transatlantic Security Initiative

Americas Arms Control

The Transatlantic Security Initiative, in the Scowcroft Center for Strategy and Security, shapes and influences the debate on the greatest security challenges facing the North Atlantic Alliance and its key partners.

Explore more

The post Guevara in El Heraldo de Mexico on modernizing in the face of global geopolitical changes (in Spanish) appeared first on Atlantic Council.

​​​​​What you should know

• Economic outlook: The head of the UN Economic Commission on Latin America and the Caribbean (ECLAC) said that the region’s stagnation is ”worse than the 1980s” due to weak investment, low productivity, and inadequate education.
• Mexico: Remittances sent from workers abroad surpassed $5.35 billion in October, beating economists’ forecast on US job strength.
• #ProactiveLAC: On Wednesday, December 7, the Atlantic Council will host a virtual conversation on LAC’s economic outlook, fiscal policy, and small and medium-sized enterprises in uncertain times. Register here.

Monitoring economic headwinds and tailwinds in the region

• Argentina: Upcoming legislation is set to encourage investment in its liquified natural gas sector, as demand, driven by the war in Ukraine, continues to grow. 
• Bolivia: The country lowered its 2023 growth forecast from 5.1 to 4.8 percent, as an ongoing strike in Santa Cruz has led to over $780 million in losses.  
• Chile: During the recent high-level dialogue with the United States covering migration and sustainable development, both parties agreed to relaunch their bilateral Science, Technology, and Innovation Council. 
• Dominican Republic: The United States will block sugar imports from Central Romana, the Caribbean nation’s largest employer, accusing it of using forced labor. 
• Ecuador: The government is considering a new financing deal with the International Monetary Fund (IMF) for 2023, as its current agreement is set to expire at the end of 2022.  
• Guyana: According to new ECLAC data, the country recorded the highest FDI growth in the Caribbean in 2021, and now accounts for half of all Caribbean FDI, thanks to its booming hydrocarbon sector.  
• Peru: Farmers and truckers set up roadblocks to protest rising gas and fertilizer prices, driven up by the war in Ukraine.  
• FDI: In a 2022 ECLAC report, Foreign Direct Investment (FDI) in Latin America and the Caribbean (LAC) rose by 40.7 percent in 2021 but fell short to achieve pre-pandemic levels.

In focus: Venezuelan thaw

Last weekend, the United States granted Chevron a six-month license to expand operations in Venezuela after the Maduro government agreed to resume talks in Mexico City with the country’s opposition. The two sides signed an agreement to use frozen Venezuelan assets for humanitarian relief as well.  

The United States has framed this policy shift as a “targeted” response to promote “concrete steps” forward by the parties meeting in Mexico City. At the same time, the energy crisis driven by Russia’s war in Ukraine has elevated Maduro’s–-and Venezuela’s –-importance in a time of rising oil demand.  

Health + Innovation

• ICYMI: On November 16, the Atlantic Council launched a report with actionable recommendations for improving immunization program outcomes and financing in the region. Read it here.
• Uruguay: Health authorities issued a recommendation that immunocompromised patients and over 50 year-olds should take their fifth dose of the COVID-19 vaccine.
• Food insecurity: An ECLAC report found that 56.5 million people in LAC are impacted by hunger.

Geopolitics of vaccine donations: US vs. China

• The United States outpaces China in its donations of COVID-19 vaccines to Latin America and the Caribbean, with Colombia and Mexico topping the list. The region has received roughly 52 percent of all US COVID-19 vaccine donations. To learn more, visit our COVID-19 vaccine tracker: Latin America and the Caribbean.

The post Aviso LatAm: December 3, 2022 appeared first on Atlantic Council.

Fellow

Inigo Guevara Moyano

Nonresident Senior Fellow

Scowcroft Center for Strategy and Security Transatlantic Security Initiative

Americas Arms Control

The Transatlantic Security Initiative, in the Scowcroft Center for Strategy and Security, shapes and influences the debate on the greatest security challenges facing the North Atlantic Alliance and its key partners.

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A joint report by the Atlantic Council’s Adrienne Arsht Latin America Center, the University of Texas at El Paso’s Hunt Institute for Global Competitiveness, and El Colegio de la Frontera Norte.

Executive summary

Improvements in border management and the adoption of new technologies at the US-Mexico border have the potential to enhance security and generate economic benefits for the United States and Mexico through expedited flows of goods and people. Reduced border wait times would lead to more traffic entering the United States from Mexico, both in terms of commercial trucks loaded with goods for US consumers and shoppers ready to buy US goods. This report quantifies the economic impact of this additional commerce and cross-border spending, which would lead to further economic prosperity in the two countries.

We know that long wait times at the border can hurt our businesses and economy, especially in my district. Ensuring our ports of entry have sufficient funding to reduce wait times is necessary to keep our economy on track and ensure businesses on both sides of the border succeed.” 

The Hon. Juan Vargas
Representative (D-CA-51)
US House of Representatives

Research shows that a 10-minute reduction in wait times could lead to an additional $26 million worth of cargo entering the United States each month via commercial vehicles. This translates to more than $312 million in further commerce from Mexico into the United States annually. The extra inventory of finished and intermediate goods would drive down US domestic prices, creating increased economic well-being for US citizens.

This report also finds that reducing border wait times by 10 minutes has a positive annual impact of $5.4 million on the US economy due to purchases by additional families and individuals entering the United States from Mexico. While the immediate effect of these purchases is most evident in border communities, economic benefits would spread to the continental United States due to the economic linkages between local economies, with approximately 25 percent of the total impact reaching non-border states.

Strengthened US-Mexico collaboration at our border will unlock significant economic growth, promote supply chain resilience, and boost competitiveness, benefiting Mexican workers and families. These benefits will reverberate far beyond the border, reaching states throughout Mexico. Now is the time to invest in initiatives to create an even more efficient and secure shared border.”

H.E. Luz Maria de la Mora
Subsecretary of International Commerce, Secretariat of the Economy
United Mexican States

Beyond the $312 million in added commerce from Mexico into the United States, a 10-minute reduction in border wait times would promote the creation of nearly 18,700 direct and indirect jobs in Mexico, increase labor income per sector by an average of $17,474, and boost growth for various Mexican economic sectors, particularly manufacturing, wholesale trade, and mining.

More specifically, a one-minute reduction in border wait times would increase the average production (or output) per sector—for Mexico’s top ten sectors exporting to the United States—by 2 percent, adding an average of $41.5 million per sector to the Mexican economy. This reduction in border wait times would also lead to an average sectoral growth in intermediate sales and final demand of 2.4 percent and 1.7 percent, respectively. 

Our border communities rely on efficient and effective infrastructure for work, trade, tourism and other economic exchanges across the US-Mexico border. As the North American region seeks to retain its competitive global advantage, it is more important than ever for these communities to have access to top-notch ports of entry, staffing and technology. With the proper tools for border management, our border cities will be enabled to prosper now and well into the future.” 

The Hon. Tony Gonzales 
Representative (R-TX-23) 
US House of Representatives

These findings illustrate the economic benefits of prioritizing investments at the US-Mexico border to reduce commercial and noncommercial wait times. They are understood as the lower range of the potential national-level economic benefits of deepened US-Mexico collaboration to create a more efficient and secure border. A forthcoming second study will build on these findings, disaggregating the economic impact of reduced wait times for US and Mexican states and counties at the border and beyond.

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Russia remains an inescapable focus, though not entirely for predictable reasons. The busiest sanctioning entity this summer has been Russia itself. The country does, of course, remain the prime target of Western sanctions. For more on that, take a look at our brand-new Russia Sanctions Database, which tracks Western sanctions against Russian entities and individuals—and highlights where gaps still remain.

Iran: US designations continue as nuclear negotiations wind up

The United States and Iran are negotiating a deal that would lift harsh sanctions on Iran in exchange for a major rollback of Iran’s recent nuclear advances. The next few weeks will be critical. On September 14, US President Joe Biden’s Iran envoy will report to Congress on the progress of negotiations. Iran has made new demands that the US has rejected and it is by no means certain that an agreement will be reached before US midterm elections. While Iran’s nuclear activities are key, another important factor is the West’s desire to secure new sources of energy as Russia and Saudi Arabia have agreed to slow down oil production.

Opponents of the deal argue that, if sanctions are lifted, Tehran would have additional sources of income to spend on proxy groups in the Middle East and that restrictions on Iran’s stockpile of enriched uranium would expire in 2031. Another concern is that Iran, once freed from energy sanctions, could make oil swap deals with Russia and allow Moscow to circumvent energy sanctions. Specifically, Russia could gain a backdoor route to sell its oil by supplying crude to northern Iran via the Caspian Sea, while Iran would sell equivalent amounts of crude on Russia’s behalf in Iranian tankers. This would undermine Western energy sanctions against Russia by allowing Moscow to profit from oil revenues through Iran. The argument is far-fetched in our view. Technical difficulties aside, Iran would make more money by selling its own hydrocarbons than by serving as a transit point for Russia. Supporters of the deal have consistently argued that this is the best and only way to curb Iran’s rapidly accelerating nuclear weapons program. 

In the meantime, until any deal is reached, the United States will keep sanctioning Iranian petrochemical companies and persons engaging in transactions with them. Most recently, the US Treasury Department designated companies used by Iran’s Persian Gulf Petrochemical Industry to facilitate sales of Iranian oil in East Asia. Treasury has also sanctioned international front companies and shipping companies facilitating oil transactions for Iranian companies. The United States re-applied broad sanctions on Iran when it left the Joint Comprehensive Plan of Action (JCPOA) in March 2018. The United States often designates new companies on the basis of new intelligence and US officials are likely to increase pressure if a deal remains elusive.

Sanctions certainly have damaged important sectors of Iran’s economy. The heavily sanctioned Iranian aircraft and cargo fleet is becoming more dilapidated day by day. More than 170 planes are grounded while more than 50 percent of passenger planes cannot fly because of a lack of engines and spare parts. The National Iranian Tanker Company, which owns the world’s largest fleet of super tankers, is also unable to modernize its vessels due to sanctions. The 2015 nuclear deal allowed some updates and repairs to take place, but these stopped in 2018. 

Spotlight Russia: Number one imposer and target of sanctions this summer

Looking at the visual below, one thing should stand out: The country that imposed the highest number of sanctions this summer was Russia. Moscow maintains an autonomous sanctions regime and also complies with the United Nations Security Council’s sanctions. This summer, the Russian intelligence agency Rosfinmonitoring (RFM)—also known as the Federal Financial Monitoring Service and reports directly to the president of Russia—added 752 entities and individuals to its terrorists and extremists list. 

One of the entities recently added to RFM’s sanctions list is the Adat People’s Movement, which was previously added to the Russian Ministry of Justice’s banned entities list based on the Supreme Court of Chechnya’s decision in 2022. The movement, which does some of its work on the active 1ADAT Telegram channel, stands for an end to the “occupation” of Chechnya. The court decision and consequent listing by the Ministry of Justice already meant that the Public Association Adat People’s Movement was slated for liquidation. Adding the Adat People’s Movement to the RFM’s list may appear to be unnecessary duplication, but the listing could be used in the future against individuals associated with the movement. The RFM designation could also apply to a grouping which avoids taking on any form of legal identity. Crucially, RFM designations do not require an official court decision, unlike new designations to the Ministry of Justice’s list of banned entities. 

In addition to becoming the number one sanctioning country, Russia also remained the number one sanctioned country. The European Union’s (EU) seventh package of sanctions targeted Russia’s top lender, Sberbank, freezing its assets in the West and blocking transactions that are not food- and fertilizer-related. 

On September 5, Russia cut gas exports to Europe by ceasing all deliveries through the Nord Stream 1 pipeline, citing the need for turbine repairs. Germany exposed itself to heavy criticism when it secured a sanctions exemption in June to send a turbine repaired in Canada back into Russia. At the time, Berlin argued that sending the power compressor turbine (which is needed for the pipeline to function) would call Russia’s bluff and make clear that deliveries were being curtailed for purely political reasons. This is ultimately what has happened only three days after the Group of Seven (G7) countries announced they would force a price cap on Russian oil exports.

Drug trafficking sanctions: Are they effective?

Turning to Latin America, Mexico and Colombia have a high number of sanctioned entities and individuals. The primary reason is their involvement in the illegal drug trade, covered by US Executive Order 14059, as well as Narcotics Trafficking and Foreign Narcotics Kingpin Sanctions Regulations. 

This summer, the US Treasury designated Obed Christian Sepulveda Portillo, an individual acting on behalf of the Mexico-based Cartel de Jalisco Nueva Generacion (CJNG)—a violent organization responsible for trafficking fentanyl and other deadly drugs to the United States. Portillo was trafficking firearms from the United States to CJNG, enabling the cartel to protect drug trafficking routes and other illicit assets. Treasury has previously sanctioned CJNP and its network of businesses and individuals facilitating the illegal drug trade. As a result of sanctions, any property or interests owned by Portillo in the United States will be blocked and reported to Treasury, and Americans will be prohibited from facilitating transactions with him.

By restricting access to US financial institutions, sanctions against drug trafficking organizations and individuals disrupt their operations. However, it is unclear whether sanctions alone can deter potential traffickers. Treasury has been keen to highlight that its designations have helped dismantle cartels and apprehend leaders; but it also acknowledges that these outcomes were achieved in coordination with US and foreign law enforcement agencies. Taking on the cartels does cause collateral damage locally: Unemployment and drug-trafficking violence tend to increase as new groups compete for abandoned territory. Still, there are merits to deploying sanctions to tackle the illegal drug trade, and it is reassuring to see that policies are subject to internal scrutiny and frequent evaluation. 

Russia is the main driver behind this year’s designation uptick

This year has been one of the most intense in the history of sanctions, driven by the West’s resolute and united response to Russia’s invasion of Ukraine. Still, given that the United States has the most expansive sanctions program, partners have been catching up. Switzerland increased its total number of sanctions by 66 percent from last year, followed by the United Kingdom’s 56 percent. 

To learn about Western sanctions against Russia and to find out where gaps still remain, check out our brand-new Russia Sanctions Database.

On the radar

1. EU foreign policy chief Josep Borrell delivered a downbeat assessment of the prospects of reviving the JCPOA on September 5, noting that the US and Iranian positions were “diverging.” However, this divergence is mainly to do with nuclear safeguards, not with new sanctions designations by the United States.
2. Fears of a winter crisis in Europe have heightened speculation that EU sanctions against Russia may be lifted. Recently we have seen well-attended protests in Prague calling for sanctions to be lifted, frequent comments by France’s opposition parties disparaging “counterproductive” sanctions, and even some calls for the Nord Stream 2 pipeline from Russia to Germany to be opened. Some voices in Germany still assume the technical difficulties befalling Nord Stream 1 are real.
3. The EU member most strongly threatening to break from the bloc’s sanctions consensus is Hungary. Ahead of a routine European Council vote on sanctions renewal on September 15, Budapest threatened to wield its veto unless three Russian businessmen were removed from the asset freeze and travel ban list. It has since dropped this demand. Though frequent, Hungary’s demands for exemptions and amendments do not threaten the overall architecture of the EU sanctions regime.
4. We remain strongly of the view that the EU will maintain sanctions pressure on Russia. EU members are already pushing back against speculation that it would lighten the pressure, arguing that export controls take time to be properly effective. Through the G7, the EU has also signed on to the US price cap initiative despite skepticism in Brussels and Paris about its technical feasibility.

Global Sanctions Dashboard

The Global Sanctions Dashboard provides a global overview of various sanctions regimes and lists. Each month you will find an update on the most recent listings and delistings and insights into the motivations behind them.

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Jason Marczak was quoted in The Washington Post on AMLO’s comment on Mexico’s cheaper gas during his visit in Washington DC.

“The Mexican leader’s comment about cheaper Mexican gas “was a clear attempt to show that division between Mexican energy policy and U.S. energy policy and what AMLO sees as the implications of each policy,” said Jason Marczak, a Latin America scholar at the Atlantic Council.”

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Jason Marczak

Senior Director

Adrienne Arsht Latin America Center

Americas Caribbean

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

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After AMLO’s visit to the White House, Jason Marczak was quoted in the Los Angeles Times, regarding AMLO’s decision to not attend the Summit of the Americas.

“AMLO not going to the Summit of the Americas was a big blow to the relationship” between Washington and Mexico City, said Jason Marczak, senior director of the Adrienne Arsht Latin America Center at the Atlantic Council. “This [meeting] is incredibly important to reassure both Mexicans and Americans of the strength of U.S.-Mexico ties.”

More about our expert

Staff

Jason Marczak

Senior Director

Adrienne Arsht Latin America Center

Americas Caribbean

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

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María Fernanda Bozmoski was quoted in Bloomberg following AMLO’s visit to the White House commenting on AMLO’s and Biden’s discussion of immigration.

“It’s not viable in the current domestic context in the United States. We have mid-terms coming and even if this was an idea the US Congress would entertain, the numbers we’re talking about — 300,000 or half a million visas — is a drop in the bucket,” said Maria Fernanda Bozmoski, deputy director for programs at the Atlantic Council’s Latin America center.”

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Jason Marczak

Senior Director

Adrienne Arsht Latin America Center

Americas Caribbean

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

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The post Bozmoski quoted in Bloomberg on temporary visas in the US appeared first on Atlantic Council.

Following a tumultuous negotiation period, the USMCA has now been in force for two years, and its impact has been overshadowed by pressing economic issues: the COVID-19 pandemic, supply-chain problems, and inflation driven by the Russian invasion of Ukraine. Despite that, the USMCA is still important, having made critical modernizations to the North American Free Trade Agreement (NAFTA) by securing enforceable environmental commitments, strengthening workplace protections, committing Mexico to its labor reforms in recent years, and including provisions for confronting or working with “nonmarket economies” as a bloc. Critically, as the Western Hemisphere sees a boom of digital products and services, the USMCA also sets rules for trading in the digital economy, including a guarantee that data moves freely across borders.

Multiple levels of government will need to cooperate in order to harness the full economic potential of the USMCA. The rare bilateral meeting offers the perfect opportunity for Biden and López Obrador to chart the course forward together.

Two years on, the USMCA still provides guiding principles for the US-Mexico-Canada relationship. Last year’s North American Leaders’ Summit (NALS), while focusing primarily on challenges posed by the pandemic, resulted in commitments by the three countries to increase support for small- and medium-sized enterprises (SME), strengthen labor protections, and cooperate on environmental concerns, building on USMCA chapters 25, 23, and 24, respectively. The Americas Partnership for Economic Prosperity announced at last month’s Summit of the Americas echoes the USMCA’s commitments to protect biodiversity and the environment, improve labor standards, and create standards for the digital economy. It is important that the United States, Mexico, and Canada follow up on their USMCA commitments via concrete mechanisms, initiatives, and working groups. This upkeep is especially important considering that the parties are halfway to the first joint review session, where they will consider changes and updates to the agreement.

Challenges such as COVID-19 have made the quantitative impact of the USMCA hard to measure, and the reality is it’s too soon to understand precisely how it has benefited the North American economy. But what we do know is policymakers have taken new steps to enhance collaboration, particularly in the form of initiatives to strengthen supply chains. For example, Biden’s US Supply Chain Task Force is developing solutions for strained supply chains in collaboration with Mexico and Canada, among other trade partners. Furthermore, the USMCA’s Competitiveness Committee—which was suggested by Mexico during negotiations—is actively working to ensure that North American supply chains can withstand a future emergency and avoid the pitfalls and coordination failures of the COVID-19 pandemic. Beyond that, the US-Mexico Supply Chain Working Group, established at the US-Mexico High Level Economic Dialogue earlier this year, is currently exploring the semiconductor industry as a potential area for joint development.

Despite these successes, opportunities for the United States and Mexico remain untapped, threatening the potential for the countries to share growth. For example, the Competitiveness Committee has a broad mandate—beyond strengthening supply chains—to incentivize production in North America, encourage regional economic integration, harmonize regulation, improve transportation, and respond to new developments; the committee has met twice since the USMCA came into force, but it could do so more frequently to better explore its expansive remit. Other committees established by the agreement (for example, the Committee on SME Issues), offer a powerful avenue for the parties to work on shared goals at the ministerial level and maintain momentum between major summits like NALS. But these committees are currently underutilized, and the relationships between different committees are unclear. Those relationships need to be defined so that committees can cooperate with each other and fully realize their potential. Opportunities spelled out in deliverables from NALS have also been left untouched: Leadership has yet to update the North American Plan for Animal and Pandemic Influenza as promised or host a Trilateral Cyber Experts Meeting to discuss internet infrastructure and security.

Domestic politics are also threatening the potential for shared growth. As Mexico was preparing to pass a controversial energy reform this spring that seemed to have given preferential treatment to the government-run Federal Electricity Commission (CFE), US Trade Representative Katherine Tai raised objections; she also directed her office to review Mexico’s compliance with the USMCA, which includes provisions against favoring state-owned companies and for protecting the environment. While the energy-reform bill crumbled, Mexico’s 2021 law giving dispatch priority to electricity produced by the CFE has remained, as the courts recently failed to rule it unconstitutional. Tai is now reportedly considering formal consultations on the topic, which would be one of only a couple such disputes with Mexico. Mexico’s nationalization of its lithium industry in the wake of the constitutional change’s failure may also come to be considered a violation of USMCA. Such disagreement on key areas for North American cooperation—energy security, the climate crisis, and strategic mineral resources—undermines the United States and Mexico’s ability to strengthen ties and present a united front on global issues.

Looking to the future, though, the North American partners have clear, common goals thanks to the USCMA: strengthening supply chains, supporting SMEs, and equitable growth and recovery. Biden and López Obrador must use this meeting to frame the next five months of collaboration on these goals and to guide cabinet-level cooperation through to the next NALS and High-Level Economic Dialogue at the end of 2022. Together, the presidents can set the agenda for securing digitalization and environmental protection while clarifying which committees and ministers will take the lead on shared goals going forward.

The USCMA and other agreements already provide a strong framework. The two presidents must build upon it, starting now.

Jacob M. Kaufhold is a project assistant at the Atlantic Council’s Adrienne Arsht Latin America Center.

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The fundamental tension lies in the AMLO Administration’s ongoing efforts to undo the 2013 Mexican Energy Reforms in all but name amid attempted re-nationalization of Mexico’s energy sector. These efforts have left his administration embroiled in legal disputes with both US and international private investors, a situation over which the Biden Administration has voiced its concerns for several months.

Energy is core to AMLO’s vision for Mexico and to his own ideology. He views successive “neoliberal” reforms of the energy sector that allowed for private investments and eventually competition as corrupt and fundamentally counter to state interests. His solution is reasserting the dominance of state-owned Petróleos Mexicanos (Pemex) and Comisión Federal de Electricidad (CFE). On one hand, that has led to billions of dollars in fiscal injections to those companies to shore up their struggling finances while doing nothing to improve their profitability and, on the other hand, systematically sidelining private players in areas in which they compete with the state champions. The casualties include all types of energy—wind, solar, natural gas, and refined US products—and the companies and consumers that rely on that energy. All of this means that Mexico is moving away from climate mitigation, and its own legally binding emissions reductions targets, as it spurns clean energy investment in favor of state-owned inefficient coal and fuel oil plants.

Mexico’s future economic prosperity is at risk. At a time when energy prices are at record highs, Mexico risks taking itself out of what could be a North American manufacturing renaissance. Mexico needs massive investment to provide its citizens and industry with reliable, affordably priced, and environmentally friendly energy. In principle, that creates room for state financial support for Pemex and CFE in a manner more aligned with AMLO’s world view (which he did win a popular mandate to pursue) alongside private companies that bring the capital, expertise, and technology that the state companies lack. In practice, however, AMLO’s attempts to favor Pemex and CFE have led to repeated blatant violations of Mexico’s obligations under the United States-Mexico-Canada Agreement (USMCA) and of Mexican law, efforts to carve out energy from USMCA, capture of once-independent regulatory agencies, and pressure on the judiciary.

For its part, the Biden Administration was initially reluctant to prioritize energy issues. The bilateral agenda is packed, and there are other real humanitarian crises of security and immigration with which to contend. Yet what happens in energy does not stay in energy. The Biden Administration’s strategy to help manage immigration through economic opportunity and climate action is undermined by weak rule of law in the Mexican energy sector. Meanwhile, the mounting detrimental impacts of Mexican energy policies on the US economy, energy security, climate, and credibility of USMCA enforcement has led to bipartisan Congressional backlash.

Crucially, Climate Envoy Kerry recognized that backsliding on energy investment was unraveling Mexico’s climate commitments—specifically crushing renewables despite the country’s staggering potential—and raised the issue directly with AMLO. Kerry’s long coattails recently facilitated an encouraging start to provide relief for around $30 billion in US investment, according to U.S. Embassy Mexico City figures, a tactical win-win for both governments. In addition, United States Trade Representative (USTR) Katherine Tai has helpfully signaled that diplomacy is not the only US option. She has made clear that some of the AMLO Administration’s actions in the energy sector violate USMCA and is reportedly pursuing formal consultations, which could lead to retaliatory sanctions.

Nonetheless, AMLO has dug in on his state-centered energy strategy, leaving disputes simmering with the United States on energy security, climate, and trade relations. But while friction is high, there is opportunity for the Biden and AMLO administrations to understand each other’s perspectives and legitimate concerns, and produce sustainable outcomes which might reset the bilateral relationship around energy.

As AMLO visits the White House this week, areas to watch are:

1. Steps to stop the bleeding on rule of law in the Mexican energy sector. Most important is whether President Biden clearly asserts US national interests and demands fair treatment of US companies, products, and services in a manner consistent with its treaty commitments to the US and that his Administration will enforce USMCA in that regard. In AMLO’s Mexico, energy decisions are made by the President, and failure to receive a clear message from his US counterpart is a green light for AMLO to keep on his current course.
2. Accelerating areas of agreement on energy security and climate. For example, Mexico and the US can partner to enable shipment of US LNG from its Pacific coast to provide much needed energy security for Japan and South Korea and more affordable gas to replace coal in emerging Asia, while also providing local supplies of cleaner-burning and affordable fuels in under-developed regions of Mexico. Additionally, Mexico’s methane leakage rate from its oil industry is amongst the highest in the world, which is both bad for the environment and a waste of much-needed fuel in Mexico. Mexico has joined the US-led Global Methane Pledge already. Reducing methane waste could be an invaluable win for North America and indeed the world.
3. Charting cooperation on secure energy and climate supply chains. Mexico should be a natural partner for the United States as it seeks to build the manufacturing supply chains necessary both to lead the generational economic opportunity of the energy transition and to secure access to critical materials and components. While that opportunity cannot be realized at scale until Mexico turns a page on its existing energy policy, steps can be taken now to lay the groundwork.

Much rides on the Biden-AMLO meeting, and the stakes could hardly be higher. The Biden and AMLO Administrations can chart a more proactive, collaborative course on energy policy which supports their shared goals. As climate change accelerates and a worsening energy supply crisis engulfs the world, it is more essential than ever for the US and Mexico to work constructively on these issues and overcome differences of opinion wherever possible.

David L. Goldwyn served as Special Envoy for International Energy under President Obama and Assistant Secretary of Energy for International Relations under President Clinton. He is chair of the Atlantic Council’s Energy Advisory Group.

Neil Brown served on the senior Republican staff of the Senate Foreign Relations Committee and is currently a nonresident senior fellow at the Atlantic Council Global Energy Center and managing director at the KKR Global Institute.

Andrea Clabough is an associate at Goldwyn Global Strategies, LLC and a nonresident senior fellow at the Atlantic Council Global Energy Center.

Meet the authors

Fellow

David L. Goldwyn

Nonresident Senior Fellow

Adrienne Arsht Latin America Center Global Energy Center

Caribbean Climate Change & Climate Action

Fellow

Neil Robert Brown

Nonresident Senior Fellow

Global Energy Center

Energy Markets & Governance Energy & Environment

Fellow

Andrea Clabough

Nonresident Fellow

Global Energy Center

Climate Change & Climate Action Energy & Environment

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On June 23, Christopher Preble co-hosted a new iteration of the Net Assessment podcast in the War on the Rocks network about the Summit of the Americas.

By all accounts, the Summit was poorly organized, and attending leaders were unimpressed with the lack of consultation before the event and with the initiatives set forth by the US during the conference. Does the planning and execution of the Summit tell us anything about the Biden administration’s foreign policy more broadly? What should our policies towards Central and South American countries be? And are President Biden and his team unwilling to make hard choices in foreign policy because the decisions will be unpopular with important domestic constituencies?

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Jason Marczak

Senior Director

Adrienne Arsht Latin America Center

Americas Caribbean

The post Preble on Net Assessment: Is Biden’s approach to Latin America a problem? appeared first on Atlantic Council.

Washington DC – June 3, 2022 – The Atlantic Council’s Adrienne Arsht Latin America Center today announced a new partnership with the State Department’s Bureau of International Narcotics and Law Enforcement Affairs (INL), the Hunt Institute for Global Competitiveness at the University of Texas at El Paso (UTEP), and Colegio de la Frontera Norte (COLEF) in Tijuana to enhance security and economic growth in the United States and Mexico. This year-long partnership will include an economic impact study of improved US-Mexico border management practices and tools, among other impact analyses about the security and environmental impacts of these technologies.

“As companies look at nearshoring and as global supply chains are being reconfigured to adjust to new commercial and geopolitical realities, the US-Mexico border is quickly becoming all the more critical for the economic competitiveness of both countries. With new technologies deployed, a more efficient, transformed border has the power to expedite legitimate trade and travel and reduce commercial bottlenecks while simultaneously improving border security. This new partnership will provide timely insights on steps that can be taken to improve the lives of millions along the border and beyond,” said Jason Marczak, Senior Director at the Atlantic Council’s Adrienne Arsht Latin America Center.

Mexico’s role as the United States’ largest trading partner, with over $661 billion in total trade between the countries in 2021, makes safe and efficient borders a shared priority for both nations. President Joseph R. Biden reinforced the importance of secure borders with increased detection and screening capabilities during his first State of the Union address. The high volume of movement of goods and people at the border, combined with current inefficiencies in border management practices, often leads to extensive wait times and the over-use of scarce management resources. The introduction of new technology-focused border management practices could positively impact the lives of millions of people in the United States and Mexico by creating safer and more efficient borders. This project will detail the economic, security, and environmental benefits that would stem from investing in a 21st century US-Mexico border.

“We are two nations with a shared future. If we want that future to be brighter, we need to modernize our border infrastructure, strengthen our cooperation on border security, and ensure the more efficient flow of goods, services, and lawful travelers,” said Ambassador Ken Salazar, United States Ambassador to Mexico.

In addition to the economic impact study, the Atlantic Council, the Hunt Institute, and COLEF will produce three short publications specifically focused on foresight, security, and the environment. The consortium will also host a series of consensus-building activities such as roundtables, consultations, and focus groups with stakeholders from the public, private, and civil society sectors in the United States and Mexico.

“As a research organization within UTEP, the Hunt Institute is intimately aware of both the economic possibilities of binational cooperation and the potential impediments to that cooperation posed by border security. Border management has direct economic impacts on national economies, not just within border communities. The Hunt Institute is excited to collaborate with the Atlantic Council and COLEF to generate widespread support for the economic benefits of enhanced screening procedures at the US-Mexico border,” said Mayra Maldonado, Executive Director of the Hunt Institute for Global Competitiveness at the University of Texas at El Paso.

The project will deliver new insights into the economic, security, and environmental impacts of enhancing detection and screening capabilities at the US-Mexico border to inform policy decisions that will determine the shared future of our countries for years to come.

“The commercial partnership between Mexico and the United States takes place within a very competitive economic regional framework. As we look to the future, the economic performance of both countries will be strengthened as more sectors participate in cross-border trade and as the benefits of US-Mexico commerce reach further into all parts of Mexico, in addition to northern border areas,” said Dr. Edgar David Gaytán Alfaro, Coordinator of the Master’s Program in Applied Economics and researcher in the Economic Studies Department at Colegio de la Frontera Norte.

Please email inquiries to achavez@atlanticcouncil.org

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

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Last week, the Eurasia Center and Latin America Center hosted experts to discuss the consequences of Russia’s war on European energy security, the US-Mexico bilateral relationship, and strategies to sustain green and equitable economic growth across the Americas.

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What is the opportunity?

Throughout US history, many American entrepreneurial heroes have been immigrants or the children of immigrants—from Alexander Graham Bell and Andrew Carnegie, both born in Scotland, to Intel’s Andy Grove and Google’s Sergey Brin, originally from Hungary and Russia, respectively. Indian immigrants comprise only about 1 percent of the US population but 6 percent of Silicon Valley’s workforce, and, as the appointment of Twitter Chief Executive Officer Parag Agrawal exemplifies, they disproportionately dominate the top echelons of tech corporate leadership. With increasing competition from China and elsewhere, immigrants are even more critical today to the future of US technology excellence. According to the nonpartisan National Foundation for American Policy (NFAP), “Immigrants have started more than half of America’s startup companies valued at $1 billion or more and are key members of management or product development teams in more than 80 percent of these companies.” 

The United States can maintain its competitive edge by revising its immigration laws. Ironically, there is no reliable way under current law for immigrants to start a business and remain in the country after founding a company. Successful immigrant entrepreneurs must be refugees who qualify for staying, or be sponsored by employers, or have family ties in the United States. A “startup” visa, for example, which would allow foreign nationals to start companies and create jobs, would be an important addition to the US immigration system. The long wait for employment-based green cards prevents many individuals in H-1B status from having the employment status that allows them to start a business.

The relatively low cap on the number of annual H-1B temporary visas—65,000 plus 20,000 for those with advanced degrees—can make it difficult for startup companies to hire new personnel in their fast-growing businesses or for international students to remain in the United States. Moreover, restrictions on H-1B immigration have caused multinational companies eager for talent to hire US-educated foreign scientists and technologists at their foreign affiliates when these individuals cannot attain H-1B visas for employment in the United States. In these situations, the other countries where the affiliates are located reap the benefit. Many of the companies facing the most difficulty in obtaining H-1B visas for their employees are concentrated in highly H-1B-dependent and R&D-intensive sectors operating offshore tech service sectors. In most cases, the affiliates to which the new hires are sent are in Canada, India, or China.

Without more skilled immigrants, US businesses run the risk of not being able to expand and remain competitive in the global economy.

Distinct from nonimmigrant foreign workers with H-1B visas, another important avenue for immigrants coming to the United States has been as international students. A quarter of the “unicorn” founders in the NFAP study originally enrolled in top US universities. Like foreign jobseekers requiring a work visa, international students have faced hurdles in the past few years. In 2018, the Trump administration reduced the duration of student visas from five years to one. Even more harmful was President Donald Trump’s anti-immigrant rhetoric, which many experts believe dampened international students’ interest in studying in the United States (while raising parental fears for their children’s safety). “After years of phenomenal expansion starting in the mid-2000s, enrollment growth [of international students at US universities] slowed to less than 1 percent by 2019-2020.” Arguably, the pandemic—which led to a halting of immigration for a time—took a bigger toll on the number of international students coming to the United States than Trump’s anti-immigrant policies. Some 2 million fewer working-age immigrants are living in the United States today than in 2019. Pandemic restrictions also caused “a staggering 15-percent decline in international students in the 2020-21 academic year.” Fortunately, enrollment partially rebounded in fall 2021 with a 4-percent increase over last year’s earlier level. If enacted by Congress, proposals to reduce the number of Chinese students coming to US shores could substantially affect US universities because the Chinese comprise the largest group of foreign students in the United States, approximately 30 percent.

Going forward, the economic damage to universities from lowered enrollment could be substantial. International students represented nearly 60 percent of all student population growth in 2000–2018. Today, with a declining youth population in the United States, the concurrent drop in the number of international students studying at US universities will be an extra burden on academic budgets. Many science, technology, engineering, and math (STEM) PhD programs depend on international students for their survival. A pre-pandemic study found that 70.3 percent of all full-time graduate students in electrical engineering; 63.2 percent in computer science; 60.4 percent in industrial engineering; and more than 50 percent in chemical, materials, and mechanical engineering, as well as in economics, were international students. If US immigration law is not overhauled to attract more international talent to study in the United States, university funding will not only decrease, but US innovation will stall as well. A World Bank report warned that any reduction in the number of “foreign graduate students” could significantly reduce US innovative activities; conversely, the report assessed that a 10-percent increase in the number of foreign graduate students would raise patent applications by 4.7 percent, university patent grants by 5.3 percent, and non-university patent grants by 6.7 percent. Although the United States remains a top destination for international students, other countries are increasingly competing for such students, particularly those in the STEM field. In trying to recover from the COVID-19 pandemic, Canada has opened additional pathways for enticing older graduates with work experience and others who are French-speakers to apply for permanent residency. Australia—another popular destination for Indians and others—offers permanent residency possibilities for postgraduates, although the process is considered more complex than in Canada. Germany, which has an active program for attracting and retaining highly skilled workers in areas experiencing shortages, is providing a fast track to permanent residency for both international graduates (after two years) and those recruited for their skills (four years). With such competition, US complacency could spell a slow decline in attracting the best and brightest. 

Why now?

Trump cited the hardships suffered by American workers who lost their jobs because of the pandemic as justification for suspending new work visas. Today, unemployment is low, and companies are facing a new crisis in trying to fill vacancies: too few skilled workers for the number of jobs. Shortages exist at all levels: lower-skilled workers are in high demand in the agriculture, construction, hotel, restaurant, and hospitality sectors. 

Even before the pandemic, tech-skilled workers were scarce. A New American Economy report found that “computer-related jobs . . . made up 69.6 percent of all foreign labor requests in FY 2020, a slight increase from FY 2019 despite the COVID-19 pandemic.” Despite lingering criticism that foreign workers threaten to take jobs away from Americans, “The unemployment rate for computer- and mathematics-related occupations was 2.3 percent. By 2020, that had only increased by 0.7 percentage points, to 3.0 percent. By March 2021, the unemployment rate for workers in these occupations was 1.9 percent, lower than it was before the pandemic.” Computer and highly skilled mathematics-based jobs have traditionally been filled in high proportions by immigrants on H1-B and other temporary worker visas. Business groups, such as the US Chamber of Commerce, assess that the need to increase immigration is urgent. Without more skilled immigrants, US businesses run the risk of not being able to expand and remain competitive in the global economy. Angering many traditional Republican supporters, US Chamber of Commerce CEO Suzanne Clark, has, in fact, called for “doubling the number of legal immigrants.”

Despite sharp partisan differences, public views of immigrants have shifted toward greater acceptance, according to a mid-2021 Pew Research Center survey. The share of people who see being Christian and being born in the United States as critical for being “truly American,” Pew found, “has significantly decreased between 2016 and November 2020.” Moreover, this has been the case regardless of a respondent’s party leaning, although less so for Republicans.

How to make it happen

Most every immigration reform has been controversial and has required a modicum of bipartisanship to secure passage. While the post-COVID recovery, tight labor market, and growing worries about competitiveness with China on technology make today a propitious moment for reform, the sharp partisan divide in Congress, as well as the upcoming midterm elections, make even limited legislative efforts parlous. The Biden administration still has some means to address the tech-worker shortage and the declining number of international students coming to the United States and could lay the groundwork for more substantial immigration reform over the long term.

Short-Term Expedients: The Biden administration downplayed H-1B visas in its original Citizenship Act in favor of increasing the number of green cards from 140,000 to 170,000, exempting STEM doctoral candidates. Biden hoped to make H-1B visas less attractive to employers, while promoting the chance of permanent residency, which has traditionally been more appealing to students and workers. The Citizenship Act, which included these changes, has stalled, prompting the administration to expand the types of degrees qualifying for STEM recognition and to allow STEM graduates to remain in the country for up to 36 months. University officials have commended the executive measure, which will help them re-attract the world’s STEM talent.   

Under the House’s COMPETES Act, holders of doctorates in certain STEM fields would be exempt from numerical caps on green cards, regardless of whether they earned their degree in the United States or abroad. Whether those provisions will survive the reconciliation process is unclear: the bill’s Senate counterpart contains no analogous STEM immigration provisions and, to become law, at least 10 Republican senators would need to support it to avoid a filibuster.  

The Biden administration should consider asking Congress to raise the cap on the number of H1-B visas. The base number of 65,000 was set more than 30 years ago, in 1990, and the additional 20,000 visas for advanced-degree-holders from US universities was added in 2006. Last year’s (FY 2021’s) H1-B lottery attracted more than 300,000 candidates, representing a 12-percent increase from FY 2020. Raising the cap is not unprecedented: it was raised to 115,000 in 1999–2000 and to 195,000 in 2001-2003. Encouraging more temporary visas can help keep the channel open for needed skilled immigrants in case the provisions favoring STEM PhD candidature for green cards in the COMPETES Act fail. Even if those provisions were enacted, more technically skilled workers would be required than those with PhDs. Expanded H-1B visas would provide such an avenue for a wider spectrum of highly skilled workers to come to the United States.

Needed Long-Term Solution: Close observers of the immigration debates on Capitol Hill believe that Democrats should invest more in building a consensus because there have been potential opportunities to forge common ground with Republicans. In March 2021, the House passed two bipartisan immigration bills to legalize the so-called DREAMers (individuals living in the United States illegally, but who first came to the United States as minors) as well as farmworkers. Nine Republicans joined Democrats to pass the Dream and Promise Act by a vote of 228-197. The Farm Workforce Modernization Act also passed, by a vote of 247-174, backed by 30 Republicans.  

The need for immigration reform is more pressing than ever. During the past decade and a half, demographers, economists, and other experts have grown increasingly worried about the declining birth rate and accelerating aging in the United States. Many had believed that the United States, with its large number of immigrants—who typically have higher birth rates than native-born Americans—would not see its birth rate decline so precipitously. The United States’ birth rate is now more in line with the low birth rates found among US allies and partners in Europe and Asia. Meanwhile, since 2008 the birth rates for immigrant groups in the United States have also dropped. In 2020, according to the Centers for Disease Control (CDC), the general fertility rate in the United States was about 56 births per 1,000 women—the lowest rate on record and about half of what it was in the early 1960s. Moreover, the decline in birth rates is seen across all measured racial and ethnic groups. Births dropped by 4 percent among white, black, and Latina women; 9 percent for Asian women; 3 percent for Hawaiians and other Pacific Islanders; and 7 percent for Native American and Alaska native women. 

Beginning in 2030, immigration is projected to overtake natural increase as the principal driver of US population growth, according to the US Census Bureau. In the absence of any immigration, the US population would stagnate, if not decline starting in 2030. With no population growth, the United States could experience permanently lowered economic growth; this is already occurring in rural counties, whose populations are shrinking. Not only is there a strong argument to allow an increased number of immigrants, but there is also a need to attract immigrants with special skills that could help the United States sustain its competitive edge. Conservative Republicans have been particularly vociferous in calling for skills-based immigration, which could help form the basis for a compromise on other issues that Democrats support—and Republicans largely oppose—such as providing a pathway for the United States’ 11 million undocumented immigrants to obtain citizenship.

The question is: how long does Washington want to wait to reform US immigration policies? The year 2030—when the US population could begin to decline—is only eight years away, and the last major reform of US immigration law was in 1990. Congress needs to better understand the demographic implications of inaction and consider the effects of a shrinking population on the United States’ ability to compete globally. With public attitudes becoming more accepting of immigrants, the Biden administration should begin educating the public on the demographic and economic future awaiting the United States if its immigration policies are not reformed soon. 

Photo by Go Nakamura. Migrants seeking asylum in the US from India, walk to turn themselves in to the US border patrol after crossing the border from Mexico at Yuma, Arizona, US, January 23, 2022. REUTERS

Assumptions Testing Series

The New American Engagement Initiative’s Assumptions Testing series explores some of the foundational beliefs that guide US foreign policy. By questioning the conventional wisdom, and exposing these assumptions to close scrutiny, the series aims to open a new seam in the policy debate and generate a more lively, fruitful, and effective strategic dialogue – one that is capable of producing a sustainable, nonpartisan strategy for US global engagement.

Reality Check Series

The New American Engagement Initiative’s Reality Checks are short briefs dedicated to exploring a particular policy or set of policies, assessing their efficacy, and, where appropriate, proposing alternatives. Reality Checks are published regularly and tied to the news of the day or derive from NAEI’s Assumptions Testing series. All are succinct and straight-to-the-point. The briefs are designed for busy professionals anxious for pragmatic and timely policy options.

Engagement Reframed Series

The New American Engagement Initiative’s Engagement Reframed policy briefs reimagine and reframe the US approach to the world beyond traditional, narrow notions of US military dominance to fashion an achievable and sustainable form of US leadership in a world of many capable actors.

The post Engagement Reframed #4: Securing America’s demographic and economic future appeared first on Atlantic Council.

However, approval requires support from two-thirds of both the higher and lower legislative chambers. At the moment, the ruling party MORENA does not have supermajority in either. Supporters of the bill claim that it will end preferential treatment for private energy companies and projects funded by foreign private finance, while detractors claim it will hinder global clean energy efforts and increase energy costs.

Looking ahead, upticks in oil prices stemming from Putin’s invasion of Ukraine could alter the proposed timeline and viability of this energy reform bill.

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

Explore more

The post What to expect from Mexico’s energy reform bill appeared first on Atlantic Council.

Social media war: Meta establishes monitoring center, Patreon bans military fundraising, Russian accounts under new scrutiny

TASS website apparently hacked to display casualty statistics

Pro-Kremlin disinformation aims to diminish trust in Ukrainian army’s capabilities

Retaliations spread against Russian celebrities who urged an end to the war

Belarus Cyber Partisans disrupt Belarus railway network

“War” isn’t mentioned on pro-Kremlin and Kremlin-owned media outlets

Pro-Kremlin newspaper publishes commentary comparing Ukraine to Gaza

Mexican YouTube channels claim the US will invade Mexico in response to the Russian invasion 

Georgian PM says Ukraine failed to avoid war, Georgia not joining sanctions against Russia

Georgia’s breakaway region of Abkhazia recognized DNR and LNR

Social media war: Meta establishes monitoring center, Patreon bans military fundraising, Russian accounts under new scrutiny

Meta announced the creation of a “Special Operations Center” to monitor Ukraine war content on Facebook and Instagram. This model was previously deployed during the Taliban’s takeover of Afghanistan in August 2021, as well as in select elections beginning in 2018. Meta further activated a one-click privacy tool that it developed after the fall of Afghanistan to shield Afghans from Taliban surveillance and reprisals. The tool renders all user data, including profile pictures, inaccessible to any account that has not been directly added by that user.

Patreon removed a fundraising campaign for Come Back Alive, a Ukrainian charity organization that collects donations for the Ukrainian military and which was founded in 2014. The fundraiser had gone viral on February 23 when Twitter users discovered that different donation tiers were tied to different pieces of military equipment (e.g. $4 for a bullet, $299 for a tank). While Come Back Alive claimed that the $250,000 raised since the invasion had disappeared, Patreon stated that the funds would be given to the charity. Patreon has a longstanding ban on the financing of violent activities, although this policy has been inconsistently enforced in the past.

Lastly, social-media companies are being pressured to remove Russian diplomatic and media accounts from their platforms. Following the initial bombardment by Russian forces, the official Twitter account of Ukraine (@Ukraine) appealed directly to Twitter users and Twitter policy staff to remove the @Russia handle. Russian media also reported that Facebook had imposed restrictions on the social media accounts of RIA Novosti, the state-owned media conglomerate whose properties include RT and Radio Sputnik. At the time of this reporting, however, the pages were still accessible.

—Emerson T. Brooking, Resident Senior Fellow, Washington, DC

—Ingrid Dickinson, Young Global Professional, Washington, DC

Additional reading: Silicon Valley Must Pull the Plug on the Kremlin (Tech Policy Press)

TASS website apparently hacked to display casualty statistics

On February 27, Twitter user @PutinIsAVirus noticed an article published by Russian state news service TASS that listed Russian losses and acknowledged Vladimir Putin’s “disappointment” in how the war was proceeding. The DFRLab confirmed that the page was displaying this information before it was removed from the article.  

@PutinIsAVirus presumed that someone at TASS had intentionally leaked the figures, but another user, @kamerknc, raised the possibility that TASS had been hacked, noting that the page had also briefly displayed pro-Ukrainian information on how readers could contact Ukraine’s hotline for Russians to learn about missing soldiers.

While there have been numerous instances of hackers shutting down websites in Ukraine and Russia, this incident would be one of the first examples of hackers successfully altering content on a state media website to demoralize audiences. Russia has largely avoided discussing its own casualties.

—Andy Carvin, DFRLab Managing Editor, Washington DC

Pro-Kremlin disinformation aims to diminish trust in Ukrainian army’s capabilities

Debunks published by Ukrainian fact-checkers reveal that pro-Kremlin media have pivoted from spreading disinformation that paints Ukraine as the aggressor to disinformation that implies the Ukrainian army is demoralized.

Since Russia’s full-scale military assault began on February 24, Ukrainian fact-checkers have seen an increase in stories that focus on the demoralization of Ukraine’s armed forces. One narrative claimed that servicemen with the 57th Separate Motorized Infantry Brigade gave up their arms and defected to the so-called Luhansk People’s Republic; a second said that Ukrainian forces were abandoning their positions en masse; and a third claimed that the Ukrainian army was not resisting Russia. All these stories were debunked by StopFake.org, the Ukrainian fact-checking collective. 

Additionally, Kremlin-controlled television channel Russia-24 accused Ukraine of sharing disinformation about its victories. The Facebook page for Ukraine’s ground forces announced the capture of two Russian prisoners of war (POW), sharing a photo of the men, potentially in violation of the Geneva Convention. Russia-24 said this claim was false because snow was visible in the photo and “there is no snow in the streets.” In the image, the POWs are standing in a wooded area, where snow typically remains on the ground longer than in streets. 

In addition, Russia-24 suggested that a report from Ukraine’s State Emergency Service about a fire in an apartment building in Chuguiiv, which killed a young boy, was false. Russia-24 claimed that “journalists contacted the mother and it turned out that everyone is safe and sound.” The story did not include any evidence of them contacting the mother. 

Russia’s Ministry of Defense has only reported about its success in Ukraine and has not mentioned any casualties among its forces, while Ukraine’s Ministry of Defense claimed eight hundred Russian soldiers have been killed as of Friday, which cannot be verified. 

—Nika Aleksejeva, DFRLab Lead Researcher, Riga, Latvia 

Retaliations spread against Russian celebrities who urged an end to the war

Many Russian and foreign celebrities popular in Russia made public statements condemning Russia’s invasion of Ukraine, and some of them have already experienced consequences for their public condemnation of the Kremlin regime.

Ivan Urgant, host of the popular comedy show “Vecherny Urgant,” posted a black square on his Instagram channel with the phrase “Fear and pain. NO TO WAR.” The show, which aired on the Kremlin-controlled Pervijchannel, then disappeared from its programming. Channel spokesperson Larisa Krimova was evasive, later telling journalists, “The current program layout is connected with important social and political events. Ivan Urgant, of course, continues to work on the channel.”

Similarly, the TV channels TNT and Pyatnica!, both owned by Gazprom Media, a part of the state-owned gas enterprise Gazprom, ended their contracts with Armen Oganyan, a producer at Comedy Club Production, and Marina Grankina, producer at Ukrainian TeenSpirit, after both condemned the war in Ukraine. Meanwhile, ticket sales were suspended for a Minsk concert by Valery Milardze, a popular Russian singer who condemned the war on Instagram.

Other Russian anti-war celebrities such as actress Chulpan Hamatova were labeled as “politically illiterate” by Kremlin-controlled media outlet RIA FAN. Additionally, Russian pop singer Sergei Lazarev, actress Maria Mironova, and other Russian celebrities received online threats after making anti-war statements on social media.

—Nika Aleksejeva, DFRLab Lead Researcher, Riga, Latvia 

Belarus Cyber Partisans disrupt Belarus railway network

On February 27, Belarus Cyber Partisans announced the “collapse” of Belarus Railway’s computer systems “to slow down the deployment of occupying troops and give Ukrainians more time to repel the attack.”  This was their second attempt to disrupt the train network in recent weeks. Cyber Partisans also claimed that they had disrupted Belarus Railway websites. The DFRLab confirmed that the websites pass.rw.by, portal.rw.by, and rw.by were no longer functioning that evening.

Later, a Telegram channel named Belarus Railway Worker’s Community claimed that Belarus Railway operations were now in “manual mode” and that trains in Neman, Minsk, and Orsha were “paralyzed.” On Twitter, an anonymous user named @liksio reported from a train that ticket validation had been disrupted.

The railway company announced on Telegram that ticket sales had been disrupted but made no comment about the status of other railway operations.

—Nika Aleksejeva, DFRLab Lead Researcher, Riga, Latvia 

“War” isn’t mentioned on pro-Kremlin and Kremlin-owned media outlets

As the international community condemns Russia’s war in Ukraine, pro-Kremlin and Kremlin-owned media outlets are refusing to use the term “war,” instead referring to the situation in Ukraine as a “special military operation.”

The DFRLab analyzed the headlines of four major outlets known for pushing the Kremlin’s agenda: Sputnik Georgia, Zvezda, Ria Novosti, and RT. The findings revealed that the outlets commonly used variants of “special military operation” like “special operation” and “military operation” instead of “war” or “invasion,” the terms widely used by independent media to describe the situation in Ukraine. For example, the Russian-language edition of state-owned RT placed a banner on its website reading “special operation.”

However, RT seems to have no issue using the term “war” when describing Ukraine’s actions. On February 22, two days before Russia’s invasion, RT’s English-language platform published an article titled “How Ukraine’s ‘Revolution of Dignity’ led to war, poverty and the rise of the far-right.” The article also uses the term “Nazi” twenty-three times while pushing the narrative of a “Nazi Ukraine”—one of the justifications used by Putin when announcing the invasion into Ukraine on February 24.

—Sopo Gelava, Research Associate, Tbilisi, Georgia

Pro-Kremlin newspaper publishes commentary comparing Ukraine to Gaza

Komsomolskaya Pravda, a Russian daily newspaper, published a commentary comparing the war in Ukraine with the recent conflicts in Gaza. A letter authored by a former Donetsk resident with Israeli citizenship claimed that Ukraine has been bombing the so-called Donetsk People’s Republic for eight years, not unlike how Israel has been targeted by rockets from Gaza. The author asked, “If Israel is allowed to respond to shelling from Gaza and capture the Golan Heights, then why is Russia not allowed to do the same?”

The letter then went on to claim that 100 percent of residents in Donetsk are Russians rather than Ukrainians, yet there was not a single Russian-language school there in 2014. “Why do we suddenly believe that there will be no war considering this situation?” the author concluded.

—Sopo Gelava, Research Associate, Tbilisi, Georgia

Mexican YouTube channels claim the US will invade Mexico in response to the Russian invasion 

Videos posted in Spanish by Tu COSMOPOLIS, a Mexican channel that describes itself as a platform spreading “verified information,” and Campechaneando, a YouTuber close to Mexico’s President Andrés Manuel López Obrador (AMLO), amassed hundreds of thousands of views by misleadingly claiming that the United States will invade Mexico in the wake of Russia’s invasion of Ukraine.

Tu COSMOPOLIS and Campechaneando posted the videos on February 23 and February 24 respectively. Both videos distorted an interview with former US President Donald Trump and misleadingly claimed that he suggested that the United States will invade Mexico’s northern states in response to the Russian invasion of Ukraine. Campechaneando also suggested that US President Joe Biden will follow up on the false statement attributed to Trump. Tu COSMOPOLIS and Campechaneando videos garnered 458,000 and 385,000 views, respectively, as of Friday evening.

Although Trump mentioned Mexico three times, he did not suggest an invasion of the country. Instead, Trump proposed to increase the presence of security forces on the southern border—on US territory—to prevent “millions of people [who] are bum-rushing our country” from “127 countries,” not just Mexico.

In another video posted on February 22, Campechaneando also claimed that Russia’s Vladimir Putin told AMLO that the United States will defeat Mexico and invade the country. Campechaneando did not show Putin’s statement or quote him. However, Putin’s claims about the United States stealing Mexican territories first appeared in 2014, prior to AMLO becoming president, when Putin used the 1848 Guadalupe-Hidalgo agreement between the US and Mexico as an argument to defend the 2014 Russia-Ukraine armed conflict. The video garnered 450,000 views.

The DFRLab could not find a connection or coordination between the Tu COSMOPOLIS and Campechaneando channels.

—Daniel Suárez Pérez, Research Assistant in Latin America, Colombia 

Georgian PM says Ukraine failed to avoid war, Georgia not joining sanctions against Russia

On February 25, Georgian Prime Minister Irakli Gharibashvili said that Ukraine failed to avoid war and that it would harm its territorial integrity and citizens. While commenting on Ukraine at a memorial for Georgians killed during the 1921 Soviet invasion of Georgia, Gharibashvili recalled the 2008 Russian-Georgian war and blamed the Georgian government that was in power at the time for “stupidly, foolishly… succumbing to provocation.”

Gharibashvili also announced that Georgia will not join international economic sanctions on Russia, claiming that to do so would damage “the country, the populace, and more.” In a response to opposition criticism for not calling a National Security Council meeting about Russia’s invasion of Ukraine, Gharibashvili commented that “there is no need.”

Kremlin media hailed Gharibashvili’s decision not to join sanctions against Russia. RT editor in chief Margarita Simonyan tweeted in Russian, “Ребята, Грузия выздоровела!” (“Guys, Georgia has recovered!”) Russian First anchor Artyom Sheynin considered Gharibashvili’s statement as support for “precise military operations to force to peace,” adding that Russian military operations “clean people’s minds historically,” referring to Russia’s war in Georgia in 2008.

Domestically, Gharibashvili is under fire for his remarks. Thousands of Georgian citizens went into the streets to condemn Gharibashvili and express support to Ukraine.

—Sopo Gelava, Research Associate, Tbilisi, Georgia

Georgia’s breakaway region of Abkhazia recognized DNR and LNR

On February 25, the president of Georgia’s breakaway region of Abkhazia signed decrees recognizing the Donetsk and Luhansk people’s republics. In a Russian-language statement published by Apsnypress, President Aslan Bzhania stressed that Abkhazia has experienced the same fate as Donetsk and Luhansk, insisting that “more than four million Russian-speaking citizens of Ukraine were effectively subject to genocide.” Bzhania’s statement went on to accuse Ukraine of aggression incited by the West, adding that “Georgia tried to destroy the Abkhaz people” thirty years ago.

Bzhania claimed that “militant nationalism” and radical political forces deprived Ukraine of the ability to negotiate, so instead Ukraine had resorted to the persecution of Russian speakers residing in the Donbas. He added that the West provided Ukraine with lethal weapons, thus helping Ukraine prepare for its “final annihilation” of Russian speakers. Bzhania assessed Russia’s recognition of Ukraine’s breakaway republics as “fair,” adding that a military operation is “absolutely justified.”

Bzhania also called on the government of Abkhazia to start preparation for establishing diplomatic relations between Abkhazia and the two Ukrainian breakaway republics.

—Sopo Gelava, Research Associate, Tbilisi, Georgia

The post Russian Hybrid War Report: Russia retaliates against anti-war celebrities as social platforms crack down on Russian media appeared first on Atlantic Council.

The year 2022 will be one of change across the Western Hemisphere. From presidential elections in Brazil and Colombia to newly elected presidents taking office in Chile and Honduras, regional leaders will be looking at new ways to rebuild economies from the COVID-19 pandemic while balancing mounting social pressures. So, what might or might not be on the horizon in 2022?

Join the Adrienne Arsht Latin America Center as we look at some of the key questions that may shape the year ahead for Latin America and the Caribbean, then take our signature annual poll and see how your opinions shape up against our predictions.

How might key presidential elections shake out? Will regional economies recover to pre-pandemic growth rates? What might be the outcome of the US-hosted Summit of the Americas, and will Caribbean voices play a larger role than in previous gatherings? Will the region expand its ties with China?

Take our ten-question poll in less than five minutes!

Question #1: Caribbean – Will Vice President Kamala Harris make her first trip to the Caribbean in 2022?

Question #2: Central America – Will the United States have confirmed ambassadors in all three northern Central American countries (currently only Guatemala) by year-end 2022?

Question #3: Chile – Will the new Chilean constitution be approved when put to a referendum?

Question #4: China and Latin America – Considering Nicaragua’s newly established China ties, will the three other Central American countries that currently recognize Taiwan—Belize, Guatemala, and Honduras—also switch recognition to China?

Question #5: Colombia – Will Colombia’s presidential election go to a second round?

Question 6: Economy – Can the region recover pre-pandemic growth rates in 2022?

Question #7: Mexico – Will Mexico remain the United States’ top trading partner throughout the next year?

Question #8: Bitcoin – Following in El Salvador’s footsteps, will support for Bitcoin tender grow in the region?

Question #9: Venezuela – Will Nicolas Maduro return to the negotiating table in Mexico City?

Question #10: Brazil – Will President Jair Bolsonaro win another term this year?

Bonus Question: Will Latin America and the Caribbean be represented in the final of the World Cup?

Our answer to question #1: YES

In 2022, the Biden-Harris administration will look for big wins and opportunities to expand its leadership in the Americas. This is achievable in the Caribbean with a high-profile visit, which would optimally be accompanied by a major policy announcement from Vice President Harris. President Joe Biden was the last vice president to visit the region, where he focused his time discussing the Caribbean Energy Security Initiative.

The stage is set for a similar visit to occur with Vice President Harris. Economic recovery is slow, vaccine hesitancy is increasing, and other actors, such as China, are playing a more active role in the Caribbean. Regional leaders often note that US attention is inconsistent, and that few high-profile US officials travel to the Caribbean. A visit and subsequent policy announcement that aids the Caribbean in its time of need would build on recent conversations between the Vice President and Prime Minister of Trinidad and Tobago Keith Rowley (virtual) and Prime Minister of Barbados Mia Mottley (in person).

Our answer to question #2: NO

Given President Nayib Bukele’s recent personal attacks against President Biden and other US government officials, including Ambassador Jean Manes and current Charge d’Affaires Brendan O’Brien, it is unlikely that the United States will confirm all ambassadors to the Northern Triangle countries. President Bukele’s attacks were a response to the Biden administration’s decision to add Osiris Luna Meza, the chief of the Salvadoran penal system and vice minister of justice and public security, and Carlos Marroquin, chairman of the Social Fabric Reconstruction Unit, to the Specially Designated Citizens and Blocked Persons List. Both Salvadoran officials are accused of having a direct relationship with gangs, including MS-13. In Honduras, however, a new administration under President-elect Xiomara Castro provides a renewed sense of cooperation between the United States and the Central American country.

Our answer to question #3: YES

Once the constitutional draft is finalized by summer 2022, the Constitutional Convention will vote to approve or reject the new legal charter. If the body rejects the new constitution, Chile will keep its current one. However, if it is approved, the group will present the document to the newly elected head of state, who, in turn, will issue a call for a national referendum in which Chileans will vote to approve or reject the new constitution. Voting will be mandatory, and the new constitution will move forward only if an absolute majority is achieved.

While 78.3 percent of voters cast their ballot in favor of a new constitution in 2020, rising polarization and inefficiencies within the Constitutional Convention have left thousands of Chileans disenchanted with the reform process. However, the desire for fundamental changes remains high. If the new legal charter is approved by Chilean voters, it will be put into effect shortly after the vote through a formal ceremony. However, if Chile votes to reject, the 1980 Constitution written under Augusto Pinochet will remain in place. With just one opportunity to get the new constitution approved, the convention will attempt to generate a moderate bill that will stimulate consensus among the political left and right.

Our answer to question #4: NO

It is unlikely that all three of Taiwan’s Central American allies will switch recognition to China in 2022. But, considerations of international benefits, domestic political agency, or both may prompt a change in at least one of the countries. Internationally, US COVID-19 vaccine donations far outstripped those of China, sending a reassuring message to Taiwanese allies in the region.

But, Chinese vaccine diplomacy—including early, well-publicized vaccine sales and shipments—and broader medical, humanitarian, and economic assistance could still prove alluring for countries in need. Despite running with a pro-China message, Honduran President-elect Xiomara Castro recently declined to switch diplomatic recognition from Taiwan to China. Absent any external shocks, Belize, Guatemala, and Honduras will likely attempt to maintain the status quo for as long as possible, favoring Taiwan while leaving the door open for closer ties with China. This delicate balancing act has served to remind larger countries not to take their allegiances for granted and will continue to do so. But, it will be increasingly tested, as seen with Nicaragua, in the critical and uncertain year ahead.

Our answer to question #5: YES

There has yet to be an election in Colombia’s history in which a president is elected in the first round. Senator Gustavo Petro, who served as mayor of Bogotá (2012–2014), leads the left-wing political party Colombia Humana, and was the runner-up in the 2018 presidential election against incumbent President Ivan Duque. With nearly 42 percent of the vote, Petro has positioned himself as the candidate with the greatest support from Colombian voters.

However, Petro currently polls at 25.4 percent, which is not enough for an absolute majority that will grant him the presidency in the first round. Petro will most likely go to a second-round vote against a center-right or center-left candidate, potentially former Mayor of Bucaramanga Rodolfo Hernández or former Governor of Antioquia Sergio Fajardo. To date, Hernández polls at 11 percent and Fajardo at 7 percent. As recommended by the Atlantic Council’s US-Colombia Task Force, co-chaired by Senators Roy Blunt and Ben Cardin, strengthening the alliance between Colombia and the United States ahead of 2022 presidential elections is paramount to safeguard Colombia’s gains in terms of development, rule of law, and democracy. Regardless of election results, the United States should continue to position itself as Colombia’s strongest ally, advancing stability and prosperity at home and abroad.

Our answer to question #6: YES

Led by its five major economies, regional gross domestic product (GDP) is on track to return to pre-pandemic levels in 2022, though per-capita income will likely not recover until 2023. Key uncertainties may alter this outlook: the extent of success in vaccination and pandemic management, stimulus trade-off between continued support and fiscal discipline, labor markets (currently experiencing slower recovery than GDP), inflation, electoral outcomes, and external conditions including evolving investor appetite and commodity prices.

The region as a whole is not expected to return to pre-pandemic growth trajectories in the coming years, signaling permanent output losses due to COVID-19. In a divergent recovery, smaller and vulnerable states, such as those in the tourism-dependent Caribbean, are experiencing an even slower return to normal. Lastly, Latin America and the Caribbean (LAC) should set an ambitious agenda beyond “recovery”—given unimpressive pre-pandemic growth rates and patterns—and, rather, seek ways to accelerate development and build forward in a more inclusive, productive, and sustainable way.

Our answer to question #7: YES

It is likely that Mexico will remain the United States’ top trading partner throughout 2022. Mexico currently holds the top position—overtaking China in February 2021—with Canada in the second spot, lagging behind by $2.9 billion in total trade. COVID-19 significantly hindered US-Mexico trade—which largely relies on land trade via trucks and railcars—due to the pandemic-induced land-border closures to “non-essential” traffic. As of November 8, 2021, however, the United States reopened its borders to non-essential traffic and booming commerce is expected along the border. Moreover, US-Mexico trade topped $545 billion through October 2021 (the most recent data available), an increase of over 24 percent from one year earlier. Given the highly integrated nature of US-Mexico trade in the automotive and energy sectors, coupled with the efforts in border cities and ports to increase capacity and efficiency, trade is likely to continue to grow between the United States and Mexico.

Our answer to question #8: YES

Bitcoin presents an attractive option for countries in Latin America and the Caribbean, yet those countries will not replicate El Salvador’s approach. The government of El Salvador claimed that adopting Bitcoin would reduce financial exclusion and high remittance fees. These issues also affect the entire region. The World Bank predicted that remittances to Latin America and the Caribbean rose 21.6 percent in 2021, costing roughly $6.9 billion in remittance fees. According to the International Monetary Fund (IMF), financial inclusion in the region falls below global averages, and is exacerbated in the Caribbean due to the de-risking of correspondent banks. The worsening effects of climate change will also likely generate support for a decentralized virtual currency, as remittances typically increase following natural disasters, alongside decreased access to financial institutions.

Despite Bitcoin’s allure, its implementation in El Salvador has been marred by technological unreliability, weak financial regulations, and high price volatility. Politicians in Paraguay, Mexico, and Panama have already introduced legislation to regulate Bitcoin’s use as legal tender, and more will follow in 2022. As support for Bitcoin rises, so will debates on its social and environmental risks. Countries across the region will chart their own paths instead of following El Salvador’s playbook.

Our answer to question #9: YES

Although, the latest round of negotiations in Mexico has been suspended since October 2021, a combination of long-term incentives will likely propel Maduro to negotiate with the Venezuelan Unitary Platform—the umbrella organization encompassing the main political opposition parties in the country. Maduro seeks access to capital, legitimacy, guarantees against prosecution, and division within factions of domestic opponents—all of which he can accomplish through negotiations.

However, these factors are not the only ones at play in determining Maduro’s negotiation participation. After the highly visible diverging strategies within the opposition during the recent regional elections—and Julio Borges’ recent resignation and call for the interim government’s dissolution—Maduro might decide to simply wait out further erosion of opposition unity, instead of engaging with it directly. The success of such a strategy, if taken, would enhance the regime’s monopoly on power.

Our answer to question #10: Too early to call.

The odds are not in his favor, but it’s too early to say. Recent polls suggest that President Bolsonaro and former President Luiz Inacio Lula da Silva will face each other in a second round of elections, repeating the 2018 Bolsonaro versus Workers’ Party (PT) duel. However, this time around, former President Lula, as the PT candidate, is leading the way in early polling. Both candidates have a strong support base, but former President Lula’s history with corruption and President Bolsonaro’s mismanagement of the pandemic and current economic hurdles also give them significantly high rejection rates.

Third-way candidates, such as President Bolsonaro’s former minister of justice, Sergio Moro—famous for leading the Car Wash Operation that put President Lula in jail—is running on an anticorruption, center-right platform. Those Brazilians who in 2018 voted for President Bolsonaro as a “vote against corruption” might be more inclined to seek other alternatives. Current high inflation and unemployment rates might also play against President Bolsonaro’s reelection. Having said that, it will likely be a close race, and there is still a long way to go until elections in October 2022.

BONUS QUESTION ANSWER: YES

Brazil and Argentina are the only Latin American counties that have already qualified for the 2022 World Cup. In the Caribbean, Jamaica seems to be the only country with a chance of qualifying. While it is impossible to know who will be in the final (RIP Paul the Octopus), Brazil and Argentina are always strong contenders.

The post Spotlight: Latin America and the Caribbean – Ten questions for 2022 appeared first on Atlantic Council.

This week’s North American Leaders’ Summit will focus on opportunities for deepened collaboration on issues such as health, commerce and investment, security, and migration. The Leaders’ meeting – following a five-year hiatus – reaffirms the importance of US-Mexico-Canada cooperation. A vibrant and more economically integrated North America is fundamental to advance common interests.

This new Adrienne Arsht Latin America Center infographic highlights North American leadership across the aforementioned issues

The post Infographic: Why North America matters? appeared first on Atlantic Council.

In an effort to protect the finances and monopolistic positions of the national oil company, Pemex, and the Federal Electricity Commission (CFE), the Mexican government has seized US-owned terminals used to import American petroleum products for Mexicans, given preference to higher-GHG-emitting sources of electricity over privately held renewable sources, and subsumed political control of the formerly independent regulator Comisión Reguladora de Energía (CRE) into the national energy ministry, Secretaría de Energía (SENER), thus allowing the CRE to be used to block permits for renewable power developments and to harass US companies. These steps contravene the commitments that President López Obrador himself made when he (re)signed the USMCA. Among other stipulations, that agreement provides US companies with national treatment in Mexico that bars discrimination in favor of state-owned Pemex and CFE, forbids barriers to energy of US energy products, and prohibits any efforts by the government at nationalization and expropriation of privately held assets. Mutual respect and assurance of these carefully negotiated provisions is at the heart of the bilateral, and indeed the trilateral, relationship, along with the strength of North America as a whole in a hotly competitive global economy.

So far, the Biden administration, mindful of Mexico’s indispensable cooperation on immigration issues, has been largely silent on the AMLO government’s actions which so clearly threaten cross-border cooperation on energy and climate security. President López Obrador is a leader who believes that important messages come from the head of government and, as demonstrated in his responsiveness to former President Trump, has proven willing to take such messages seriously. When North American leaders meet in Washington this Thursday, it is essential for President Biden, as well as Secretary Blinken and Secretary Kerry, to be absolutely clear to their Mexican counterparts that these USMCA treaty violations, as well as the proposed reforms which would constitutionally enshrine discrimination against nongovernmental generators, are wholly unacceptable and will result in retaliation at the highest levels of the US government. Importantly, President Biden need not imitate the style of public admonishment in asserting American interests associated with his predecessor, and he need not reverse AMLO’s deeply held nationalistic energy ideology, but he must be clear that there is no free pass for expropriation and discrimination among neighbors and allies. Setting these red lines is essential for Mexico’s future prosperity and America’s national security. On the other hand, failure to act will chill private investment in Mexico—other than that from China—for the foreseeable future. In the interim, Mexico will continue to regress on decarbonization, renege on its climate commitments—violating its own laws—and crush low-cost renewable energy in Mexico in its misguided nationalistic push.  In the long term, undermining private investment will undermine Mexican prosperity and quality of life not just for Mexicans, but also for residents of the Northern Triangle region of Central America, in which an undermining of regional investment efforts will exacerbate illegal migration.

The Mexican energy reforms, which took 76 years to enact, are now on the verge of producing both fresh revenue for the Mexican economy and low-cost, affordable, and privately financed renewable energy, which will be foundational to Mexico’s development and prosperity of its people. The stakes at this week’s meeting could hardly be higher. From President López Obrador’s point of view, when it comes to Washington, silence is assent. President Biden should not miss the opportunity to make the US position clear.

David L. Goldwyn served as Special Envoy for International Energy under President Obama and Assistant Secretary of Energy for International Relations under President Clinton. He is chair of the Atlantic Council’s Energy Advisory Group.

Neil Brown formerly served on the senior Republican staff of the Senate Foreign Relations Committee and is currently a nonresident senior fellow at the Atlantic Council Global Energy Center and managing director at the KKR Global Institute.

Meet the authors

Fellow

David L. Goldwyn

Nonresident Senior Fellow

Adrienne Arsht Latin America Center Global Energy Center

Caribbean Climate Change & Climate Action

Fellow

Neil Robert Brown

Nonresident Senior Fellow

Global Energy Center

Energy Markets & Governance Energy & Environment

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La presidencia de Donald J. Trump ha puesto en duda la suposición de que la OTAN podía contar con el apoyo del comandante en jefe estadounidense. El desafío que Trump plantea a la ortodoxia en torno a la Alianza es en parte personal, en parte político, y en parte reflejo del cambio de actitud de la opinión pública estadounidense sobre la política exterior y de defensa. También resuena, en el fondo, si no en el estilo, con aspectos de las presidencias de Barack Obama y George W. Bush, en las que la OTAN se consideraba a veces una carga que había que mantener en lugar de un activo que operar.

Si bien esta realidad podría considerarse circunstancial para cada administración, el cuestionamiento de la centralidad de la OTAN para los intereses de seguridad de los Estados Unidos debería considerarse como una tendencia con fundamentos estructurales subyacentes vinculados al sentimiento público. El desapego progresivo de los Estados Unidos de la OTAN podría dar lugar a una repentina desvinculación de la Alianza, una situación a la que la OTAN no podría sobrevivir y que, según múltiples testimonios, estuvo a punto de producirse durante la Cumbre de la OTAN en Bruselas de 2018.¹ Para los europeos, que consideran que las garantías de seguridad de Estados Unidos son fundamentales para su soberanía, y para aquellos en los Estados Unidos que creen que el sistema de alianzas de Estados Unidos es la condición sine qua non de su poder e influencia a nivel mundial, existe una confluencia urgente de propósitos para reavivar el compromiso fundamental de Washington con la OTAN.

El ingreso hipotético de México en la OTAN puede ser un ingrediente necesario para que los Estados Unidos siga invirtiendo en la seguridad europea a largo plazo.² Esta sugerencia se hace teniendo en cuenta la realidad de que el poder económico³ y político⁴ de los Estados Unidos se está desplazando hacia lugares y poblaciones con menos vínculos tradicionales con Europa, de modo que resulta imperativo ampliar el atractivo de la OTAN para un público estadounidense cada vez más diverso.

Argumentos a favor de diversificar el apoyo público estadounidense a la OTAN

La idea de que México es clave para mantener el compromiso de Estados Unidos con una Alianza cuya principal misión es disuadir la agresión rusa en Europa es, sin duda, contraintuitiva. De igual forma se requiere una evaluación del por qué ésta sería una opción atractiva para México y de lo que México aportaría a la Alianza en términos prácticos; hay argumentos convincentes, mas no concluyentes, sobre ambos aspectos. 

Nuestro planteamiento parte de la premisa de que la OTAN es fundamental para el liderazgo mundial de los Estados Unidos, de modo que hacerla relevante para las comunidades emergentes en los Estados Unidos resulta obligatorio si la Alianza quiere ganarse su lealtad política. De igual manera supone que mantener el apoyo a la OTAN debe ser algo más que un ejercicio de diplomacia pública, aunque éste sea un elemento necesario. Por el contrario, garantizar el apoyo de la opinión pública estadounidense a la Alianza debe basarse en políticas que interesen a un segmento de la ciudadanía cada vez más diverso y con más poder.

Hacer que estas políticas sean relevantes para una amplia franja de la población estadounidense es especialmente difícil en un país tan extenso como los Estados Unidos. Las divergencias regionales, la diversidad étnica y racial y la polarización política hacen que las soluciones monolíticas sean poco prácticas. De hecho, las fechorías rusas—incluida la injerencia directa en las elecciones estadounidenses—no son la preocupación generalizada y animada que eran cuando, durante la Guerra Fría, el arsenal nuclear de Moscú constituía una preocupación omnipresente para todo el mundo. Es posible que una competencia a largo plazo entre los Estados Unidos y China pueda servir como causa de unión general, pero el papel de la OTAN en ese escenario es incierto, ya que la opinión pública europea no se siente amenazada militarmente por China.

Por el contrario, es más probable que el compromiso perdurable de los Estados Unidos con la OTAN se garantice mediante una serie de políticas o misiones que reflejen los intereses de seguridad de un público estadounidense cada vez más diverso. Entre ellos debe figurar, sin duda, la disuasión frente a Rusia—que también debe interesar a los europeos—pero igualmente podría ser necesario combatir amenazas no tradicionales, como las pandemias y el cambio climático, que cada vez son más importantes para los ciudadanos más jóvenes.⁵ Sin embargo, los intereses regionales seguirán siendo también una parte importante del rompecabezas.

Al igual que la atención a la seguridad de los aliados europeos ha sido una prerrogativa para generaciones de estadounidenses de linaje europeo—que hasta ahora han dominado el poder político y económico en los Estados Unidos—tiene sentido que los ciudadanos de otros orígenes se vean obligados a preocuparse por la seguridad de sus países de origen. Para la OTAN, esto podría significar un papel más destacado al abordar la seguridad en África o Asia.⁶ Pero primero, los intereses de la comunidad hispana/latinx⁷ deberían tener prioridad, sobre todo porque la formalización de una relación entre México y la OTAN constituye un objetivo político alcanzable.

Al igual que la atención a la seguridad de los aliados europeos ha sido una prerrogativa para generaciones de estadounidenses de linaje europeo—que hasta ahora han dominado el poder político y económico en los Estados Unidos—tiene sentido que los ciudadanos de otros orígenes se vean obligados a preocuparse por la seguridad de sus países de origen.

Tropas mexicanas desfilando el 16 de septiembre de 2015. (Fuente Wikimedia Commons)

Las tendencias demográficas nacionales en Estados Unidos también apoyan esta lógica. Según el Pew Research Center, la población hispana/latinx de Estados Unidos alcanzó los 60.6 millones en 2019, lo que supone el 18% de la población total de los Estados Unidos.⁸ De esa cifra, las personas de origen mexicano representan el 62% de la población latinx total del país, o alrededor de unos 37 millones de personas. Entre 2010 y 2019, la comunidad latinx representó más de la mitad de todo el crecimiento de la población de los Estados Unidos, incluso cuando ese crecimiento ha comenzado a disminuir. En general, los latinx son el segundo grupo étnico más grande del país, detrás de los blancos no hispanos.⁹

Dado que se prevé que la comunidad hispana/latinx represente el 29% de la población estadounidense en 2050, es preciso tener en cuenta sus opiniones sobre las relaciones internacionales.¹⁰ Si bien los datos en las encuestas sobre las preferencias de los latinos en materia de política exterior,¹¹ son limitados y contradictorios, y aún menos sobre las opiniones respecto a la OTAN, anecdóticamente, es una prioridad baja. Sin embargo, un estudio del Chicago Council on Global Affairs de 2014 descubrió “que los hispanoamericanos son más positivos que otros estadounidenses hacia México. En la escala de ‘sentimientos’ de 0 a 100, siendo 100 el más cálido y 50 el neutro, los latinos dan a México una calificación media de 67, frente a una media de 51 entre los no latinos.”¹²

A falta de nuevas investigaciones, se desconoce si el ingreso de México en la OTAN motivaría a la comunidad latinx de los Estados Unidos a convertirse en defensores de la Alianza, pero es una suposición razonable basada en los datos disponibles actualmente y en el sentido común. Incluso un debate sobre dicha posibilidad podría dar a conocer la OTAN a un número significativo de ciudadanos estadounidenses que de otro modo no estarían familiarizados con la Alianza, un resultado beneficioso en sí mismo, y cuyo efecto puede medirse. Para ello, un diálogo estructurado entre la OTAN y México para explorar una base de cooperación constituiría un primer paso positivo.

Si bien la adhesión de México a la OTAN es un proyecto generacional que requiere la alineación de una serie de incentivos políticos y normativos por todas las partes, una asociación formal es posible a corto plazo. Tal perspectiva representa una oportunidad para determinar cómo se verían afectadas las actitudes de los latinx estadounidenses hacia la OTAN, a la vez que proporciona el tiempo necesario para trabajar en los beneficios prácticos de una eventual adhesión tanto para Bruselas como para Ciudad de México.

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Planteando el caso a las capitales aliadas

Aunque el argumento central de este ensayo es que los aliados europeos deberían apoyar una relación formal con México como medio para consolidar el apoyo a largo plazo de los Estados Unidos a la OTAN, el argumento tradicional a favor de la eventual adhesión de México es razonablemente sólido en cuanto a sus fundamentos.

En términos reales y relativos, México aportaría importantes recursos a la Alianza. Luego de haber gastado algo más de 5,000 millones de dólares en defensa en 2019, México se situaría en la mitad superior de los miembros de la OTAN, aunque con un gasto en defensa del 0.5% del PIB, ocuparía el último lugar de la OTAN proporcionalmente.¹³ Sin embargo, el ingreso en la Alianza seguramente estaría condicionado a un aumento del presupuesto de defensa, de modo que los 5,000 millones de dólares de referencia tendrían una ventaja incorporada. Con cerca de 237,000 efectivos en servicio activo, México sería el tercer ejército de la OTAN, por detrás de los Estados Unidos y Turquía, y el ejército y la marina representarían la mayor parte de los efectivos mexicanos.¹⁴ Para poner esto en perspectiva, la adhesión de México añadiría más personal militar en servicio activo a las filas de la OTAN que los trece nuevos miembros de la Alianza juntos.

Aún cuando las fuerzas armadas de México tienen capacidades más limitadas que los ejércitos de más alto nivel de la OTAN, sus capacidades parten de un piso alto, beneficiándose de la cooperación bilateral en materia de seguridad con los Estados Unidos. Como explica un estudio del Wilson Center de 2016, “En la última década, las fuerzas armadas mexicanas se han convertido en un ejército fortalecido y más profesional, experto en la guerra de cuarta generación, que opera en todo el espectro del conflicto, desde misiones quirúrgicas de las Fuerzas Especiales de pequeñas unidades hasta las operaciones de estabilidad a nivel de división en áreas comparables en tamaño a Bélgica.”¹⁵ Al igual que la mayoría de los nuevos aliados o socios, no se esperaría que México fuese un contribuyente significativo a las misiones de la OTAN de forma inmediata, aunque en teoría, el tamaño y la capacidad de sus fuerzas armadas—que cuentan con un amplio historial de misiones de Ayuda Humanitaria/Apoyo en caso de Catástrofes en todo el mundo—lo hacen capaz de contribuir.¹⁶ 

Más allá de los argumentos de capacidad, México podría servir como puerta de entrada para una mayor presencia de la OTAN en América Latina, donde la Alianza está ausente fuera de una asociación formal con Colombia. Dada la influencia crítica de Rusia para apuntalar al régimen de Nicolás Maduro en Venezuela y la creciente influencia de China en el Sur Global, un mayor papel de la OTAN en América Latina podría fomentar la promoción de la democracia al tiempo que proporcionaría un efecto disuasorio oportuno, incluyendo la solicitud de Rusia a México para aumentar los acuerdos bilaterales de comercio y seguridad. Además, la incorporación de un tercer país del Pacífico a la Alianza contribuiría a fomentar los vínculos transatlánticos y transpacíficos con vistas a contener a China.

Con el tiempo, la OTAN podría utilizar sus relaciones con México y Colombia para replicar sus otros acuerdos de asociación regional, como el Diálogo del Mediterráneo, con el fin de incluir consultas políticas para compartir información sobre las actividades locales de Rusia y China, y fomentar el apoyo a las políticas sobre 5G, las cadenas de suministro o contrarrestar la desinformación. En tal contexto, el coqueteo de Brasil con la OTAN parecería menos descabellado, y otras posibilidades, como una futura Cuba democrática asociada a la OTAN, serían conceptos alcanzables.

Independientemente de otros beneficios, los aliados europeos querrían tener garantías de que se puede contar con México para apoyar las decisiones relacionadas con la defensa y la disuasión en Europa. Incluso la perspectiva de mantener el compromiso de los Estados Unidos con la causa de la soberanía europea sería menos atractiva si México ejerciera su derecho de veto en medio de una crisis con Rusia, por ejemplo. Si bien estas garantías son difíciles de imaginar en la actualidad, es probable que se puedan conseguir mediante un diálogo a lo largo del tiempo.

Planteando el caso a México

Las largas tensiones entre México y Washington y la renuencia histórica de México a imponerse en los asuntos de seguridad global hacen que la idea de pertenencia de México a una alianza de seguridad liderada por los Estados Unidos sea ostensible.¹⁷ Como país sin una amenaza militar tradicional, es poco probable que México necesite la protección del Artículo 5. De hecho, la adhesión a la OTAN podría aumentar los riesgos para la seguridad de México, al requerir compromisos militares en misiones alejadas de sus preocupaciones de seguridad tradicionales, mientras se desvían recursos hacia gastos de defensa y lejos de las necesidades sociales apremiantes. 

Sin embargo, una relación formal con la OTAN daría derecho a México a una reforma mejorada del sector de seguridad (RSS)¹⁸ por parte de una organización muy versada en la materia; reforzaría las relaciones comerciales transatlánticas a través de la consolidación de los intereses económicos y de seguridad en conjunto con el Tratado Estados Unidos-México-Canadá (TMEC) y el Acuerdo Global UE-México;¹⁹ le permitiría enmarcar una política exterior como un socio aún más cercano en la seguridad de América del Norte tras el TMEC; y subrayaría su estatus como una potencia regional²⁰ creciente y un ejemplo influyente para otros estados latinoamericanos.²¹

El más atractivo de estos factores podría ser el prestigio y el estatus que supondría una afiliación a la OTAN. A pesar del enfoque nacionalista del presidente mexicano Andrés Manuel López Obrador, éste comparte un objetivo con su predecesor: conseguir un mayor respeto para México en el extranjero. Una asociación formal con la OTAN se alinea perfectamente con las identidades e intereses de México como potencia norteamericana y latinoamericana. México puede acentuar su relación dentro de la comunidad norteamericana, solidificando los renovados lazos con Estados Unidos y Canadá a través del TMEC. Al mismo tiempo, la adhesión reforzaría el papel de México, actualmente implícito, como modelo para otras naciones latinoamericanas, dándole la oportunidad de influir en cualquier ampliación de la presencia de la OTAN en la región.

Una asociación formal con la OTAN se alinea perfectamente con las identidades e intereses de México como potencia norteamericana y latinoamericana.

_{El presidente Donald J. Trump recibe al presidente de los Estados Unidos Mexicanos, Andrés Manuel López Obrador, el 8 de julio de 2020.}

_{(Fuente: White House Flickr)}

A su vez, varios países de la OTAN podrían ofrecer incentivos bilaterales atractivos para la participación de México, incluido el apoyo binacional de los Estados Unidos y Canadá a los sectores policial y judicial de México. La OTAN serviría tanto para institucionalizar como para hacer multilaterales los diálogos existentes con los Estados Unidos en materia de defensa y seguridad, de forma que podría beneficiar a México desde el punto de vista práctico y político (y que podrían ser igualmente bien acogidos por el Congreso y la comunidad política de los Estados Unidos). La OTAN podría también servir como columna vertebral para intensificar los diálogos sobre seguridad con naciones como España y Francia, con las que México ya mantiene sólidos vínculos.

Encontrar el conjunto adecuado de incentivos para los ciudadanos y los políticos mexicanos llevará tiempo, pero hay opciones reales. Una serie de circunscripciones—entre ellas la Secretaría de la Defensa Nacional (SEDENA) y la Secretaría de Marina (SEMAR), que obtendrían recursos adicionales y la capacidad de centrarse en tareas militares más tradicionales en lugar de seguridad interior—podría considerar una relación con la OTAN como una posibilidad atractiva.²²

Conclusión

La comunidad política estadounidense se ha centrado en apuntalar el apoyo de los Estados Unidos a la OTAN persuadiendo a los Estados miembros europeos para que aumenten sus contribuciones para equilibrar la carga. La idea de que el aumento del gasto en defensa europeo solucionaría el malestar de Estados Unidos con la OTAN no tiene sentido. De hecho, el debate sobre el reparto de las obligaciones está sirviendo para representar las realidades demográficas subyacentes que están en el origen de la disminución del apoyo estadounidense a la Alianza.

Si bien se supone que el balance de las obligaciones es importante para Trump y sus partidarios, no hay pruebas de que incluso grandes aumentos en el gasto europeo en defensa durante la presidencia de Trump hayan mejorado la posición de la OTAN con el presidente estadounidense o su base política. En lugar de intentar apaciguar a los que no pueden ser apaciguados, la comunidad política estaría mejor servida si encontrara nuevos defensores de la Alianza.

Al discutir esta propuesta con colegas europeos, una réplica común es que la construcción de la relación de la OTAN con México es una distracción de los muchos retos de seguridad que enfrenta Europa. De hecho, pudiera ser la clave para mantener a Estados Unidos en rápida evolución en sintonía con esas mismas preocupaciones. Es comparable a un caso como el de Islandia, cuya importancia estratégica (la geografía) supera otro tipo de contribuciones que pudiera hacer. Para los aliados que dependen de las garantías de seguridad de los Estados Unidos, poco debería importar que México envíe fuerzas a una misión reforzada de Presencia Avanzada si su membresía mantiene a Estados Unidos comprometido con la causa de la soberanía europea.

Si bien la idea de una posible adhesión de México a la OTAN puede parecer improbable, también lo fue en su momento la posibilidad de que los países del Pacto de Varsovia se unieran a la Alianza antes de que las circunstancias intervinieran para hacerlo inevitable. Mientras los Estados Unidos experimenta una dramática agitación política relacionada con el rápido reajuste demográfico, las circunstancias pueden estar conspirando de nuevo para escribir el próximo y sorprendente capítulo de la OTAN.

* * *

Christopher Skaluba es el director de la Iniciativa de Seguridad Transatlántica en el Centro Scowcroft para Estrategia y Seguridad del Atlantic Council. Anteriormente se desempeñó como director principal de Política Europea y de la OTAN en el Despacho de la Secretaría de Defensa.

Gabriela R. A. Doyle es la asistente de programa en la Iniciativa de Seguridad Transatlántica.

Explora la serie de podcasts

NATO 20/2020 Podcast

NATO 20/2020 is a weekly podcast that explores 20 bold ideas to push NATO to be more visionary, more capable, and more self-evidently valuable to the security of more people.

Leer el ensayo en inglés

NATO 20/2020

Oct 14, 2020

Seek membership for Mexico

By Christopher Skaluba, Gabriela R. A. Doyle

Building a relationship between NATO and Mexico may be the key to keeping a rapidly changing America invested in European security.

Europe & Eurasia Mexico

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Modernize the kit and the message

By H.E. Dame Karen Pierce DCMG

NATO will only remain successful over the next seventy years if it modernizes its capabilities, takes command of emerging technology, and harmonizes its strategic messaging.

Defense Policy Defense Technologies

NATO 20/2020 Oct 14, 2020

Put NATO back in the narrative

By Bridget Corna and Livia Godaert

NATO can recapture the imagination of allied publics by telling its own story better and in new ways to new audiences.

Europe & Eurasia Media

NATO 20/2020 Oct 14, 2020

Reimagine the Washington Treaty

By Damon Wilson and Will O’Brien

Reexamining NATO’s founding charter can be an exercise in creating an Alliance fit for a new geopolitical era.

Economy & Business Europe & Eurasia

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The Transatlantic Security Initiative, in the Scowcroft Center for Strategy and Security, shapes and influences the debate on the greatest security challenges facing the North Atlantic Alliance and its key partners.

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ISSUE BRIEF RELEASE

What is security of supply?

Security of supply is a conviction that crucial goods and services will be available when a government’s foreign and military policies demand action. Around NATO, the European Union, and in other contexts, governments have entered into various forms of agreements designed to ensure that security in a crisis. The United States has such agreements of varying enforceability and reciprocity with twenty-eight countries. These include the legislated designations of the national technology and industrial base (NTIB), security of supply arrangements (SOSAs), reciprocal defense procurement memoranda of understanding (RDP MOUs), reciprocal government quality assurance agreements (RGQAAs), and commercial contracts with foreign suppliers.

Why is this issue critical now?

Why discuss these now? Protectionism has recently been rising around the world and particularly in the United States, where enthusiasm for rewarding domestic producers has often been conflated with the actual demands of national security. During the COVID-19 pandemic, several countries initially restricted exports of medical supplies on which trading partners depended. The United States was at times on both sides of that problem. Even now, there is rising US enthusiasm for rewarding domestic producers. These trends beg the question: Would even the SOSAs, the more reciprocal and salient of these agreements, be honored in a national military crisis?

A foundational study

To answer that question, this issue brief considers the text of the arrangement documents, interviews with Washington-based diplomats and defense officials, and a historical analysis of the few contemporary cases in which US security of supply has been tested. The paper concludes that the SOSAs themselves say little, and that in practice, they have almost never been tested. Nevertheless, the agreements, though unenforceable, have value as easily arranged signals of underlying, enduring relationships between governments. They are thus worth reinforcing and perhaps extending to several other important US partners.

Recommendations for the United States

The issue brief provides several actionable and timely recommendations for improving the way in which US policymakers contact potential foreign suppliers and market their security requirements, contract with those suppliers to negotiate deals and divide proceeds, and control these relationships by monitoring and enforcing deals.

• Contact: The assistant secretaries of defense for acquisition and industrial policy should facilitate awareness within the acquisition community of how to leverage agreements undergirding defense trade with allies to secure access to supplies from comparatively advantaged sources.
• Contracts: Contracts with foreign sources of supply should employ stockpiling and licensing to hedge against the potential for disruptions of supply arising from circumstances beyond the control of allied governments.
• Control: The US government should explore whether security of supply arrangements can be extended to allies and partners whose industrial bases are important to US defense, such as Japan, Taiwan, and Mexico. Doing so could enhance a conviction that goods and services sourced from these countries are secure.

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James Hasik

Former Nonresident Senior Fellow

Forward Defense Scowcroft Center for Strategy and Security

Defense Industry Defense Policy

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Steven Grundman

Senior Fellow

Forward Defense Scowcroft Center for Strategy and Security

Defense Industry Defense Policy

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Forward Defense, housed within the Scowcroft Center for Strategy and Security, generates ideas and connects stakeholders in the defense ecosystem to promote an enduring military advantage for the United States, its allies, and partners. Our work identifies the defense strategies, capabilities, and resources the United States needs to deter and, if necessary, prevail in future conflict.

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The post The security of defense trade with allies: Enhancing contact, contracts, and control in supply chains appeared first on Atlantic Council.

Successfully concluding these talks will require both parties to navigate some difficult issues over the next six-seven months. This post recaps the situation at hand and the key issues that require resolution.

National security tariffs on steel and aluminum

Section 232 of the Trade Expansion Act of 1962 authorizes the president of the United States (and, thus, the US Trade Representative) to impose tariffs on imports if it is found that the imported items in question constitute a threat to US national security. Section 232 tariffs therefore assume a highly globalized economy generates vulnerability for the domestic economy based on factors other than the terms of trade. The factors all seek to ensure that the US Government can acquire necessary materials from domestic sources in the event of a national emergency. When the Trump administration in 2018 imposed tariffs on steel and aluminum imports under Section 232 of the Trade Expansion Act, it triggered widespread fears of a global trade war. The controversy arose over (i) the foundation for the tariffs on national security grounds and (ii) the global scope of the tariffs, which included traditional transatlantic allies in Europe while exempting the United States’ bordering neighbors in Canada and Mexico pursuant to tariff-free commitments under the United States-Canada-Mexico Agreement.¹ Global trade war fears escalated further when the European Union threatened retaliatory action.  Fortunately, trade tensions simmered down in 2019 with no further action. The May 17, 2021 joint statement by the US Trade Representative and the EU Commission acknowledged these concerns by highlighting that “as the United States and EU Member States are allies and partners, sharing similar national security interests as democratic, market economies, they can partner to promote high standards, address shared concerns, and hold countries like China that support trade-distorting policies to account.” Even as the announcement of negotiations focused on eliminating tariffs between the US and the EU, the joint statement also indicated that both the United States and the European Union face damage from steel dumping and overcapacity in the global steel market. However, they may find it difficult to eliminate the tariffs despite best intentions.

Metals trade: Key data points

Policymakers on both sides of the Atlantic frequently assert that Chinese steel and aluminum production generate the majority of adverse competitive effects on the global steel market. The actual import data in the United States tells a slightly different story. Department of Commerce data shows that the top 10 sources of steel imports into the United States do not come from China. Steel imports dropped significantly following the imposition of Section 232 tariffs, including even from Canada that had been exempted from the tariffs.

The data also indicate that the dispersion of importers is far from even. The top three steel importers (Canada, Brazil, and Mexico) account for 50 percent of steel imports. Germany only accounts for 4 percent; Italy for even less.

The import structure for aluminum is more concentrated. Canada accounts for over two-thirds of US aluminum imports. The next three largest importers are the United Arab Emirates, Argentina, and Russia. Aluminum imports from China to the United States are limited to a small set of products (such as rods, wire, and bars). European imports to the United States are minimal.

Finally, the imposition of an import tariff does not mean the tariffs remain in place without the possibility of change. The United States permits US firms to request exclusions from the tariffs, and the Congressional Research Service indicates that the Department of Commerce to date has granted roughly 60 percent of all exclusion requests regarding aluminum.  At the end of 2020, the Department of Commerce further announced that 105 steel and fifteen aluminum products would become eligible for a “general exemption.”

European exports of steel and aluminum also are similarly muted. Italy’s exports to the United States are dominated by pharmaceuticals products (17 percent), machinery (12 percent) and aircraft (7 percent). Germany’s exports to the United States follow a similar structure.

In other words: the economic significance of the aluminum and steel tariffs for transatlantic trade is not as large as media headlines might suggest. Similarly, claims that Chinese steel and aluminum distorts import markets are less impactful than asserted. Rather, the symbolic and geopolitical significance of aluminum and steel tariffs is much higher, particularly in the context of global market dynamics.

Two key issues for 2021

The Joint US-EU Statement this week makes clear that policymakers on both sides of the Atlantic seek to join forces to combat a larger, persistent problem in the global market for steel: Chinese over-production. Powered by state subsidies, Chinese steel production alone has increased 418 percent since 2000, making it responsible for nearly 50 percent of all global production by 2019. The success of the Chinese steel market seems to have also inspired many large emerging steel markets (India, South Korea, Russia, Taiwan, Brazil, and Mexico) to scale up rapidly, supported by state subsidies and market intervention.

Transatlantic policymakers must now grapple with two very difficult issues if they are going to successfully eliminate the Section 232 tariffs applied to European producers.

• State subsidies: On the surface, a joint US-EU effort to address Chinese overcapacity could take the form of challenging state subsidies provided by Beijing to local firms. The challenges could include bilateral initiatives as well as more formal complaints within the World Trade Organization (WTO).

This will not be an easy transatlantic conversation. Certain EU member states currently provide significant subsidies to their domestic steel and aluminum manufacturers. Market intervention also is not uncommon. Pandemic-era industrial policy spending priorities focused on preserving and creating jobs by funding the transition to a green economy mean that traditional manufacturing companies are likely to receive even larger shares of government funding to facilitate changes in their production processes that decrease their carbon emissions.

European efforts to pressure China to decrease state subsidies for steel and aluminum may not be as effective as policymakers might like. If the elimination of Section 232 tariffs for European steel and aluminum becomes contingent on Chinese action, the prospects for a deal by year end dramatically decrease.

• National security: US policymakers could certainly decide that no national security issues arise from European steel and aluminum imports based solely on the nearly minimal amount of such imports relative to other trading partners. European policymakers certainly will seek to promote the perspective that they should at least be treated on a par with the largest importer of both products (Canada), which already receives a large exemption due to the USMCA’s tariff terms.

Eliminating the Section 232 tariffs would certainly go a long way towards assuaging the diplomatic insult of being deemed a national security threat to the United States. But making this decision based on geopolitical grounds potentially undermines the ability to make progress regarding state subsidies that distort global markets.

Transatlantic policymakers have thus created a potentially problematic framework for discussion. If US officials lift the Section 232 tariffs on EU steel and aluminum imports, they effectively determine that European state subsidies and market intervention in this sector is not as important as geopolitical priorities. In other words, they suggest that the problem with the tariffs were not state subsidies themselves – but who was giving them.

Prioritizing preferential treatment for allied nations makes it far more difficult to persuade China by making arguments about substantive market distortion. Any such move instead could backfire, incentivizing China to call out the various government subsidies being distributed as part of the pandemic-era recovery process. Pursuing all these initiatives outside the WTO umbrella potentially further weakens the global trade body. How Europe and the United States resolve the steel and aluminum tariffs issue will thus tell us a great deal about the shape of global trade policy over the near- to medium-term.

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The post Transatlantic tariffs, national security, and geopolitical priorities appeared first on Atlantic Council.

The Leaders Summit brought together forty world leaders, including seven from Latin America and the Caribbean, representing Antigua and Barbuda, Argentina, Brazil, Chile, Colombia, Jamaica, and Mexico. The Americas are a crucial player in coordinated efforts to tackle global climate change, so we asked experts from the Atlantic Council and elsewhere to lay out what’s next.

What were some of the most ambitious commitments made by Latin America and the Caribbean in mitigating climate change? Are they aligned with the expectation put out by the Biden administration and COP26? How will the international community contribute to these regional efforts? 

Jorge Gastelumendi is the global policy director at the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center. He is also a COP26 high level climate champions co-lead for the Race to Resilience.

Putting nature-based solutions at the core of the efforts to fight climate change was the most outstanding, though not surprising, feature of commitments advanced by Latin American and Caribbean representatives—from Brazil’s president, Jair Bolsonaro, indicating the country’s commitment to end illegal deforestation in the Amazon by 2030, to Mexico’s president, Andrés Manuel López Obrador, committing to implement one of the largest reforestation programs in the world. Peru went even farther by committing that 50 out of the 150 actions in its climate plan will be nature-based solutions in sectors such as water management, land use, and forests. The main obstacles to materialize these commitments is the lack of implementation capacity in the region and the lack of financial resources from both public and private actors, particularly the financial sector. The international community, with the leadership of the United States, is critical in helping overcome these two obstacles. Colombia, for example, highlighted exploring innovative financial mechanisms, such as debt-for-adaptation swaps, which could avoid deforestation in the Amazon (a priority of Brazil, Colombia, and Peru) and protect the oceans (a priority for Chile).

President Bolsonaro, in his speech, raised the need for the right to development of current and future generations, also mentioning the Amazonian Paradox. What is the Amazonian Paradox and in what ways can a collaborative approach with the international community, the private sector, civil society, and indigenous communities help address it?  

Rodrigo Lima is a lawyer with expertise in international trade, non-tariff barriers and sustainable development. He is the director of Agroicone, a Brazilian sustainable agribusiness organization.

The Amazonian Paradox emerges from the immense contradiction between the assets and potentials from a mega-biodiverse forest that covers almost five million square kilometers over nine countries, and the social realities and inequalities among its more than twenty-three million inhabitants. The possibility to provide effective value to the forest, generate profits from its services, promote its sustainable use, and allow its population to thrive from the economic benefits and environmental services reflects the challenge of the Amazonian Paradox.

It is reasonable to compare the Amazon to a puzzle that needs time and effort to be assembled. The Amazon is home to 329 indigenous lands, covering almost one million square kilometers—local communities, family farmers, medium and large farmers. About 640,000 square kilometers are non-designated public lands, which should be designated as national parks, private areas, indigenous land, or for other uses.

To organize the territory and create policies to enable a low carbon economy, while considering different actors and interests, depends on federal and state governments. But it also relies on cooperation from multiple sources. In this regard, climate finance can play a critical role not just in promoting Reducing Emissions from Deforestation and forest Degradation (REDD+) projects, but more broadly in creating and sustaining a flourishing nature-based economy.

The completed puzzle relies on fostering a thriving economy based on natural resources, tourism, sustainable agriculture, forest management, and conservation activities. Bioeconomy opens a huge possibility to build upon this challenge, connecting extractivist producers to processing facilities and the market, generating social co-benefits from REDD+ projects, harnessing sustainable agriculture production based on innovation and good practices, and generating cosmetics and medicines, among other activities that could transform the Amazonian Paradox into the Thriving Amazonia.

International cooperation, as discussed at the Leaders Summit on Climate and other forums, has a fundamental role to play to support assembling this puzzle. The Amazon cannot be seen as a pure protection area; it must enable and promote social, economic, and environmental benefits for its population while it generates environmental goods to all society.

President López Obrador, in mentioning Mexico’s reforestation program, suggested its expansion to the South of Mexico and into Central America, generating jobs. He also suggested temporary work-permits and residency in the United States for those committed to this program, as a mechanism to address the migration crisis. How could the climate crisis be a greater challenge to the current border crisis? In what ways could addressing climate issues also be an opportunity to solve migration?

Maria Fernanda Bozmoski is the deputy director for programs at the Atlantic Council’s Adrienne Arsht Latin America Center, where she leads the Center’s work on Mexico and Central America.

Hurricane season in Central America is right around the corner, and back-to-back natural disasters may bring the region to the breaking point. The number of migrants will likely increase in anticipation of hurricane season, as well as in the aftermath. While migration from the dry corridor—which stretches from Guatemala to Costa Rica—is likely, hurricanes also greatly affect the Caribbean coast. The Central American Integration System (SICA) estimates that up to eight hurricanes may form in the region this year. Four of the eight may be intense, according to the organization.

Climate change is both a long-term push factor for migration and an accelerant. The United Nations estimates more than 7.3 million people were directly impacted by hurricanes in 2020, and there are more than 8 million starving people in Honduras, Guatemala, and El Salvador—up from 2.2 million in 2018. While the nearly four-fold increase in starvation is not all a result of the climate crisis, the destruction of crops and villages is a factor in this increase. In fact, experts find that climate change is a major factor explaining in the current surge in hunger.

The consequences of climate change are being felt now by current generations and the Caribbean nations are particularly impacted. Like other heads of state, the leaders of Antigua and Barbuda, and Jamaica reinforced the need for support and collaboration on addressing climate change. How could the international community support Caribbean nations in adapting to the existing and upcoming consequences of the rise in global temperatures?

Vicki Assevero is a former senior fellow for the Adrienne Arsht Latin America Center’s Caribbean Initiative.

The international community can support Caribbean nations and other small island developing states (SIDS) by acknowledging the World Meteorological Association’s 2020 Report that sea level rise has doubled, and hurricanes have intensified, so the imperative to finance climate adaptation is urgent. Prime ministers Gaston Browne of Antigua and Barbuda, and Andrew Holness of Jamaica urged acceleration of the pace of implementation of existing accords. This would mean not only funding the financing mechanisms foreseen in the original Paris Climate Accord but also those outlined in the Warsaw Mechanism and the Samoa Pathway. More importantly, multilateral institutions must continue to mobilize capital for greater investments in renewable energy and green technologies. The Caribbean SIDS are also urging new metrics in the form of a multi-dimensional vulnerability index that would facilitate access to concessional financing. 

Commitments on energy transition and renewable energy were popular among leaders at the summit. In terms of transitioning to cleaner energy, how close is Latin America and the Caribbean to reaching that goal and significantly reducing its greenhouse gas emissions? What key steps could be taken to accelerate an energy transition in the Americas?

Randolph Bell is the director of the Atlantic Council’s Global Energy Center, and Reed Blakemore is the deputy director of the Atlantic Council’s Global Energy Center.

Though the reaffirmation and raised ambitions for climate action last week from across Latin America and the Caribbean were encouraging, regional progress to meeting climate goals has thus far been inconsistent. That said, growing electricity demand and the cloudy forecast for hydropower (long the prevailing baseload electricity source in the region) presents an important opportunity for countries to take significant steps to transform their energy mix and kickstart their climate goals. Accelerating the introduction of a mix of variable renewables, low-carbon natural gas resources, and in some cases nuclear energy, will offer alternatives to bioenergy, diesel, and coal in order to fulfill new electricity demand while also replacing potential declines in hydropower output. Additional efforts to decarbonize the transportation sector will also further electrify the region and support reduced emissions. Taken together, this makes investment into accompanying grid infrastructure as well as digitalization and energy efficiency important next steps in maximizing the emissions-reducing potential of regional electrification and energy transition.

Valentina Sader, is assistant director and Brazil lead at the Adrienne Arsht Latin America Center.

AfricaSource Apr 23, 2021

Climate change will not be fixed without Africa

By Rama Yade

When Congolese President Félix Tshisekedi spoke at the virtual Leaders Summit on Climate this week, he had the force of the continent behind him. And his message was that developed countries must do more. As the summit comes to a close, the world still has so much to learn from Africa about how to tackle the climate crisis—if the world would only listen.

Africa Climate Change & Climate Action

Fast Thinking Apr 13, 2021

FAST THINKING: Why economic development is key to addressing the migration crisis at the US border

By Atlantic Council

On this episode of Fast Thinking, Atlantic Council experts Rebecca Scheurer and Jason Marczak dive into the root causes of mass emigration from Guatemala, Honduras, and El Salvador, and offer recommendations for long-term solutions to the underlying push factors that drive people from their homes—including crime, gang violence, corruption, and climate change.

Migration Northern Triangle

New Atlanticist Apr 25, 2021

Climate diplomacy can help turn action into results: UAE minister

By Larry Luxner

Al Jaber, the United Arab Emirates’ minister of industry and advanced technology, reflected on the connection between climate partnerships and economic results.

Climate Change & Climate Action Energy & Environment

The post Raising ambitions: How Latin America and the Caribbean is tackling the climate crisis appeared first on Atlantic Council.

On April 26, 2021, Pepe Zhang was quoted in an El País article, “México ahuyenta la inversión extranjera excepto la de China” (“Mexico discourages foreign investment except that of China”).

Originally quoted in Spanish, Zhang’s remarks translate as follows: “Something that has been consistent between the Trump and Biden administrations here in Washington is that China has become one of the top foreign policy priorities. Part of that is national security. If we look at Mexico through that lens, which is so deeply integrated in the North American block of trade and investment and has a strong relationship with the US, it’s reasonable that Washington is very focused on the Chinese economic presence in Mexico.” Zhang then added, “Having said that, I don’t think we are seeing anything as dramatic as if Washington were actively pressuring Mexico or saying, ‘You have to rethink your investment approach’. I don’t think we’re there yet.”

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Pepe Zhang

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Adrienne Arsht Latin America Center

China Coronavirus

The post Pepe Zhang in El País: México ahuyenta la inversión extranjera excepto la de China appeared first on Atlantic Council.

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Marc L. Busch

Former Nonresident Senior Fellow

Scowcroft Center for Strategy and Security

Americas Economy & Business

The post Busch in The Hill: US should challenge Mexico’s ban on glyphosate and genetically-modified corn at the WTO appeared first on Atlantic Council.

As we approach one year since the first COVID-19 case in Latin America and the Caribbean, we look ahead at what might or might not be on the horizon for the region over the next year.

Join us as we look at some of the key questions that may shape the region, then take our informal poll and see how your opinions shape up against our analysis.

Will the region see mass vaccinations? How will regional economies fare? What might be on the agenda for the US relationship with Brazil and Mexico? US President Joe Biden’s administration has entered office with a full inbox: how will developing trends in the region affect the new administration’s agenda?

Here are the eleven questions that the Adrienne Arsht Latin America Center is answering to map the rest of the year.

Question #1: COVID – Will Latin America and the Caribbean achieve widespread vaccination in 2021?

Question #2: Economy – Will regional economies outpace growth forecasts in 2021?

Question #3: Central America – Given the extent of damage from the 2020 hurricanes in Central America, will the region see more climate migrants?

Question #4: Mexico – Will joint security challenges top the list of priorities in the US-Mexico relationship under Biden?

Question #5: Stability – Latin America has faced sporadic, but massive, waves of protests and national strikes prior to and during the pandemic. Will 2021 be a year of even greater social unrest?

Question #6: Venezuela-EU – Will the European Union (EU) resume conversations with Nicolás Maduro’s regime to monitor Venezuela’s regional elections in 2021?

Chapter #7: Brazil – Will the Biden administration and that of Brazilian President Jair Bolsonaro find ways to cooperate on a climate agenda?

Question #8: Colombia – Will the United States and Colombia reform the underlying premises of their anti-narcotics policies?

Question #9: China and the Caribbean – Will the five Caribbean nations and two Central American countries that still recognize Taiwan shift to recognizing the People’s Republic of China (PRC)?

Question #10: Caribbean – Will the Caribbean Community and Common Market (CARICOM) achieve its goal of a Caribbean Single Market and Economy (CSME) in 2021?

BONUS QUESTION: In the 2016 Summer Olympics in Rio de Janeiro, Brazil (#13), Jamaica (#22), and Cuba (#23) were the only Latin American and Caribbean countries to finish in the top twenty-five in the medal count. Assuming the Olympics are held, will more countries from the region finish in the top twenty-five this summer?

OUR ANSWER TO QUESTION #1: NO

The first case of COVID-19 in Latin America and the Caribbean was reported in Brazil on February 26, 2020. Since then, the region has reported nearly 17.5 million cases and more than 550,000 COVID-19-related deaths, accounting for one third of global deaths. Countries have actively worked to secure vaccines through bilateral and multilateral arrangements, including agreements with Pfizer, Moderna, AstraZeneca, Russia’s Sputnik V, and China’s CoronaVac. Nevertheless, widespread vaccination requires not only adequate planning for vaccine acquisition, but efficient and equitable distribution. Recent incidents in Germany and the United States show that even more resourceful countries are experiencing hiccups in massive vaccine rollouts, such as logistical challenges (especially the required temperature-controlled supply chain), personnel shortages, and vaccine hesitancy. Latin American and Caribbean nations may face these hurdles at a greater scale, due to resource and capacity constraints.

As of January 19, 2021, eleven Latin American and Caribbean countries have authorized emergency use of COVID-19 vaccines: Argentina, Brazil, Bolivia, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Mexico, Panama, and Venezuela.  On December 24, 2020, Mexico, Chile, and Costa Rica became the first countries in Latin America to begin mass vaccination. Despite moving quicker than most others in the region, Mexico aims to inoculate only 75 percent of its population by March 2022. For most countries in Latin America and the Caribbean, definitive delivery and mass vaccination timeframes remain unclear, and could be delayed over time.

Some low-income countries in the region may be able to vaccinate, at most, 20 percent of their populations in 2021, a figure considerably lower than the 65-percent theoretical threshold for herd immunity. Of added concern, the COVAX initiative—a key global initiative launched to secure vaccine doses for poor countries—currently faces a $4.9-billion funding gap. This could potentially complicate the initiative’s goal of helping inoculate 20 percent of each low-income country’s population against COVID-19 by the end of 2021. With stark disparities in vaccine access across and within countries, widespread vaccination is a distant prospect for Latin America and the Caribbean in 2021.

OUR ANSWER TO QUESTION #2: YES

In July 2020, a month after Latin America and the Caribbean became the global epicenter of the coronavirus pandemic, Alicia Bárcena, head of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), cautioned that the region should brace for a “lost decade.” By the end of 2020, the economic contraction in Latin America reached 7.7 percent—its steepest contraction ever, albeit 1.4 percent less than ECLAC’s earlier forecast. Can the region rebound in 2021 and exceed current growth forecasts?

After experiencing its worst economic crisis ever in 2020, the regional economy is expected to grow 3.7 percent in 2021. But, it’s also possible that the region can outpace this forecast, if it can manage a strategic balancing of expanded fiscal support for social-protection programs and small businesses, investment in job-generating productive sectors, and structural reforms to tackle long-standing challenges in the rule of law, equality, productivity, and climate. To accelerate economic reactivation, the region must leverage international investment and cooperation from global institutions such as the World Bank and the International Monetary Fund (IMF), as well as from regional organizations such as the Inter-American Development Bank. The private sector, at the national and international levels, must also play a central role in revamping growth, but will require strong incentives from local governments and risk-mitigated business climates.

Eyes will be on Brazil, Mexico, and Argentina (the region’s three largest economies) as well as Peru, which has had one of the best developing-world growth rates in the past decade, to recover from their 2020 economic downturns. In comparison to these four countries, Chile and Colombia suffered less devastating declines and could be positioned for stable growth over the year, but the migration crisis in Venezuela will continue to pose a heavy burden on neighboring countries’ already-strained public resources.

OUR ANSWER TO QUESTION #3: YES

This year will almost certainly see a surge in Central American migrants and refugees trekking north to the US southern border, due to a unique confluence of the devastation caused by Hurricanes Eta and Iota, as well as the myriad effects of the coronavirus pandemic and other long-standing migration pressures. Days before Biden’s inauguration, a caravan of more than nine thousand Hondurans created international headlines. The caravan was fueled, in part, by the promise of a revamped immigration policy in the United States.

The back-to-back hurricanes—which made landfall in Central America less than two weeks apart—wreaked havoc across Nicaragua and the Northern Triangle (Guatemala, Honduras, and El Salvador), affecting more than five million people and forcing at least 350,000 Hondurans and Guatemalans into emergency shelters. With hundreds of thousands of Central Americans internally displaced, shelters lacking basic services and sanitation quickly became new ground for rapid coronavirus infection. The destruction to essential infrastructure—such as bridges, roads, buildings—and entire communities was a heavy blow to a region that saw a 6.5-percent economic decline in 2020.

Food insecurity in Nicaragua, Guatemala, and Honduras is expected to rise significantly, due to the destruction of large swaths of agricultural lands, livestock, and infrastructure. In a region with long-standing pre-pandemic challenges around rule of law, insecurity, and economic opportunity, the most likely outcome from these push forces is a novel wave of “new” climate refugees seeking better livelihoods in the United States.

In 1998, Hurricane Mitch, the second-deadliest Atlantic hurricane, caused a massive surge in Central American migration to the United States. If history is any indication of the future, Hurricanes Eta and Iota—Category 4 and 5, respectively—can trigger a similar scenario in 2021.

OUR ANSWER TO QUESTION #4: NO

Security cooperation will be an important, though complicated, part of the US-Mexico relationship. In the days leading up to Biden’s inauguration, Mexican President Andrés Manuel López Obrador’s (AMLO) administration decided to stop investigations into former Mexican Secretary of National Defense General Salvador Cienfuegos—who was arrested in Los Angeles at the end of last year, and then sent for prosecution to Mexico. AMLO then released more than seven hundred pages of confidential evidence and intelligence, prompting an unusual rebuke by the US Department of Justice. The General Cienfuegos saga is just the latest example of a strained US-Mexico security relationship.

The Mexican Congress passed a new law in December 2020 that limits and deters the work of foreign enforcement agents in Mexico. Under the law, all communications—at all levels—with foreign enforcement agents will need to be reported, meetings with foreign agents must be approved in advance, and senior federal officials will need to be present at said meetings. Failure to do any of the above may result in expulsion of foreign agents. The law has prompted serious concerns that international cooperation with Mexico on the security front will be henceforth paralyzed. Most of the intelligence on criminal groups and illicit activities comes the United States.

AMLO has sought to double down on addressing the root socioeconomic causes of crime, and has moved away from the drug-kingpin strategy of past administrations. These actions also reflect a desire to move away from a “war” with cartels and other powerful criminal organizations in Mexico. But, security cooperation goes beyond reduction of homicides and combating drug trafficking—a stable security climate is a requisite for business and commerce to thrive. The Biden administration will have to navigate this complex scenario in Mexico.

OUR ANSWER TO QUESTION #5: YES

Protests in Bolivia, Chile, Colombia, Ecuador, Peru, and Haiti that began in 2019 were expected to continue into 2020, but extended lockdowns to control the spread of the pandemic led to the suspension of protests in the first half of 2020. Despite the lockdowns and the inherent risk of public gatherings, citizens gathered in large numbers last fall in Argentina, Chile, Colombia, Costa Rica, Guatemala, and Peru for reasons ranging from a rejection of government austerity plans to calls for racial equality, better social and economic protections, increased transparency, and free elections.

As vaccines become available and social activities resume, protests will most likely resume in 2021 as citizens will air new grievances. The pandemic has increased inequality in the region, pushing an additional forty-five million people below the poverty line. As governments struggle to fund social-protection programs, discontent with ruling governments will rise. Costa Rica will likely see protests as President Carlos Alvarado Quesada’s administration resumes negotiations with the IMF to secure a much-needed loan. In 2020, the Costa Rican government quickly retracted proposed tax measures after protestors blocked major roads. Colombia may also continue to see protests as long as marginalized groups, including Colombia’s indigenous and Afro-Caribbean groups, feel the government has failed to address their demands.

Finally, as Nicaragua heads toward an election in November in which the opposition will be unable to run, protestors against Nicaraguan President Daniel Ortega’s regime should be expected to return to the streets. Protests may also gain momentum in Chile, Ecuador, Honduras, and Peru, as they also head toward elections.

OUR ANSWER TO QUESTION #6: YES

The EU will continue to promote a democratic transition in Venezuela. In September 2020, a European mission was sent to Venezuela in a failed attempt to promote minimum democratic conditions ahead of legislative elections. High Representative of the EU for Foreign Affairs and Security Policy Josep Borrell, who announced the EU’s rejection of Venezuelan election results, asked Maduro to “chart a path towards national reconciliation.” Borrell also reiterated the EU’s commitment to supporting Venezuela’s transition to democracy.

In 2021, municipal and regional elections are set to occur according to the Venezuelan Constitution. This will open a new opportunity for the EU and a multilateral coalition to continue engaging in close dialogue with the Maduro regime, the opposition, academia, non-governmental organizations, and other civil organizations to seek to promote conditions that allow for the participation of all political parties in a competitive electoral process. However, conversations aside, the Maduro regime is unlikely to see any upside in allowing elections that are transparent or fair.

OUR ANSWER TO QUESTION #7: MAYBE

In past years, the synergy between the United States and Brazil has led to the signing of the Alcântara Technological Safeguards Agreement, advancing scientific and technological cooperation; support from the United States for Brazil to join the Organisation for Economic Co-operation and Development (OECD); and, at the end of 2020, the signing of a protocol to facilitate trade and investment between the two largest economies in the Western Hemisphere. Despite some diverging views at the presidential level, stronger bilateral relations between Brazil and the United States are mutually beneficial, and opportunities could still exist for advancing on a common agenda.

Brazil has been criticized for recurrent fires in the Amazon rainforest and Pantanal wetlands, environmental disasters such as the Brumadinho dam collapse, and high levels of deforestation, heightening pressures on the Brazilian government to take action to protect its environment.

For Bolsonaro, the economy and structural reforms are top priorities. The government has pursued trade agreements with the EU, South Korea, and Canada, as well as the United States. However, with increasing pressure from the EU, and now the United States, failing to advocate for strong democratic principles and a concrete plan for sustainable development can isolate Brazil in the global arena, undermining possibilities for cooperation with the United States and other countries. To advance on the trade and investment fronts, which are priorities for the Bolsonaro administration, Brazil will need to double down on its efforts to reconstruct its image and role abroad, particularly regarding the climate agenda.

OUR ANSWER TO QUESTION #8: YES

In December 2020, the Congressional Western Hemisphere Drug Policy Commission (WHDPC) unveiled a bipartisan report recommending that the United States rethink many of its historical anti-narcotics policies. The report found that while Colombia has made remarkable progress in strengthening state authority in marginalized areas, the United States’ $11.6-billion Plan Colombia was unsuccessful in meaningfully curbing coca cultivation. Despite having significantly increased manual eradication efforts in Colombia, coca cultivation and cocaine production remain high; it is unlikely the current strategy will allow the United States and Colombia to reach their joint objective of decreasing coca cultivation and cocaine production to half of 2017 levels. As discussed in the report “The Untapped Potential of the US-Colombia Partnership,’’ the United States and Colombia must take measures to reduce coca cultivation and also target other stages of the drug market, including cocaine production, trafficking, and consumption.

Entering office with a profound understanding of the Americas and a track record of advancing policies fundamental to the region’s prosperity, Biden will prioritize strengthening the United States’ ties to the region—particularly the US-Colombia partnership, which he has referred to as the keystone of US foreign policy in the region. In light of the WHDPC report, the new administration has new thinking on how to reorient the US counter-narcotics policy in Colombia away from mass eradication and toward a more holistic approach, placing renewed emphasis on providing physical and economic security to rural Colombians and demobilized rebels. There is also new momentum for the United States to develop a whole-of-government strategy to counter transnational criminal organizations (TCOs) and the international drug trade, per the report’s recommendations.

OUR ANSWER TO QUESTION #9: NO

It is unlikely that all five Caribbean countries that currently recognize Taiwan—Belize, Haiti, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines—will instead recognize the PRC in 2021. However, the Dominican Republic’s switch to establish diplomatic ties with the PRC in 2018 puts significant pressure on Haiti, with whom it shares the island of Hispaniola. In its overtures to Haiti, the PRC recognizes the country’s extreme poverty and holds out a promise of building the kind of capacity that allowed China to lift 850 million of its citizens out of extreme poverty, but only if Haiti recognizes the “One-China” policy. The other Caribbean countries have long, and sometimes ethno-cultural, histories with Taiwan, which has been a loyal and generous partner. Nevertheless, the geopolitics playing out between Washington and Beijing will put pressure on these small island nations to choose—not necessarily in their own developmental interests, but in the interest of alignment with one great power.

For Guatemala, Honduras, and Nicaragua—the three Central American countries that still recognize Taiwan—pressing domestic issues around the pandemic, natural disasters, citizen and food insecurity, and the economic downturn will prevail over the diplomatic issue of recognition. In addition, the new administration in the United States will move away from a bilateral and mostly stick approach to the isthmus, and toward a more regional and balanced carrot-and-stick approach, in which the question of China can be a powerful bargaining chip. A ramping up of conditionality on foreign aid and support to the region from the United States can be highly persuasive, and can discourage Central American leaders from switching sides.

Caribbean and Central American recognition of China versus Taiwan also hinges on the intensity of Chinese outreach efforts. This, in turn, is often dictated by the state of play in cross-strait relations between China and Taiwan. Since 2016, Taiwan under Tsai Ing-wen’s leadership—in alignment with former US President Donald Trump’s administration—has shifted to a more explicitly competitive stance vis-à-vis Beijing. As cross-strait relations soured, both sides became more aggressive in maintaining or courting new diplomatic allies (e.g., the Dominican Republic, El Salvador, and Panama). In this context, China will likely continue its soft-power diplomacy in the region. The PRC’s staunch verbal support for multilateralism also has the potential to tilt more Caribbean countries toward its orbit. However, much of this could change in the next four years, contingent upon new dynamics in the US-China-Taiwan triangle, as well as Biden’s promised return to global, non-transactional cooperation and a renewed focus on the Americas.

OUR ANSWER TO QUESTION #10: NO

Although the CARICOM has operationalized the single market, the prospect of a single economy remains unlikely. A little history will help. CARIFTA was formed in 1965, shortly after anglophone Caribbean countries achieved independence. CARIFTA removed tariffs and other non-tariff barriers to regional trade. CARICOM was formed in 1973 to implement the Treaty of Chaguaramas, which replaced the free-trade area with a single market. The intended free movement of people, goods, and capital is still not a reality because there is not a “regional body with powers and accountability that can help transform community decisions to binding laws in individual jurisdictions is a key impediment,” according to a 2020 report from the IMF.

In 1989, the CARICOM heads decided that further economic integration was required in an era of globalization. The Treaty of Chaguaramas was revised in 2001 to accelerate the implementation of the CSME, which started in 2006. The 2008 global financial crisis further delayed what former Managing Director of the London-based Caribbean Council David Jessop called “a process plagued by rhetoric and inaction.”

COVID-19, however, may have done what neither of the two best-known analyses of the Caribbean’s challenges, the Golding Report and the Ramphal Commission, could: show the fragmented Caribbean nations the real benefits of integrated, unified coordination when faced with externalities. As she relinquished the CARICOM chair In June 2020, Barbadian Prime Minister Mia Mottley praised the regional architecture for its sterling performance in organizing and supporting the region during the pandemic.

Current Chairman of CARICOM and Prime Minister of Trinidad and Tobago Keith Rowley called for 2021 to be “the year of CARICOM,” and challenged the region to live up to its promise: “Let this be the year that we make CARICOM work for us and construct the resilient society that will provide a safe, prosperous and viable community for all of us.” He boldly called for the CSME to become the principal framework for recovery. Despite the real obstacle of establishing a single currency and its attendant institutions, CSME got a shot of energy from the COVID-19 crisis.

BONUS QUESTION ANSWER

Assume the Olympics occur this summer. Several factors contribute to a country’s medal-count prospects—population size, the promotion of women in sports, national investment in sports, etc. While no single factor explains a country’s success or failure, decisions and investments made by Latin American nations over the past four years could be an indication of a strong Olympic showing.

Brazil has made the strategic decision not to prioritize one sport, and has instead sought to be in the competition for as many Olympic slots as possible, securing one hundred and eighty so far. Cuba, in comparison, has focused on boxing and baseball to achieve its Olympic medal goals. Mexico’s Olympic team is also looking promising, with a fairly gender-balanced team (forty-nine men and thirty-seven women). AMLO also announced a financial stimulus for athletes who participated in the 2019 Pan American Games and are now preparing for Tokyo 2020+1 amid the COVID-19 pandemic. Jamaica is also investing in its Olympic athletes, despite the economic constraints of the pandemic, providing $40 million in funding for its athletes’ preparation and qualification.

With all eyes hopefully on the Summer Olympics, the authors predict that countries that provided the most comprehensive support to their athletes during the pandemic will come out on top in the upcoming games. 

The post Spotlight: 10 Questions for Latin America and the Caribbean appeared first on Atlantic Council.

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About this episode

Eventual Mexican membership in NATO may be a necessary ingredient for keeping the United States invested in European security over the long term. This suggestion is made with an eye toward the reality that economic and political power in the United States is shifting to places and populations with fewer traditional ties to Europe such that broadening NATO’s appeal to a diversifying US public is imperative.

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Key takeaways

• 1:59: Chris talks about how support for NATO is eroding in the United States and why NATO needs to address that quickly
• 4:36: Chris shares why he thinks that it is important for the United States to support NATO
• 7:44: Chris and Gabriela talk about some of the benefits that Mexico’s membership could bring to NATO
• 17:54: Chris and Gabriela explain why NATO could choose to make Mexico a member first and not other countries in hot spots like Georgia and Ukraine
• 22:34: Chris and Gabriela discuss the advantages in Mexico’s large number of active duty personnel and their capabilities
• 25:47: Chris talks about the generational nature of the idea
• 27:49: Chris and Gabriela talk about how increasing diversity in the US population parallels the need for diversifying US public support for NATO
• 34:29: Gabriela talks about the case from Mexico City’s point of view and what it stands to gain

Read the essay

NATO 20/2020

Oct 14, 2020

Seek membership for Mexico

By Christopher Skaluba, Gabriela R. A. Doyle

Building a relationship between NATO and Mexico may be the key to keeping a rapidly changing America invested in European security.

Europe & Eurasia Mexico

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The post Seek membership for Mexico: NATO 20/2020 podcast appeared first on Atlantic Council.

The month of November 2020 marked a turning point for the United States as voters cast their ballots at rates not recently seen in a US election. The historic race saw around 65 percent of the voting population in the United States participating, the highest in more than one hundred years. With three hundred and six Electoral College votes in their favor, former US Vice President Joseph R. Biden and California Senator Kamala Harris will become the next president and vice president of the United States. 

The atmosphere of uncertainty that characterized the 2020 US election was consistent with the rampant uncertainty that has plagued 2020 as a whole. The global COVID-19 pandemic, which has taken the world by storm, has disrupted lives, upended economies, and destabilized supply chains. 

This disruption was profoundly felt in the Western Hemisphere, where suppliers in the Americas were forced to adapt sourcing and inventory strategies as suppliers in Asia and other regions shut down operations, where companies faced shortages and interruptions, and where costs soared as necessary raw materials became harder to source. Even as grocery-store shelves quickly emptied, food and basic necessities became scarce for many, and personal protective equipment (PPE) went on back order, the world stepped up to diversify sourcing and manufacturing locations, setting the stage for the modernization and increased resilience of supply chains in the coming years. 

Supply remains crucial as governments, businesses, and individuals brace for a second wave of shutdowns and prepare to bounce back post-pandemic. A key priority for the next US administration will be working alongside partners and allies in the Western Hemisphere to assure supply-chain resilience is achieved and prioritized. 

President-Elect Joe Biden has pledged to build broad-based supply-chain resilience and to work collaboratively with the private sector to improve productivity and avoid unnecessary costs and bureaucracy.¹ Snap polls of businesses show they are counting on the next US administration to deliver on this promise.² As the inauguration of the forty-sixth president of the United States approaches, the question becomes: how can cooperation across the Americas, under a Biden administration, impact the future of supply chains in the Americas?

In this Spotlight, seventeen authors from various countries, regions, and industries, representing the public and private sectors, tackle various opportunities in five key questions.

Question one

Given what is known about the incoming Biden-Harris administration, what might be the US role in advancing the development of greater commercial integration in the Western Hemisphere? 

Manuel Padrón-Castillo

Partner, International Commercial and Trade Group
Baker McKenzie (Mexico City)

On the factors that will shape a US approach to integration

The United States’ role in advancing the development of greater commercial integration in the Americas will be both strategic and central to its success. But, while it may be intuitive that the United States should move toward greater integration for greater prosperity, the pace of that continued integration will be subject to a variety of internal and external factors over the coming years.

COVID-19 will be a key factor in US trade policy for the Biden administration. The coronavirus has devastated the US economy. Quicker adaptation to new conditions going into 2021 will be essential to bringing back economic growth, and the pandemic’s effects are not exclusive to the US economy; many Latin American countries have seen similar, or worse, consequences. Recovery of the US economy would bring an expectation south of the Rio Grande that a renewed partnership with the United States may alleviate the burdens on the broader regional economy.

Recovery of the US economy would bring an expectation south of the Rio Grande that a renewed partnership with the United States may alleviate the burdens on the broader regional economy.

Manuel Padrón-Castillo

The pandemic will not be the only factor to influence the future of economic and commercial policy in the United States. Even prior to the emergence of COVID-19, the trends in globalization that were prominent over the second part of the past century and the beginning of this new one encountered resistance from protectionism and nationalistic views. It was under these conditions that the US-Mexico-Canada Agreement (USMCA) was negotiated and enacted. For the future of commercial integration, the USMCA shows multilateralism still has a place in the commercial agenda. This is a positive sign for broader, deeper, and further integration. 

A good indicator of a successful approach to further integration under USMCA is the automotive industry. The increased degree of regional value content (RVC) for vehicles and some auto parts to enjoy free trade, demands that producers provide a comprehensive review of their respective supply chains. In six years, when the window to review the treaty comes up, it will have to be determined if the higher RVC resulted in growth in trade and investment, or if consumers ended up carrying the burden of more expensive vehicles. 

Finally, the steady and significant increase of Chinese investment in the hemisphere, particularly in Latin America, suggests that US commercial interests will find stronger competition. Overlooking or minimizing this reality may be detrimental for US economic presence in the region. 

Maurice Bellan

Managing Partner, Washington, DC; 
Member, Global Dispute Resolution and North America Litigation and Government Enforcement Steering Committees
Baker McKenzie (Washington, DC)

On US leadership in support of regional stabilization and recovery

As the next president of the United States prepares to enter office, I am comforted by the following words: We the people of the United States in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish the Constitution of the United States of America.

The first priority of the president of the United States is to uphold and to honor the US Constitution. In a globally-connected world, the intersectionality of communities and economies test the ability of the US president to provide for the common defense and promote the general welfare of the citizens of the United States. To achieve the economic security that is inherently implied in these venerable clauses of the US Constitution, the president must be mindful that the success of US strategy is inextricably linked to that of its regional neighbors in the Caribbean, Canada, and Central and South America.

To achieve the economic security that is inherently implied in these venerable clauses of the US Constitution, the president must be mindful that the success of US strategy is inextricably linked to that of its regional neighbors in the Caribbean, Canada, and Central and South America.

Maurice Bellan

President Donald Trump’s “America First” foreign policy approach has had the effect—whether intended or not—of placing the United States in a precarious security position with its neighbors in the Western Hemisphere. The Trump administration’s border-enforcement strategy—which appears to have been the depth of its foreign policy agenda—has not proven to be an effective means of engagement, and has not resulted in enhanced security for the United States. 

Bilateral discussion and economic development that addresses the root causes of flight from one nation to another is a strategy one can expect a Biden administration to employ. This approach will not only begin to mend a damaged US leadership profile, but will attempt to create a stronger economic profile for the Western Hemisphere—not just for the United States. 

For the next US president, helping to stabilize the region must be a top priority. Over the last four years, the lack of US presence and leadership in the region has resulted in increased influence by China and Russia in several Central and South American and Caribbean countries. A Biden administration would prioritize mending the polarization that has occurred, and pull southern allies together to forge a comprehensive and mutually beneficial economic-integration plan. Biden’s experience as the point person for Latin America during the Barack Obama administration will prove helpful for assembling allies and friends and beginning to repair alliances.

Ildefonso Guajardo

Former Secretary of Economy, Mexico 
Member, Adrienne Arsht Latin America Center Advisory Council
Atlantic Council 

And 

Juan Carlos Baker

CEO & Founding Partner, Ansley Consultores
Former Undersecretary of Foreign Trade, Mexico

On the framework of USMCA as a guiding principle for further integration

In today’s context of global economic downturn, the emerging economies in Latin America and the Caribbean need a reliable partner in order to turn the corner and minimize the risk of a “lost decade.” The Biden administration’s “Build Back Better” approach focuses on bringing manufacturing and production back to the Americas, including through nearshoring and reshoring, and could offer unprecedented opportunities for the region.

However, a first step for the next US administration will be to kickstart the United States’ own economic recovery, and to do so in partnership with the private sector. This way, the country can counter China’s commercial influence and viably become the reliable partner the region needs to further commercial integration in the hemisphere. 

The USMCA offers an ideal framework. Although the pandemic has complicated the implementation and enforcement of the USMCA in Mexico, the agreement’s updated provisions on labor, environment, digital trade, and small and medium enterprises—to name a few—bolster North America’s competitive edge, with unprecedented potential for forward and backward linkages.

Although the pandemic has complicated the implementation and enforcement of the USMCA in Mexico, the agreement’s updated provisions on labor, environment, digital trade, and small and medium enterprises—to name a few—bolster North America’s competitive edge, with unprecedented potential for forward and backward linkages.

Ildefonso Guajardo & Juan Carlos Baker

Moreover, in addition to Mexico, there are other countries in the region that could also potentially host these new global value chains coming from Asia. Colombia and Peru, which also have free-trade agreements with the United States—albeit not as ambitious and modern as the USMCA, nor as sophisticated in their manufacturing and exporting bases as Mexico—could also be attractive markets for companies seeking to have access to the US market and be geographically closer. Having said that, it is important to assess other elements of the business environment: the rule of law, protection of intellectual property, and tax and fiscal issues. 

Lisa Schroeter

Global Director of Trade and Investment Policy
Dow

On the role of the private sector in driving integration 

At a time when the world is struggling to recover from the devastating impacts of COVID-19, to restore economic growth, and to create high-quality jobs, there has never been a better moment for the United States to energize Western Hemispheric integration, building on the innovative contributions of the US private sector.

Ultimately, companies are already drivers of integration. They invest in each other’s countries, source customers over borders, and, more importantly, engage strategically to share innovation and to partner on supporting customers to deliver new, more sustainable products to market. 

In 2021, the public and private sectors can align to support an integrated policy agenda that enables growth, including through: regulatory cooperation, as the United States has demonstrated tangible impacts of regulatory reform, streamlining and making procedures more efficient based on sound science and risk assessment principles so that companies large and small can operate efficiently and with certainty; trade facilitation, as COVID demonstrates the essential value of timely products to market, and supply chains need efficient and clear procedures, leveraging technology so that materials get to markets, especially critical inputs that support domestic manufacturing and highly skilled workers; and sustainability, as one of the greatest areas of opportunity is to share the common goal of better environmental performance in order to support better, more resource-efficient manufacturing, combat climate change, and introduce fit-to-purpose products on the market. Sustainability means both better environmental and economic performance. A common effort to reduce barriers—tariff, non-tariff, regulatory—will enable access and investment in these technologies that can contribute to a more sustainable planet, and can better all communities. 

In 2021, the public and private sectors can align to support an integrated policy agenda that enables growth.

Lisa Schroeter

Integration across the Western Hemisphere already happens across supply chains, between customers and people to people. Twenty twenty-one offers the opportunity to build on these strong alliances, with a focused agenda and a common effort to share best practices and build capacity for a more integrated, and better performing, Western Hemisphere market. 

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Question two

In what ways might the next US administration advance policies that allow for supply chains in the Western Hemisphere to withstand major disruptions/shocks similar to COVID-19?

Jason Marczak

Director, Adrienne Arsht Latin America Center
Atlantic Council 

On harmonization of supply chains in the Western Hemisphere

With more free-trade partners than anywhere else in the world, incredible human capital, and geographic proximity, Latin America offers a promising platform to expand US commercial ties in order to generate jobs in the United States and in the region. This can be achieved while helping the region to rebuild in a way that creates sustainable economic development and sets a trajectory for leapfrogging longstanding economic-development challenges. 

As global supply chains are reconfigured, the Western Hemisphere should benefit from nearshoring trends, where businesses will find similar time zones, ties to the sixty-million-plus US Latinos, and proximity to domestic and regional markets. Mexico, Colombia, and Central America, in particular, are in a unique position to potentially take advantage of this opportunity—all are free-trade partners with supply chains that, to varying degrees, are already integrated with those of the United States.

The incoming Biden-Harris administration has an opportunity to translate “Build Back Better” into a hemispheric growth plan that helps the region rebuild from COVID-19, while, at home, creating jobs and new economic opportunities. While many tools can be deployed to accelerate regional recovery, the creation of stronger and more resilient supply chains should be near the top of the list.

The incoming Biden-Harris administration has an opportunity to translate “Build Back Better” into a hemispheric growth plan that helps the region rebuild from COVID-19, while, at home, creating jobs and new economic opportunities.

Jason Marczak

Three ways exist to make supply chains stronger and more resilient. First, existing trade agreements should be analyzed to ensure that implementation is, in fact, taking advantage of the free flow of commerce intended in the original agreement. If technical barriers are found to be impeding commerce, they should be rapidly addressed. Second, the spaghetti web of Western Hemisphere agreements can be better utilized, with more efficient harmonization that facilitates greater intra-regional and US trade.

Third, and crucially, the United States should engage in consultations and create formal institutional mechanisms to ensure a common agreement among essential industries in the case of another major disruption. Earlier this spring, a US-Mexico dispute on essential industries reverberated across supply chains and industries. Here, an important starting point for the Biden-Harris administration is to update the 2012 North American Plan for Animal and Pandemic Influenza (NAPAPI) to include a new chapter focused on the protection of supply chains, especially in light of the new United States-Mexico-Canada Agreement (USMCA). An updated NAPAPI should include even clearer procedures and concrete coordination steps to be taken in the face of future health-generated shocks.

Finally, stronger and more efficient supply chains cannot be built without greater investment in both physical and digital infrastructure. Through a Development Finance Corporation with an expanded remit in the type of bankable projects, the United States can better support private-sector efforts to upgrade critical infrastructure—roads, rail, deep-water ports—but also expand broadband and Internet connectivity across the region. In the next administration, the United States will have an historic opportunity to significantly deepen and strengthen supply chains in order to position the United States as the partner of choice for the region’s post-COVID recovery. 

Christina Conlin

Partner, International Commercial Practice Group 
Baker McKenzie (Chicago)

On tax, trade, and labor policy certainty to strengthen supply-chain resilience

Businesses need certainty. This year has provided anything but that, with challenges and instability due to COVID-19, extreme climate events, and civil protests and disruption in the United States. Supply-chain stability and resilience can be enhanced by the US administration providing quick, clear guidance on its intended tax, labor, and trade policies to support diversification of the supply chain. 

The disruption from COVID-19 has placed a new emphasis on companies’ strategies for reshoring, nearshoring, or multi-jurisdictional diversification of suppliers. COVID-19 laid bare the need to diversify all tiers of suppliers to more than one location or region. Tax, trade, and labor policy certainty is needed across industries, though there will be a necessary focus on healthcare and PPE in the immediate future.

COVID-19 laid bare the need to diversify all tiers of suppliers to more than one location or region. Tax, trade, and labor policy certainty is needed across industries, though there will be a necessary focus on healthcare and PPE in the immediate future.

Christina Conlin

While company leaders may not appreciate, nor agree with, all or some of the administration’s policies, they will nonetheless appreciate knowing toward which direction they need to pivot, and how these policies will impact their companies’ supply-chain investment and strategy. Regulatory alignment with key trading partners would also bolster stability by reducing legal and operational challenges across markets. With an early indication of intended policies, businesses can promptly evaluate their investments, commercial contracts, and overall supply chain strategy. 

Conversely, the administration’s failure to provide concrete direction quickly may cause companies to withhold investments or forgo needed structural changes, increasing the risks to stability, employment, and economic growth. 

COVID-19 exposed supply-chain weaknesses, but supply-chain diversification is necessary to prevent future shocks beyond COVID-19. Companies need to make decisions faster than ever, amid more uncertainty than ever. Clear policy direction from the incoming Biden administration would remove one barrier to resilience.

Kerry Contini

Partner, International Commercial Practice Group
Baker McKenzie (Washington, DC) 

On export/import measures to avoid major disruptions

To better withstand major shocks, the incoming Biden administration should consider using export/import measures at the border as a way to keep supply chains close to home and avoid major disruptions. In particular, the Biden-Harris administration might be tempted to repurpose the “carrot” and “stick” import and export measures that were used to address the infamous shortages in PPE during the pandemic. Those measures were intended to encourage imports of the needed products (the “carrot”) while making exports more difficult (the “stick”). On the import side, US measures primarily focused on relaxing product regulatory requirements to make it easier to get the needed products into the US market. On the export side, during the early days of the pandemic, the United States dusted off long-neglected provisions of the Defense Production Act to try to minimize exports of products needed domestically to satisfy the massively increased demand. 

To better withstand major shocks, the incoming Biden administration should consider using export/import measures at the border as a way to keep supply chains close to home and avoid major disruptions. In particular, the Biden-Harris administration might be tempted to repurpose the “carrot” and “stick” import and export measures that were used to address the infamous shortages in PPE during the pandemic.

Kerry Contini

Restricting exports is unlikely to become the administration’s go-to tool to address supply-chain disruptions, as this was a controversial approach with questionable results. It is more likely that it would consider addressing mismatches in supply and demand through measures affecting imports (e.g., relaxing product regulatory requirements, expediting customs clearance and inspection procedures, or temporarily suspending import or other duties/fees). Ultimately, the nature and duration of the disruption and the type of supply chain will help to determine the appropriate tool. 

In the longer term, it’s worth keeping an eye on the impact of the administration’s continued implementation of export controls on emerging and foundational technologies, which are mandated by the Export Control Reform Act of 2018. The stated objective of these export controls is to advance US national security interests, not supply-chain resilience. However, additional restrictions on the export of US technologies to China and other countries could, somewhat paradoxically, contribute to nearshoring as companies adjust their supply chains to avoid countries subject to these export controls.

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Question three

What actions can North American and Latin American countries take to utilize new technologies in order to facilitate the modernization and innovation of supply chains as global economies are poised to fundamentally shift post-COVID-19? 

Shunko Rojas

Co-Founder and Partner, Quipu Advisors
Former Undersecretary for International Trade
Argentina 

On the importance of digital connectivity, regulatory frameworks, productive processes, and labor-force training for harnessing technology 

To maximize the benefits of new technologies in the strengthening and upgrading of regional supply chains in a post-COVID-19 context, the region needs to focus on four key areas: digital connectivity infrastructure, regulatory frameworks, productive processes, and labor force.

Digital connectivity infrastructure: Dynamic, dense, and efficient value chains require a modern and reliable digital-connectivity infrastructure to enable greater capacity, speed, and affordability of digital data processing and transmission. Countries need to invest in digital infrastructure while ensuring quality services and universal access at affordable costs. 

Regulatory frameworks: Countries in the Western Hemisphere need to adopt robust, flexible, and conducive regulatory frameworks to catalyze the benefits of new technologies. In particular, countries have to adopt sound regulations on cybersecurity, data privacy, interoperability, and competition. In addition, the region needs to work on regulatory cooperation to set up common standards, and to ensure that data and technology innovations flow freely and safely across the Americas.

Productive processes: Governments and the private sector need to work closely together to better incorporate digital technologies into processes and services to increase productivity, keep up with global technology advances, and adapt effectively to disruptive innovations. Governments should concentrate their efforts on supporting small and mid-size enterprises (SMEs), women, and other disadvantaged groups and their integration into supply chains.

Labor force: Governments must also invest in human capital, and adopt vigorous policies aimed at preparing the workforce to fully grasp the benefits of digital technologies and supporting workers in transition. Digital-skills development through training assistance and education programs can play a key role in ensuring a more even distribution of gains from trade and technology advances, which would ultimately result in more stability and prosperity in the region.

To maximize the benefits of new technologies in the strengthening and upgrading of regional supply chains in a post-COVID-19 context, the region needs to focus on four key areas: digital connectivity infrastructure, regulatory frameworks, productive processes, and labor force.

Shunko Rojas

The 2021 Summit of the Americas will provide a unique opportunity for political leaders to work on a common agenda to address these issues and set the grounds for building a prosperous post-COVID-19 Western Hemisphere based on a digitally driven and more inclusive integration.

Carlos Alberto Vela-Treviño

Partner, Information Technology and Communications Practice Group (Mexico City)
Baker McKenzie (Mexico City)

On the importance of digital transformation as a priority for companies and governments

Digital transformation powered by companies, together with innovative nearshoring regimes facilitated by Latin American governments, should be the key enablers for Latin America becoming an innovative and flexible manufacturing powerhouse, one that allows North American companies to operate in an agile, secure, and nimble environment. 

Modern treaties like the USMCA and the Pacific Alliance Treaty might be key enablers for bringing relief to US and Latin American global supply chains hammered by COVID-19 and US-China trade wars. Countries with free-trade agreements in place, free movement of information and personal data, strong privacy and cybersecurity regimes, flexible labor and immigration regimes, and solid anticorruption and intellectual property enforcement laws should score high as nearshoring options. However, to truly compete with the offering of East Asia (which combines skilled workforces with low costs), Latin American governments should be willing to invest in automation technology, artificial intelligence, and robotics, as a means to improve industrial productivity. Nearshoring arrangements of the future should include more than traditional tax benefits; they should also include stimulus for investment in digital transformation, research, and development.

Nearshoring arrangements of the future should include more than traditional tax benefits; they should also include stimulus for investment in digital transformation, research, and development.

Carlos Alberto Vela-Treviño

The creation of sophisticated workforces (rather than the creation of jobs) should become the priority for companies and governments. Digital transformation does not rely on regulatory change or government stimulus in order to produce innovative results. Rather, it is fundamentally about process transformation, about changing how the different stakeholders in a productive chain behave in order to achieve a specific result. Only a skilled workforce would be able to identify opportunities on data, and to test and deploy technology that may enhance productivity, or even fundamentally change the role of a company in the production chain; companies that will succeed are those that cease to see digital as an arm of the company and instead see, and experiment, with digital as the heart of the company.

Joyce Smith

On trends from key industries 

Countries in the region can consider implementing policies and laws that make it easier for businesses to leverage digital technologies and restructure their supply chains to meet fast-changing realities. Some of the trends that have been seen from advising companies looking to persist through the pandemic and thrive post-pandemic include: significant disruptions to workforces, production capabilities, and logistics that have resulted in the need to resize and find alternative suppliers; a huge uptick in demand for online, digital, and telecommunications services; and a desire to diversify and build flexibility into supply chains given unpredictable developments in political, regulatory, and trade regimes.

For example, in the industrial, manufacturing, and transportation industries, there is a growing emphasis on trying to shorten the supply chain and leveraging digital technologies to create digital factories that make it easier to track inventory. 

To help businesses modernize and innovate their supply chains in this environment, countries in the region can seek to bolster their investments in local infrastructure (e.g., expand fifth-generation (5G) capabilities), cooperate with other countries to standardize regulatory requirements (thus alleviating some of the compliance costs associated with engaging in cross-border activities), consider reducing trade barriers where aligned with other national interests, and increase reliance on properly vetted datasets and scientific principles to drive policy decisions.

Joyce Smith

In the consumer goods and retail space, companies have been forced to adopt more flexible business models, including increased reliance on digital platforms and concentrating efforts on key revenue centers. 

And, in the technology, media, and telecommunications space, there has been increased demand for services and consolidation of providers—which, in turn, has fostered innovation in sub-industries such as cybersecurity, identity verification, digital marketing, and e-commerce.

To help businesses modernize and innovate their supply chains in this environment, countries in the region can seek to bolster their investments in local infrastructure (e.g., expand fifth-generation (5G) capabilities), cooperate with other countries to standardize regulatory requirements (thus alleviating some of the compliance costs associated with engaging in cross-border activities), consider reducing trade barriers where aligned with other national interests, and increase reliance on properly vetted datasets and scientific principles to drive policy decisions.

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Question four

How can supply chains be used to strengthen efforts to meet environmental, social, and governance (ESG) goals in the Americas—the main pillars that measure sustainability and societal impact of the private sector—and how might the new administration’s policies impact these goals?

Reagan Demas 

Partner, Litigation & Government Enforcement Practice Group
Baker McKenzie (Washington, DC)

On the social impact of corporate supply chains

Corporations have great power and ability to influence environmental, social, and governance (ESG) standards around the world. The expansion of corporate supply chains into developing countries increases the impact—both good and bad—of corporate supply chains on ESG standards globally.

The social impact of corporate supply chains (e.g., forced or child labor, human trafficking, worker safety) is under particular scrutiny today. The significant and lasting reputational damage done by allegations of social impropriety and related legal violations within the supply chain is clear and increasing. Yet, corporate reputations are not the only thing at risk—more recently, legal risk has grown significantly with the rise of transparency and reporting obligations, and a move away from previously voluntary standards. These legal risks include statutes imposing responsible sourcing obligations (e.g., 19 U.S.C. § 1307, U.S. Trafficking Victim Protections Act); shareholder litigation based on mandatory corporate public disclosures related to responsible sourcing; litigation by suppliers’ workers based on employment, contract, or tort laws; and consumer litigation based on public statements or commitments related to responsible sourcing. Stakeholders’ expectations (including customers, investors, and civil society) of global companies to address ESG issues in supply chains has never been greater, with legal obligations holding companies responsible for the bad acts of supply-chain partners following suit.

Corporations have great power and ability to influence environmental, social, and governance (ESG) standards around the world. The expansion of corporate supply chains into developing countries increases the impact—both good and bad—of corporate supply chains on ESG standards globally.

Reagan Demas

Many ESG issues in supply chains—in particular, social matters like human trafficking—are bipartisan issues in the US Congress, and the growing volume of corporate regulations touching on those issues is indicative of this bipartisan support. The clear trajectory for future congresses and administrations is toward increased regulation over supply-chain ESG matters and the continued expansion of legal obligations on corporations. As a result, corporations are likely to continue focusing on auditing and managing supply-chain partners to ensure ESG matters are appropriately addressed, and the risk of violations is mitigated.

Jennifer Trock

Partner
Chair, North America International Commercial Practice Group and Global Aviation Group
Baker McKenzie (Washington, DC)

On how sustainability can foster recovery and competitive advantages

Supply chains are increasingly complex, creating both challenges and opportunities to integrate ESG goals. As global “shock” events—whether in the form of global trade wars, natural disasters, or pandemics—become more common, companies must look for long-term solutions to future-proof supply chains with more resilient and sustainable approaches. 

For example, one of the hardest-hit sectors has been the aviation, aerospace, and defense sector, where supply chains span from original equipment manufacturers to maintenance/overhaul to the end customer (e.g., airlines/defense sectors), and beyond. As the industry looks to reimagine its supply chains, it is doing so with an increased focus on ESG. Indeed, increased supply-chain efficiency and resilience often demand more sustainable approaches. As just one example in this hard-hit sector, aircraft-parts manufacturers are increasingly exploring three-dimensional (3D) parts and the use of new, more sustainable composites as one way to reduce supply-chain uncertainties. In addition, digitization will be critical for companies to, among other things, use the Internet of Things (IoT) to better manage and source inventory, demonstrate compliance, and report on their ESG obligations to relevant stakeholders.

ESG goals are integral to sustainable supply-chain approaches, but, more than that, sustainability can foster recovery and competitive advantages. Supply chains are a powerful tool in strengthening companies’ efforts to meet their ESG goals in the Americas.

Jennifer Trock

While the Trump administration has overseen the entry into force of USMCA, which has entire chapters devoted to environmental and labor protections in the parties, it has simultaneously rolled back global and domestic commitments on climate-change initiatives.³ Nevertheless, companies and NGOs are increasingly stepping up their ESG commitments—not only as the right thing to do, but also in response to investor expectations. The Biden administration is expected to seek to support the ESG direction of travel further by enforcing the environmental and labor chapters of USMCA, as well as supporting increased climate-change and sustainability initiatives domestically and globally. 

ESG goals are integral to sustainable supply-chain approaches, but, more than that, sustainability can foster recovery and competitive advantages. Supply chains are a powerful tool in strengthening companies’ efforts to meet their ESG goals in the Americas.

Landon Loomis

Vice President, Global Policy
Managing Director
Boeing Brazil

On lessons learned from the aerospace and aviation industry

Boeing has longstanding supply-chain relationships across Latin America that support the firm’s global commercial, defense, and service business. These ties are a testament to the region’s growing technological capabilities, and demonstrate the importance of focused investments in research and development, infrastructure, and education. Yet the nature of supply chains is evolving, and has expanded beyond the traditional metrics of quality, capability, and value, increasingly encompassing ESG standards as well. 

On environmental, social and governance issues, supply-chain relationships can help drive meaningful change in at least two ways: first, by using ESG criteria to evaluate and select potential suppliers, and second, by including ESG within the contracted work itself. True collaboration on ESG goals would also empower suppliers to speak up and identify problems they see within the contracting company – further enhancing accountability.

On environmental, social and governance issues, supply-chain relationships can help drive meaningful change in at least two ways: first, by using ESG criteria to evaluate and select potential suppliers, and second, by including ESG within the contracted work itself.

Landon Loomis

Boeing is hard at work on these issues with a stakeholder-focused approach. The company appointed a chief sustainability officer to lead its ESG agenda company-wide, made significant commitments to diversity and inclusion programs, and are investing heavily in breakthrough environmental technologies. Boeing’s supply chain and government partners across Latin America will magnify the impact of this effort, and help the company continue to meet consumer expectations to source responsibly, foster economic inclusion, and drive environmental sustainability.

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Question five

How can lessons from other regions in deepening regional supply-chain integration be applied to the Americas, especially with an eye toward leapfrogging economic development in the region?

Omar Vargas

Global Head of Government Affairs
3M

On government best practices for addressing supply-demand imbalances

In a world of just-in-time production and consumption, little supply-chain elasticity exists when there are dramatic demand spikes. With COVID-19, demand spikes ranged from twenty times to forty times pre-COVID-19 averages. Total global industrial capacity was not enough to respond to the sharp supply-demand imbalance, which was further exacerbated by rigid regulatory and trade practices. There are several key global government best practices for developing a sustainable national stockpile for future emergencies. Governments that were able to enact the following did best in their national responses. These lessons are equally applicable in the Americas.

Supply-chain localization or regionalization efforts can best be supported by policies that provide tax and regulatory certainty that will support the economics of supply-chain systems that may fall idle between demand spikes.

Omar Vargas

• Governments are resilient, and can respond to sudden demand spikes by having immediate access to a national stockpile of needed supplies. 
• Governments have “emergency-supplies stockpile” specified in their laws as a fully funded, non-negotiable national requirement.
• Governments must have the budgetary flexibility to procure what they need when they need it. 
• Governments have established “emergency-use authorizations” as part of their national public health laws to enable rapid regulatory access to needed supplies beyond their borders.  Governments must have globally harmonized standards, so they have access to global supply chains. The more non-standard the regulation, the more difficult the task of procurement becomes for a country.
• Governments must have good legal and customs systems to fight product fraud and counterfeits.
• Governments allow for flow of goods through their borders. Countries that erected export restrictions scored a short-term win, but left themselves as islands with less access to supplies because supply chains simply adjusted and flowed around them.
• Governments enter public-private partnerships with critical best-in-class suppliers. Supply-chain localization or regionalization efforts can best be supported by policies that provide tax and regulatory certainty that will support the economics of supply-chain systems that may fall idle between demand spikes.  

Alison J. Stafford Powell

Partner, International Commercial Practice Group
Baker McKenzie (Palo Alto)

On lessons learned from Europe, the Middle East, and Africa (EMEA) 

Deepening regional supply-chain integration requires a strategic vision built around an enabling environment, strong alliances with other gateway countries, and collaborative investments in technology. 

Dubai’s success as a gateway to the Middle East, Africa, and South Asia exemplifies this. The early establishment of the Dubai International Financial Center (DIFC) attracted trade-finance banks and related talent to facilitate trade and investment flows.⁴ Multiple free-trade zones, including Jebel Ali Free Zone (JAFZA) and Dubai Airport Freezone Authority (DAFZA), contributed to this enabling environment, turning Dubai into a logistics hub. 

The Dubai Chamber of Commerce & Industry’s strategy to strengthen industry ties with other regions through establishing representative offices in key locations, including Panama and Brazil, has been highly effective in solidifying the global profile of Dubai as a gateway between those other regions.⁵ The chamber regularly runs a Global Business Forum in other regions, including Latin America, to build productive partnerships and alliances across sectors, including agribusiness, logistics, energy, tourism, and financial services.⁶

Cross-regional and public-private partnerships present an opportunity to spread the costs and ensure early adoption of best practices and common standards when leveraging the latest technologies. The World Economic Forum’s pilot partnerships with the Abu Dhabi Digital Authority, the Dubai Future Foundation, and Saudi Aramco in applying its Blockchain Deployment Toolkit demonstrate the benefits of such an approach for overcoming adoption challenges for successful regional implementation of a digital infrastructure.⁷

The Dubai Chamber of Commerce & Industry’s strategy to strengthen industry ties with other regions through establishing representative offices in key locations, including Panama and Brazil, has been highly effective in solidifying the global profile of Dubai as a gateway between those other regions.

Alison J. Stafford Powell

DP World, the Dubai-based ports operator and world trade-enablement leader, has also recently intensified efforts to digitize logistics in the Middle East and beyond by implementing TradeLens, an open and neutral online, blockchain-based logistics platform, in partnership with shipping and information-technology (IT) companies A.P. Moeller—Maersk and IBM.⁸

These collaborative investments have leapfrogged cumbersome and discordant paper-based documentation systems, and have standardized processes, reduced delays, and improved operational efficiencies across the regional supply chain. 

Anne Petterd

Chair, Asia Pacific International Commercial & Trade Practice Group
Baker McKenzie (Australia) 

On lessons learned from the Asia-Pacific (APAC) region 

A key lesson for deepening regional supply-chain integration is learning how to navigate areas of common needs, as well as differences. This is illustrated by trade-integration steps taken by the ten member states of the Association of Southeast Asian Nations (ASEAN) Economic Community.⁹

As in the Americas, the ASEAN member states are diverse in many ways, including geography, culture, and legal systems, as well as economic and infrastructure development. However, the members also have shared needs. 

An identified common imperative to supporting economic growth in ASEAN was to build transport linkages that further connect the region and facilitate investment. Improved infrastructure in terms of transportation and utilities is expected to greatly assist development of supply chains in ASEAN.¹⁰ 

For example, an ASEAN member may be looking to build manufacturing hubs to attract businesses that have decided to diversify their supply chains. It is also essential to have the right infrastructure in place in terms of transportation routes, power, communications, and port capacity for the new manufacturing hub to be attractive to business. 

An identified common imperative to supporting economic growth in ASEAN was to build transport linkages that further connect the region and facilitate investment.

Anne Petterd

Improved infrastructure is not the only requirement for deepening supply chains. Another important common initiative is the ASEAN Single Window, which is being developed as an integrated platform for facilitating trade through faster clearance of cargo and release of shipments.¹¹

Of course, given the differences among ASEAN member states, first agreeing to, and then implementing, all these measures take time. While the ASEAN members have needed to remain focused on making progress, they have also needed to allow for members to progress at differing rates, in line with priorities for individual member states.¹²

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Conclusion

The year 2020 was marked by intense instability and an entire host of challenges the world had not experienced in recent history. The COVID-19 pandemic continues to devastate the health and wellbeing of the world’s population, all while destabilizing economies and growth rates alike. This is not likely to end soon. 

Caught at the center of the shockwaves are supply chains, which have experienced, and continue to experience, some of the most severe disruptions they have ever faced at such a global scale. Though different supply chains and industries have had to adapt differently, the lessons the world learned from 2020 will have lasting repercussions for the years ahead. 

As the Biden administration prepares to enter office in January 2021, one key priority will be building greater cooperation among partners and allies in the Americas. How it does so will be a determining factor for the future of supply chains, and the Americas overall. 

Acknowledgements

The Atlantic Council’s Adrienne Arsht Latin America Center would like to thank the various authors who contributed to this publication, as well as recognize the many individuals who made its creation possible. A special thank you to Roberta Braga and Angela Chavez for their leadership in the production of this Spotlight, and to Natalie Alhonte Braga, Amy Nielson, Leah Schloss, Heather Pinnock, and the entire Baker McKenzie team, who provided invaluable assistance with the publication. Thank you also to Nikita Kataev for her design expertise, and to Susan Cavan for editing the piece. Special recognition goes to Daniel Payares and Beatriz Godoy for their research support. Finally, the Atlantic Council thanks Baker McKenzie’s partners spanning practices and regions for their support of its work and invaluable contributions over the course of many years.

About the authors

Juan Carlos Baker

Juan Carlos Baker is the CEO and founding partner at Ansley Consultores. With almost twenty-two years of professional experience in the public sector, Baker is a globally recognized expert in trade negotiations, international trade, regional economic integration, and foreign relations. In Mexico’s Ministry of Economy, Baker held several important positions, including as director general for North America, where he oversaw the successful implementation of NAFTA provisions in Mexico; deputy chief negotiator of Mexico for the Trans-Pacific Partnership Agreement (TPP); chief of staff to the minister of economy; and undersecretary of foreign trade. As undersecretary of foreign trade, he led Mexico’s trade agenda during USMCA negotiations. At the multilateral level, Baker represented Mexico at different regional and multilateral organizations, such as the World Trade Organization (WTO), the Organization for Economic Cooperation and Development (OECD), the Group of 20 (G20) and the Asia-Pacific Economic Cooperation Forum (APEC).

Maurice Bellan

Maurice Bellan is the managing partner of the Washington, DC, office and a member of the Global Dispute Resolution and North America Litigation and Government Enforcement Steering Committees. He is a former trial attorney at the US Department of Justice, and is experienced in a broad range of fraud and anti-corruption matters. Bellan was recently named by Savoy magazine as one of the most influential African-American lawyers in the United States. He regularly counsels clients in industries heavily regulated by US federal programs or engaged in any activity that is sponsored by the federal government. He leads the Firm’s False Claims Act (FCA) and government-contracts practice, and his work routinely involves FCA compliance, investigations and litigation, bid proposal review and advice, suspension and debarment investigations and negotiations, protection of intellectual property in government contracting, and defense against stark and anti-kickback allegations. Bellan also handles multinational anticorruption investigations involving the Foreign Corrupt Practices Act (FCPA), and has also shepherded clients through enforcement actions pursued by several branches of government including the Department of Justice, Department of Defense, General Services Administration, Financial Crimes Enforcement Network, Environmental Protection Agency, Food and Drug Administration, Department of Health and Human Services, and various US congressional committees.

Christina Conlin

Christina Conlin is a member of Baker McKenzie’s International Commercial practice in Chicago. Prior to joining the firm, she was chief compliance officer for McDonald’s Corporation’s European operations, providing strategic leadership and guidance on regulatory compliance and corporate governance for thirty-nine markets across Europe, Central Asia, and North Africa. She also previously served as general counsel in McDonald’s US central division, where she led a legal team that advised the company and senior leadership on franchising, supply-chain, real-estate, and operational matters. Conlin also worked for more than a decade as a trial lawyer in private practice, representing franchisors, distributors, real-estate developers, manufacturers, and others in court and arbitration.

Kerry Contini

Kerry Contini is a partner in Baker McKenzie’s International Trade Practice Group in Washington, DC. She has written on export controls and trade-sanctions issues for several publications, including WorldECR, Export Practitioner, and Ethisphere. Contini is a co-chair of the Export Controls and Sanctions Section of the Association of Women in International Trade. She joined the firm as a summer associate in 2005 and became a full-time associate in 2006. She focuses her practice on export controls, trade sanctions, and antiboycott laws. This includes advising US and multinational companies on trade-compliance programs, risk assessments, licensing, review of proposed transactions, and enforcement matters. Contini works regularly with companies across a wide range of industries, including the pharmaceutical/medical-device, oil and gas, and nuclear sectors.

Reagan Demas

Reagan Demas has significant experience working on behalf of companies and investors in emerging markets and high-risk jurisdictions. He has managed major legal-compliance investigations for a variety of Fortune 500 companies and negotiated settlements before the US Department of Justice, US Securities and Exchange Commission, and other federal and state regulatory entities, obtaining declinations in a number of matters. He has also conducted risk assessments and due diligence in a variety of legal-compliance matters for companies across industries, and has worked on the ground evaluating partnerships, investments, and other business opportunities worldwide. Reagan has written and spoken extensively on emerging compliance trends, ethics, corruption, and doing business in Africa. In 2019, Reagan was selected as a BTI Client Service All-Star by corporate counsel in recognition of being a leader in superior client service. He is the founder and chief editor of Baker McKenzie’s Global Supply Chain Compliance blog, and has served on the steering committee of the North American Litigation and Government Enforcement Practice Group.

Ildefonso Guajardo

Ildefonso Guajardo Villarreal, a member of the Adrienne Arsht Latin America Center Advisory Council, is a Mexican economist and politician who, most notably, served in the administration of former Mexico President Enrique Peña Nieto as secretary of economy. Prior to this role, Secretary Guajardo worked with the International Monetary Fund as an associate economist, served as director of the North America Free Trade Agreement Affairs Office at the Embassy of Mexico in Washington, and held several other positions in various levels in the Mexican federal government.

Landon Loomis

Landon Loomis was appointed Boeing International’s vice president for global policy in August 2020. Loomis also serves as managing director for Boeing Brazil. He is based in São Paulo and reports to Sir Michael Arthur, president of Boeing International. As vice president for global policy, Loomis coordinates non-US government affairs and policy work, including geopolitical analysis to underpin key Boeing decision-making. Loomis works with Boeing’s country and regional leaders on sales campaigns and business-growth initiatives while strengthening relationships with foreign governments and other important stakeholder groups outside the United States. As managing director of Boeing Brazil, Loomis is responsible for leading company strategy, developing business and industrial partnerships, expanding stakeholder relationships, and leading Boeing’s productivity and enterprise functions in Brazil. Prior to joining Boeing, Loomis served in the White House as a special adviser to Vice President Mike Pence from April 2017 to August 2019. In that role, he was responsible for strategy, analysis, and implementation of the vice president’s engagement with thirty-five countries in the Western Hemisphere, and also advised on key international economic and trade policy issues.

Jason Marczak

Jason Marczak is director of the Atlantic Council’s Adrienne Arsht Latin America Center. He joined the Council in October 2013 to launch the center and set the strategic direction for its Latin America work. Marczak has over twenty years of expertise in regional economics, politics, and development, working with high-level policymakers and private-sector leaders to shape public policy. At the Atlantic Council, he spearheads results-oriented programming that moves ideas to action with a focus on improving socio-economic prosperity in Mexico, Central America, Colombia, Venezuela, Brazil, and Argentina. Most recently, he has overseen a multi-faceted effort to shape the region’s COVID-19 recovery. Since 2016, Marczak is an adjunct professor at The George Washington University’s Elliott School of International Affairs. He was previously director of policy at Americas Society/Council of the Americas and co-founder of Americas Quarterly magazine, overseeing the magazine’s launch. He is a frequent op-ed contributor, a sought-after speaker, and has testified before the US Congress.

Manuel Padrón-Castillo

Manuel has been practicing with Baker McKenzie since 1992. He is the national coordinator of the International Commercial & Trade Group in Mexico, the firm’s Latin American regional coordinator of the International Commercial and Trade Practice Group, and member of the steering committee for the Global Automotive Industry Group. During his professional practice, he has specialized in the manufacturing “maquiladora” industry in all matters associated with its business planning and compliance. He concentrated his practice in the representation of foreign investors doing business in Mexico. He has written various articles related to manufacturing in México, and has given lectures organized by various associations, including the Mexican-American Chamber of Commerce and American Management Association.

Anne Petterd

Anne Petterd has been with Baker McKenzie since 2001. Prior to that, she spent four years with the Australian Attorney-General’s Department/Australian Government Solicitor mostly working on large IT projects. In her time at Baker McKenzie, she has spent eighteen months working in London (2007–2008) and, more recently, three years working in Singapore (2017–2020). Her practice focuses on IT and telecommunications supply arrangements; understanding regulatory issues for online, telecommunications, and IT businesses (in particular, for data management); and trade regulatory and commercial contracting advice. Petterd regularly leads projects for drafting, localizing, or rolling out commercial agreements of data-protection policies for multiple Asia-Pacific jurisdictions, and conducting due diligence for undertaking new activities in Asia-Pacific markets. While in Singapore, she worked with many businesses seeking to navigate data, tech-regulatory, and business-establishment issues across Asia.

Shunko Rojas

Shunko Rojas is co-founder and partner at Quipu. He is a non-resident fellow at Harvard’s Institute for Global Law and Policy (IGLP), and senior adviser to the US Chamber of Commerce’s US-Argentina Business Council (USABC). He has served as a member of the World Economic Forum (WEF) Global Future Council on International Trade and Investment. Prior to founding Quipu, Rojas served as undersecretary of international trade (2016–2019), and president of the National Commission of Foreign Trade (2016) of Argentina, playing a key role in the country’s successful international insertion strategy. While in government, he led key international trade negotiations (including Mercosur—European Union), represented Argentina at international forums (the World Trade Organization, Organisation for Economic Co-operation and Development, and the Group of Twenty), and spearheaded the country’s national export strategy.

Lisa Schroeter

Lisa Schroeter is the global director of trade and investment policy for the Dow Chemical Company. As part of the corporate Government Affairs & Public Policy team, Schroeter has direct responsibilities for defining and managing the company’s global trade agenda, as well as developing strategy on the international aspects of key corporate issues. Based in Washington, DC, she focuses on trade policy and legislation, trade negotiations, and investment issues that foster growth in Dow’s global businesses through identification of policies facilitating market access and reducing global distribution costs. Before joining Dow, she was the executive director of the TransAtlantic Business Dialogue (TABD). TABD is a unique trade-facilitation process by which US and European corporations work with the US administration and the European Commission to implement practical, detailed recommendations. Schroeter was responsible for staffing the US chair chief executive officer, working with the issue committees to develop and promote their recommendations, and facilitating business and government interaction. Schroeter joined TABD in 1999, and managed the process on behalf of the Boeing Company, PricewaterhouseCoopers, United Technologies Corporation, and Xerox.

Alison J. Stafford Powell

Alison Stafford Powell has considerable experience counseling companies on cross-border outbound trade compliance in the areas of export controls, trade and financial sanctions, anti-terrorism controls, anti-corruption and anti-money laundering rules, US anti-boycott laws, and US foreign-investment restrictions. With a background also in EU and UK trade restrictions, she helps non-US companies navigate conflicting compliance obligations and risks under US and EU trade rules. She is a dual US/English qualified lawyer and has worked in the firm’s London, Washington, DC, and Palo Alto offices since 1996. She advises on all aspects of outbound trade compliance, including compliance planning, risk assessments, licensing, regulatory interpretations, voluntary disclosures, enforcement actions, internal investigations and audits, mergers and acquisitions, and other cross-border activities. She develops compliance training, codes of conduct, and compliance procedures and policies. She has particular experience in the following sectors: technology/cloud/IT services, financial services, travel/hospitality, telecommunications, and manufacturing.

Joyce Smith

Joyce Smith is a partner in the San Francisco office and chair of the California International Commercial Practice Group. Joyce leads the firm’s Global IP Transactions and Tax Practice, chairs its North American International Commercial Practice Steering Committee, and serves as the California Offices representative on the North America Diversity and Inclusion Committee. Her practice focuses on advising multinational companies on cross-border commercial transactions, intellectual-property (IP) and technology licensing, development and acquisitions, IP migrations for post-acquisition integrations and international tax reorganizations, implementation of international tax restructurings, FCPA compliance and due diligence, and other cross-border regulatory, compliance, and commercial issues. She has represented clients ranging from start-ups to large multinational corporations in a variety of industries, with a focus on technology, e- commerce, and pharmaceuticals.

Jennifer Trock

Jennifer Trock is chair of Baker McKenzie’s Global Aviation Group and North America International Commercial Practice Group. She leads the firm’s unmanned aircraft systems (UAS) focus team and is a member of the firm’s Future Mobility Taskforce. She serves as the chair of the American Bar Association’s Forum on Air & Space Law. Trock has been recognized by Chambers USA, Aviation Regulatory–National (2007–2020) and has received honors from Euromoney’s Guide to the World’s Leading Aviation Lawyers, Infrastructure Journal, and the Washingtonian. She routinely advises domestic and foreign airlines, airports, aerospace manufacturers, travel-distribution clients, original equipment manufacturers, and corporate entities on complex transportation and aviation-related regulatory, aviation safety, litigation, enforcement, commercial, restructuring, and financing matters. She has also handled all types of transportation-related regulatory issues, including with respect to transportation of hazardous materials, federal motor-carrier licensing, and transportation security matters.

Omar Vargas

Omar Vargas, a graduate of American University’s Washington College of Law and the School of International Service, was appointed in 2017 by 3M Company to lead its global engagement of government officials and public policy stakeholders. Prior to joining 3M, Vargas held senior government-relations roles with Praxair and PepsiCo, handling a range of international and US federal and state issues. In the early 2000s, he was as an appointee of President George W. Bush to the US Department of Justice, where he served in a variety of capacities, and his portfolio included a broad range of law-enforcement, civil-rights, national security, and immigration-policy matters.

Carlos Alberto Vela-Treviño

Carlos Vela-Treviño is a partner in Baker McKenzie’s Information Technology and Communications Practice Group in Mexico City, and the head of the firm’s Privacy and Data Protection practice in Mexico. He has vast experience in corporate, commercial, and transactional work, including mergers and acquisitions, corporate restructuring, corporate governance, and private-equity transactions. A certified information privacy manager, he is recognized by Legal 500 and other international publications as one of the country’s leading IT/C and media lawyers. Prior to joining Baker McKenzie, he led the IT/C legal practice of a Big Four consultancy firm. He is one of Mexico’s most active privacy, data-protection, and information security lawyers. He has implemented privacy-management compliance programs for more than one hundred companies, including several Fortune 500 companies. He advises on corporate and commercial matters where privacy is an issue, including e-discovery, FCPA investigations, e-commerce, direct marketing, privacy in the workplace, litigation, and machine-to-machine communications.

About the Atlantic Council’s Adrienne Arsht Latin America Center

The Adrienne Arsht Latin America Center (AALAC) broadens understanding of regional transformations through high-impact work that shapes the conversation among policymakers, the business community, civil society, and media. Founded in 2013, the Center focuses on Latin America’s strategic role in a global context with a priority on pressing political, economic, and social issues that will define the trajectory of the region now and in the years ahead. Select lines of programming include: Venezuela’s crisis; Mexico’s US and global ties; China in Latin America; Colombia’s future; a changing Brazil; Central American prosperity; combatting disinformation; shifting trade patterns and modernization of supply chains; charting a post-COVID future; Caribbean development; and leveraging energy resources. Jason Marczak serves as Center Director.

Sign up for Aviso LatAm: COVID-19, the Adrienne Arsht Latin America Center’s new, weekly Aviso of coronavirus-related news. Every week, we deliver to your inbox the most relevant COVID-19 coverage across Latin America and the Caribbean, focusing on government responses, COVID-19’s economic impacts and projections, medical news, etc. For more information and past editions, visit the Aviso website.

About Baker Mckenzie

Baker McKenzie helps clients overcome the challenges of competing in the global economy. We solve complex legal problems across borders and practice areas. Our unique culture, developed over 70 years, enables our 13,000 people to understand local markets and navigate multiple jurisdictions, working together as trusted colleagues and friends to instill confidence in our clients. (www.bakermckenzie.com)

Our Resilience, Recovery & Renewal model is helping organizations navigate the business and legal impact of the COVID-19 pandemic. While most businesses will pass through all three phases of the model, the phases themselves are non-linear and may recur or overlap, particularly for those with global operations. Wherever you are in your response to the pandemic, we will help you with the services and resources you need. Visit our Resilience, Recovery & Renewal Roadmap to Stability hub for more information. ​​​​​Also, visit our Beyond COVID-19 Resource Center for the latest legal and regulatory updates from around the world.

The post Spotlight: The Biden-Harris Administration and the future of supply chains in the Americas appeared first on Atlantic Council.

Donald J. Trump’s presidency has upended the assumption that NATO could count on support from the US commander in chief. The challenge Trump poses to the orthodoxy around the Alliance is part personal, part political, and part reflective of changing attitudes among the US public about foreign and defense policy. It also resonates, in substance if not style, with aspects of the presidencies of Barack Obama and George W. Bush, where NATO was sometimes regarded as a burden to carry rather than an asset to wield.

While this state of affairs might be dismissed as circumstantial to each administration, the questioning of NATO’s centrality to US security interests should be viewed as a trend with underlying structural rationales linked to public sentiment. Like the proverbial boiling frog, progressive US detachment from NATO might result in a sudden decoupling from the Alliance—a situation NATO could not survive and which by multiple accounts almost happened at NATO’s Brussels Summit in 2018.¹ For Europeans who view US security guarantees as critical to their sovereignty and for those in the United States who believe the US alliance system is the sine qua non of its power and influence globally, there is an urgent confluence of purpose to rekindle Washington’s fundamental commitment to NATO.

Eventual Mexican membership in NATO may be a necessary ingredient for keeping the United States invested in European security over the long term.² This suggestion is made with an eye toward the reality that economic³ and political⁴ power in the United States is shifting to places and populations with fewer traditional ties to Europe such that broadening NATO’s appeal to a diversifying US public is imperative.

The case for diversifying US public support for NATO

The idea that Mexico is the key to keeping the United States committed to an Alliance whose main business is deterring Russian aggression in Europe is admittedly counterintuitive. It also requires an assessment of why this would be an attractive option for Mexico and of what Mexico would bring to the Alliance in practical terms; there are compelling, if inconclusive, arguments on both counts. 

Our argument starts from the premise that NATO is foundational to US global leadership such that making it relevant to emerging communities in the United States is compulsory if the Alliance is to earn their political allegiance. It also supposes that sustaining support for NATO must be more than an exercise in public diplomacy, even if that is a necessary element. Instead, ensuring US public support for the Alliance must be grounded in policies that matter to an increasingly diverse and empowered segment of the citizenry.

Making these policies relevant to a broad swath of the US public is especially tricky in a country as expansive as the United States. Regional divergences, ethnic and racial diversity, and political polarization make monolithic solutions impractical. Indeed, Russian malfeasance—including direct interference in US elections—is not the broad-based, animating concern it was when Moscow’s Cold War nuclear arsenal was an omnipresent concern for everyone. It is possible a US-China long-term competition could serve as a general rallying cause, but NATO’s role in such a scenario is uncertain since European publics do not feel threatened militarily by China.

Instead, an enduring US commitment to NATO is more likely to be secured by a variety of policies or missions that reflect the security interests of a diversifying US public. These undoubtedly must include deterrence of Russia—such policies must be germane to European publics as well—but might also require combatting nontraditional threats, such as pandemics and climate change, that are increasingly important to younger citizens.⁵ However, regional interests will remain an important part of the puzzle as well.

Just as attentiveness to the security of European allies has been a prerogative for generations of Americans with European lineage—which have heretofore dominated political and economic power in the United States—it makes sense that citizens of other backgrounds will be compelled by the security concerns of their familial homelands. For NATO, this might eventually mean more prominent roles in addressing security in Africa or Asia.⁶ But first, the interests of the Hispanic/Latinx⁷ community should take priority, not least because formalizing a relationship between Mexico and NATO is an attainable policy goal.

Al igual que la atención a la seguridad de los aliados europeos ha sido una prerrogativa para generaciones de estadounidenses de linaje europeo—que hasta ahora han dominado el poder político y económico en los Estados Unidos—tiene sentido que los ciudadanos de otros orígenes se vean obligados a preocuparse por la seguridad de sus países de origen.

Mexican troops on parade on September 16, 2015 (Source: Wikimedia Commons)

Domestic demographic trends in the United States support this logic as well. According to the Pew Research Center, the US Hispanic/Latinx population reached 60.6 million in 2019, making up 18 percent of the total US population.⁸ Of that number, people of Mexican origin account for 62 percent of the nation’s overall Latinx population or some 37 million people. Between 2010 and 2019, the Latinx community accounted for more than half of all US population growth, even as that growth has begun to slow. Overall, Latinx people are the country’s second-largest ethnic group, behind white non-Hispanics.⁹

With the Hispanic/Latinx community projected to comprise 29 percent of the US population by 2050, its views on international relations must be accounted for.¹⁰ While there is limited and conflicted polling data regarding Latinx preferences on foreign policy,¹¹ and even less on views toward NATO, anecdotally, it is a low priority. However, a 2014 Chicago Council on Global Affairs study found “that Hispanic Americans are more positive than other Americans toward Mexico. On the scale of ‘feelings’ from 0 to 100, with 100 being the warmest and 50 being neutral, Latinos give Mexico an average rating of 67, compared to an average of 51 among non-Latinos.”¹²

That Mexico’s NATO membership would motivate the US Latinx community to become champions of the Alliance is unknowable short of further research, but it is a reasonable supposition based on the currently available data and common sense. Even a debate about the possibility is likely to introduce NATO to a significant number of US citizens who are otherwise unacquainted with the Alliance, a beneficial outcome in its own right, and one whose effect can be measured. To that end, a structured dialogue between NATO and Mexico to explore a basis for cooperation would be a positive first step.

While NATO membership for Mexico is a generational project requiring a bevy of political and policy incentives to be aligned on all sides, a formal partnership is attainable in the short term. Such a prospect is an opportunity to determine how US Latinx attitudes toward NATO would be impacted while providing the necessary time to work through the practical benefits of eventual membership for both Brussels and Mexico City.

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Making the case to Allied capitals

While the central argument of this essay is that European allies should support a formal relationship with Mexico as a means of solidifying long-term US support for NATO, the traditional case for Mexico’s eventual membership is reasonably strong on the merits.

In real and relative terms, Mexico would bring significant resources to the Alliance. Having spent just over $5 billion on defense in 2019, Mexico would rank in the top half of NATO members, even though with defense spending at 0.5 percent of GDP, it would rank last in NATO proportionally.¹³ However, joining the Alliance would assuredly be conditioned on increases to the defense budget such that the $5 billion baseline would come with a built-in upside. With nearly 237,000 active duty personnel, Mexico would be the third-largest military in NATO behind the United States and Turkey, with the army and navy accounting for the preponderance of Mexican end strength.¹⁴ To put this in perspective, Mexico’s accession would add more active duty military personnel to NATO’s ranks than the thirteen newest NATO members combined.

While Mexico’s armed forces have more limited competencies than NATO’s highest-end militaries, their capabilities start from a high floor, benefiting from bilateral security cooperation with the United States. As a 2016 Wilson Center study explains, “Over the last decade, the Mexican military has been crafted into a hardened and more professional military, skilled in fourth generation warfare, operating across the spectrum of conflict from surgical small-unit Special Forces missions to division-level stability operations in areas comparable in size to Belgium.”¹⁵ Like most new allies or partners, Mexico would not be expected to be a significant contributor to NATO missions immediately, even as the size and aptitude of its armed forces—which have an extensive record of Humanitarian Assistance/Disaster Relief missions worldwide—makes it capable of contributing in theory.¹⁶ 

Beyond the capability arguments, Mexico could serve as a gateway for an intensified NATO presence in Latin America where the Alliance is absent outside of a formal partnership with Colombia. Given Russia’s criticality in propping up Nicolás Maduro’s regime in Venezuela and China’s growing influence throughout the Global South, an augmented NATO role in Latin America could further democracy promotion while providing a timely deterrent effect, including on Russia’s solicitation of Mexico to increase bilateral trade and security agreements. Moreover, adding a third Pacific country to the Alliance would helpfully advance transatlantic and transpacific linkages with an eye on containing China.

Over time, NATO could use its relationships with Mexico and Colombia to replicate its other regional partnership arrangements, like the Mediterranean Dialogue, to include political consultations for sharing information on local Russian and Chinese activities, and building support for policies on 5G, supply chains, or countering disinformation. In such a context, Brazil’s flirtation with NATO would seem less far-fetched, and other possibilities, like a future democratic Cuba partnering with NATO, would be achievable.

Regardless of the other benefits, European allies would want assurances that Mexico City could be counted on to support decisions related to defense and deterrence in Europe. Even the prospect of keeping the United States committed to the cause of European sovereignty would be less appealing if Mexico were to wield its veto amidst a crisis with Russia, for instance. While such guarantees are hard to imagine at present, they are likely attainable with considered dialogue over time.

Making the case to Mexico City

Longstanding tensions between Mexico City and Washington and historical reluctance from Mexico to impose itself in global security affairs make the notion of Mexico’s membership in a US-led security alliance an ostensible non-starter.¹⁷ As a country without a traditional military threat, Mexico is unlikely to need Article 5 protection. In fact, joining NATO might increase risks to Mexico’s security, necessitating military commitments to missions remote from its parochial security concerns while diverting resources toward defense expenditures and away from pressing social needs. 

Nevertheless, a formal relationship with NATO would entitle Mexico to enhanced security sector reform (SSR)¹⁸ from an organization well-versed in the subject; reinforce transatlantic trade relations through consolidation of economic and security interests in tandem with the United States-Mexico-Canada Agreement (USMCA) and the EU-Mexico Global Agreement;¹⁹ allow it to frame a foreign policy as an even closer partner in North American security on the heels of the USMCA; and underscore its status as a growing regional power²⁰ and influential example for other Latin American states.²¹

The most attractive of these factors might be the prestige and status that a NATO affiliation would convey. Despite Mexican President Andrés Manuel López Obrador’s nationalist focus, he shares one goal with his predecessor: securing greater respect for Mexico abroad. A formal association with NATO aligns perfectly with Mexico’s identities and interests as both a North American and Latin American power. Mexico can emphasize its relationship within the North American community, solidifying renewed ties with the United States and Canada through the USMCA. At the same time, membership would fortify Mexico’s currently implied role as a model to other Latin American nations, granting it the opportunity to influence any expanded NATO footprint in the region.

Una asociación formal con la OTAN se alinea perfectamente con las identidades e intereses de México como potencia norteamericana y latinoamericana.

President Donald J. Trump hosts President of the United Mexican States Andres Manuel Lopez Obrador on July 8, 2020.

(Source: White House Flickr)

Additionally, a number of NATO nations could offer attractive bilateral incentives for Mexico’s participation, including binational US-Canada support to Mexico’s law enforcement and judicial sectors. NATO would serve to both institutionalize and make multilateral existing defense and security dialogues with the United States in ways that might benefit Mexico City practically and politically (and which might be equally welcomed by the US Congress and policy community). NATO might also serve as a backbone for intensified security dialogues with nations, such as Spain and France, with which Mexico already has robust ties.

Finding the right collection of incentives for Mexican citizens and politicians will take time, but there are real options. A number of constituencies—including the Mexican Secretariat of National Defense (Secretaría de la Defensa Nacional, SEDENA), which would realize additional resources and the ability to focus away from internal security to more traditional military tasks—might view a relationship with NATO as an attractive possibility.²²

Conclusion

The US policy community has been focused on shoring up US support for NATO by coaxing European member states to increase burden-sharing contributions. The idea that increased European defense spending would settle US restiveness with NATO misses the point. In fact, the burden-sharing debate is serving as a proxy for underlying demographic realities at the root of waning US support for the Alliance.

While burden sharing is supposed to matter to Trump and his supporters, there is no evidence that even vast increases in European defense spending over the course of the Trump presidency have improved NATO’s standing with the US president or his political base. Rather than attempt to placate those that cannot be appeased, the policy community would be better served by finding new champions for the Alliance.

In discussing this proposal with European colleagues, a common retort is that building NATO’s relationship with Mexico is a distraction from the many security challenges facing Europe. In fact, it may be the key to keeping a rapidly changing United States attuned to those very concerns. It is comparable to a case like Iceland, whose strategic importance (geography) outweighs other types of contributions it can make. For allies that rely on security guarantees from the United States, it should matter little whether Mexico would send forces to an enhanced Forward Presence mission if its membership keeps the United States committed to the cause of European sovereignty.

While the idea of Mexico’s eventual membership in NATO may sound implausible, so did the possibility of Warsaw Pact nations joining the Alliance before circumstances intervened to make it inevitable. As the United States experiences dramatic political upheaval related to rapid demographic realignment, circumstances may again be conspiring to write NATO’s next surprising chapter.

* * *

Christopher Skaluba is the director of the Transatlantic Security Initiative in the Atlantic Council’s Scowcroft Center for Strategy and Security. He previously served as principal director for European and NATO Policy in the Office of the Secretary of Defense.

Gabriela R. A. Doyle is the program assistant in the Transatlantic Security Initiative.

Explore the podcast series

NATO 20/2020 Podcast

NATO 20/2020 is a weekly podcast that explores 20 bold ideas to push NATO to be more visionary, more capable, and more self-evidently valuable to the security of more people.

Leer el ensayo en español

NATO 20/2020

Nov 2, 2021

Buscando la adhesión de México

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La membresía de México en la OTAN puede ser la clave para mantener a Estados Unidos que cambia rápidamente y que invierte en la seguridad europea.

Europe & Eurasia Mexico

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The post Seek membership for Mexico appeared first on Atlantic Council.

The conversation featured H.E Marta Bárcena Coqui, Mexican ambassador to the United States and The Hon. Christopher Landau, US ambassador to Mexico. Jason Marczak, director of the Adrienne Arsht Latin America Center, moderated this discussion.

The conversation focused on the priorities for strengthening US-Mexico relations in general, North American economic integration, and building partnerships to battle the COVID-19 crisis. Ambassador Bárcena emphasized that while President López Obrador’s main objective was to celebrate the entry into force of the USMCA, there was a broader agenda. The visit exposed a greater need to enhance cooperation on fighting COVID-19, particularly in the border region, as well as a greater recognition of the contribution of Mexican communities across the United States.

When asked about the major accomplishments during the trip, Ambassador Landau highlighted the importance of an in-person meeting to strengthen the friendship between both presidents and, consequentially, bilateral relations. He highlighted that the most important takeaway from the visit was that both presidents were able to talk in a more relaxed setting and that “there was a genuine bond created between [the] presidents, and that [such] bond will pay off in crises that we do not yet anticipate.” Ambassador Bárcena added that for Mexico, there was a clear change of tone in rhetoric, with President Trump “recognizing the increasing importance of the Mexican and Hispanic communities in the United States.”

During the reception dinner, President Trump and President López Obrador had an opportunity to listen to specific concerns from leaders in the private sector and innovative ideas to bring investment back to the North American region. Ambassador Landau stated the need “to strengthen the institutions that we have to regulate the flow of commerce and supply chains.” Additionally, he stated that it is imperative to recognize the region’s economic interdependence, and there is a growing need for a body that coordinates supply chains regionally.

Marczak asked Ambassador Bárcena about President López Obrador’s decision to not meet with Democratic leaders and Mexico’s commitment to work across the bipartisan aisle. Ambassador Bárcena reiterated Mexico’s commitment to engage with congressional members from both parties and explained that the decision was based on sanitary measures due to COVID-19. She stated that she is “sure that both Democrats and Republicans understand the relevance of Mexico, [as] Mexicans, understand the importance of keeping the dialogue with both political parties.” She underscored Mexico’s continued commitment to working with Congress and with Democrats on labor and environmental rights issues.

As countries consider the post-pandemic socio-economic realities, both speakers agreed on the potential for greater economic integration across the North American region. When asked about their upcoming priorities, the ambassadors concurred that the USMCA provides a new foundation for relocating supply chains from Asia. Additionally, both Ambassador Landau and Bárcena highlighted the importance of establishing an independent committee that would coordinate supply chains throughout the North American region in the case of another crisis. This committee would also identify the most relevant sectors for the region’s development. In his closing remarks, Marczak emphasized that “US-Mexico cooperation is fundamental for North America’s ability to effectively compete in the global economy.”

Cecilia Godoy is an intern at the Atlantic Council’s Adrienne Arsht Latin America Center.

The post US-Mexico ties: A post-official working visit readout appeared first on Atlantic Council.

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The post Busch in The Hill: USMCA needs the WTO even more than NAFTA did appeared first on Atlantic Council.

Mexican President Andres Manuel Lopez Obrador, better known as AMLO, arrived in Washington, DC on July 7 to meet with US President Donald J. Trump. To date, the two leaders have enjoyed a surprisingly cordial but tested relationship. The expectations for AMLO’s first international trip are inevitably high, especially given the timing amid the worst multi-dimensional crisis in recent history but also coming just a week after the US-Mexico-Canada Agreement (USMCA) entered into force. For the United States, the meeting and the ensuing side-by-side pictures will send strong signals to the region and the world that US-Mexico ties are in a good place. Some key topics for the meeting will include trade, regional prosperity and security, and public health cooperation.

Cheers to USMCA: Last year, Mexico was the United States’ number one trading partner with a total estimated value of $1.6 billion per day after a sevenfold increase of bilateral trade between the two countries between 1993 and 2019. Accepting an invitation to meet with President Trump and celebrate the USMCA, despite the political risks and Prime Minister Trudeau’s decision not to attend, can be a positive step for US-Mexico ties, if the historic occasion is seized by both parties.

A common front against economic headwinds: The International Monetary Fund’s recently-released World Economic Outlook outlines a dark scenario for Latin America, comparable to a “lost decade” for the region. The expectation is a contraction by more than five percent for Latin America, and over ten percent in Mexico—the highest estimated contraction of any country. But with the USMCA’s new rules of the game now official, ongoing supply chain disruptions from the coronavirus pandemic, and the dragging trade conflict with China, Mexico and the United States can and must find new ways to work at all levels of the relationship to attract investment, advance North American competitiveness, create jobs, and promote economic development and prosperity in neighboring Central America.

The immigration elephant in the room: Mexico functions as a “hinge” between the United States and the asylum-seeker origin countries of Central America. Immigration from Central America—and the push factors in the countries—is the big elephant in the room between AMLO and Trump. If the subject comes up, it will be an opportunity to address not just human trafficking and human smuggling, but also economic prosperity and development in Central America.

A North American response to COVID: Finally, the coronavirus has shocked the public health systems on both sides of the border. Drawing on lessons of the shared 2009 H1N1 epidemic, which included transparent reporting of cases and generous data sharing between both countries, as well as a joint plan with different future scenarios and the appropriate measures for each scenario, both sides should use the meeting to renew an ambitious commitment to a resilient, shock-proof North America. US-Mexican public health cooperation is due for a rethink that goes beyond the 2012 Operational protocol. Increased infectious disease surveillance, information sharing and even—to the greatest extent possible—shared research and development on medicines and vaccines, will be a key component for the US-Mexico agenda of the future—which begins today. The stakes are high—for the bilateral relationship and for the region—but so is the potential for a new chapter, that could have begun in July with the USMCA’s entry into force.

Maria Fernanda Perez Arguello is an associate director with the Atlantic Council’s Adrienne Arsht Latin America Center, where she focuses on Central America, Mexico, and the USMCA. 

Further reading:

New Atlanticist Jul 1, 2020

Start of USMCA brings hope amid COVID-19 economic crisis

By David A. Wemer

“Together, Canada, Mexico and the United States make North America an energy, manufacturing, and innovation powerhouse,” Damon Wilson says. “The USMCA helps unlock this potential, offering greater prosperity for these nations’ citizens and positioning democracies in North America to better shape global standards and compete with China.”

Coronavirus Energy Markets & Governance

New Atlanticist Apr 17, 2020

US-Mexico security cooperation after the COVID-19 shocks

By Pablo Reynoso Brito

In the post-coronavirus (COVID-19) world, US-Mexico security cooperation will continue to be critical for North America’s stability and prosperity. The current health and economic crises might impact Mexico’s security by causing social instability, straining law enforcement resources in marginal regions, and worsening the migration crisis.

Coronavirus Mexico

New Atlanticist Mar 25, 2020

What Mexico’s response to H1N1 can teach us about coronavirus and future pandemics

By Pablo Reynoso Brito

While the A(H1N1) and novel coronavirus (COVID-19) crises are different in magnitude and were caused by viruses with different levels of lethality, Mexico’s experience with the A(H1N1) can offer valuable lessons for current disruptions.

Coronavirus Mexico

The post Why AMLO’s meeting with Trump is important appeared first on Atlantic Council.

More than nineteen months after it was originally signed, the United States Mexico Canada trade agreement (USMCA) went into effect on July 1, upgrading the existing North American Free Trade Agreement (NAFTA).

The deal, which was agreed to by then Mexican President Enrique Peña Nieto, Canadian Prime Minister Justin Trudeau, and US President Donald J. Trump in November 2018, was updated in December 2019 to strengthen labor, environmental standards, and enforcement provisions, to address concerns from US congressional Democrats. The USMCA also includes sections on automobiles, agriculture, data flows, intellectual property, energy, and pharmaceuticals.

The beginning of the new agreement coincides with a growingly uncertain economic outlook for North America, as the COVID-19 pandemic has sent economic shockwaves around the world. What will the new phase of North American trade look like and how will the USMCA help guide recoveries from the COVID-19 crisis? Our Atlantic Council experts weigh in on what the new USMCA era may bring:

Jump to an expert response:

Secretary Ildefonso Guajardo: The only light at the end of the tunnel.

Damon Wilson: A powerhouse together.

Jason Marczak: COVID-19 will make implementation more challenging.

Reed Blakemore: More certainty for North American energy investment.

Barbara C. Matthews: New agreement establishes high standards for future deals.

Maria Fernanda Perez Arguello: An occasion for optimism for the whole neighborhood.

Hung Tran: USMCA will deepen regionalization of supply chains.

Neil Brown: Despite USMCA, North America may see more confrontation on energy.

 The only light at the end of the tunnel.

“The USMCA is the only light at the end of the tunnel, because unfortunately, we never thought we would find ourselves in this crossroad: starting the new agreement during the worst moment of a crisis. We are predicting to lose around 10 million jobs in Mexico and the people below the level of poverty is expected to rise by 10 million—this figure will take us at least a decade back in terms of social development. The agreement will give us at least a new set of rules that will guarantee the continuation of North American integration.”

Secretary Ildefonso Guajardo, Former Secretary of Economy (2012-2018), United Mexican States;  Member, Adrienne Arsht Latin America Center Advisory Council, Atlantic Council 

A powerhouse together.

 “Together, Canada, Mexico and the United States make North America an energy, manufacturing, and innovation powerhouse. The USMCA helps unlock this potential, offering greater prosperity for these nations’ citizens and positioning democracies in North America to better shape global standards and compete with China.”

Damon Wilson, Executive Vice President, Atlantic Council

COVID will make implementation more challenging.

“The US-Mexico-Canada Agreement will bring much needed certainty for the millions of US workers who depend on trade with Mexico and Canada for their jobs. It’s a result of bipartisan compromise with important new provisions for labor rights, rules of origin, and updates to make this an agreement for a new economy. But implementation will not be easy especially in the midst of a pandemic. Businesses of all sizes will have to readjust to new provisions, the new rapid response labor mechanism will quickly be tested, and questions on the exact formula for calculating USMCA rules of origin compliance will be top of mind for the many businesses who depend on the inter-connected supply chains. Getting implementation right is critical as we work to build out of economic contraction.”

Jason Marczak, Director, Atlantic Council’s Adrienne Arsht Latin America Center

More certainty for North American energy investment.

“USMCA launch day comes at an auspicious time for energy markets. Following a precarious several months due to the impact of COVID-19 on energy demand and oil and gas prices, USMCA should provide some optimism by solidifying one of the largest integrated energy relationships in the world and not doing much to upset the energy status-quo set by its predecessor, NAFTA. Introducing an additional level of certainty for energy investment by protecting dispute mechanisms and providing a framework to support liberalization, particularly at a moment when markets are looking at pathways for post-COVID recovery, further strengthens the value of USMCA as Mexico City, Washington, and Ottawa move to implementation.”

Reed Blakemore, deputy director, Atlantic Council’s Global Energy Center

New agreement establishes high standards for future deals.

“USMCA implementation arrives at an opportune moment, during a dreadful year for global trade and the global economy. The treaty establishes concrete commitments and next-generation standards regarding strategically significant 21^st century trade policy priorities such as intellectual property, labor rights, supply chain management, data transfers, and pharmaceuticals production amid ongoing—and increasingly difficult—global WTO reform negotiations. The increased prominence provided to pharmaceuticals and medical supply production issues this year during the pandemic underscores the strategic importance of more diversified supply chain relationships. The USMCA will help accelerate supply chain diversification as it goes into force today. The treaty seems also likely to provide a foundation for economic security and diversification in Mexico and Canada amid a global shift away from carbon-based energy that will take a toll on their economies in the near term. Many additionally hope that the energy, pharmaceutical, and labor market provisions together with tough new enforcement mechanisms will create concrete incentives for sectoral reform in the North American region. 

“The multi-decade shift towards regional (rather than global) trade agreements has been accelerated by the regrettable and troubling rise of economic nationalism in the United States and other countries around the world. Part of that rise relates to perceptions that the benefits of global economic interoperability deliver asymmetric benefits. Part of the backlash against global trade also relates to perceptions that classic trade agreements do not adequately address modern regulatory and policy priorities associated with the increasingly digital knowledge economy. The USMCA, for all its faults, establishes high standards that can help forward-looking trade negotiators in Geneva and the Ottawa Group advance free trade priorities regarding intellectual property and data transfers at the global table alongside advanced labor and other regulatory standards.

“Finally, the USMCA goes into force just in time to provide a deeper foundation for potential cross-border economic cooperation as European, Japanese, and North American leaders sharpen their efforts to challenge China’s alternative vision for how the global trade and economic relationships should function.”

Barbara C. Matthews, nonresident senior fellow, Atlantic Council’s Global Business and Economics Program

An occasion for optimism for the whole neighborhood.

 “The world over, but especially in Central America, nations outside of USMCA are preparing for the debut of the hemisphere’s remodeled economic engine. Pre-pandemic baselines and projections for growth and job creation are shattered, but no matter how slowed and stormy the years ahead are, the centrality of North America to the trade flows and the economic opportunity of the whole neighborhood remains. Compounded by the trending regionalization of supply chains, USMCA entry into force is an occasion for optimism south of the (Mexican) border.” 

Maria Fernanda Perez Arguello, Associate Director, Atlantic Council’s Adrienne Arsht Latin America Center

USMCA will deepen regionalization of supply chains.

“The implementation of the USMCA takes place in the middle of a rethinking about global supply chains following disruptions caused by the COVID-19 pandemic as well as escalating political and trade tensions between the United States and China. Companies worldwide have begun to find ways to improve the resilience of their operations, including by streamlining and shortening their supply chains. In addition, there has been an effort to bring production closer to their customers in big markets. These factors have given rise to a regionalization of production, correcting to some extent the earlier globalization. The USMCA, in particular its higher local (regional) content requirements for auto parts, will reinforce the regionalization tendencies—basically diverting some trade and foreign direct investment from outsiders to benefit the three North American members. For example, while US imports from China declined by 16 percent (or by $87 billion) in 2019 compared to 2018, US imports from Mexico increased by 3.5% ($11.6 billion). Many companies, including from China, have announced plans to invest in Mexico. As a comparison, US imports from Vietnam rose by 35 percent ($17.5 billion) in 2019—both Mexico and Vietnam have been mentioned as “winners” among emerging markets countries in the US-China trade war.”

Hung Tran, nonresident senior fellow, Atlantic Council’s Global Business and Economics Program

Despite USMCA, North America may see more confrontation on energy.

“While the arrival of USMCA on July 1 will have many benefits for the North American economies generally, for in the energy sector, confrontation rather than cooperation is more likely unless steps are taken to preemptively resolve escalating disputes. On the positive side, after years of uncertainty on whether “new NAFTA” or “no NAFTA” would prevail against the back drop of heighten political tensions, USMCA coming into force on July 1 reaffirms the legal foundation upon which millions of jobs rely and decades of intricate supply chains have been built. USMCA can also be a needed booster shot for three economies ailing under coronavirus. Global dislocations in trade and enhanced imperatives for resilient supply chains create significant new opportunities for North America’s integrated supply chains to outcompete global rivals.

“Energy cooperation can be a significant competitive advantage for each of the USMCA economies. North America’s abundant, low-cost natural resources, backed by efficient capital markets and developed infrastructure, can affordably power economic recovery. The global energy system is in transition to be more diverse, efficient, and cleaner. North America is well-positioned to be the global leader in innovation, manufacture, and deployment of new energy technologies to define that transition. USMCA lays the legal basis for further commercial integration on energy, and maximizing benefit of that foundation requires enhanced policy and regulatory dialogue, including to bridge the gap on areas such as national climate policies and infrastructure permitting.

“For energy, however, the dawn of the USMCA era threatens to be mired in confrontation rather than cooperation.  The crux of concern is Mexico’s slide away from fair treatment of US and Canadian energy exports and companies investing in Mexico. For example, companies report having import permits slow-rolled, thus limiting access for natural gas and refined oil product exports at a time of severe distress in the industry. Renewable power advocates are concerned by recently introduced rules that would give preferential treatment to state-owned CFE over cheaper renewable power, thus locking Mexico into use of expensive and polluting fuel oil.  Those are just two examples of how President López Obrador’s more nationalist energy agenda threatens to cross a line from Mexico asserting legitimate sovereign policy-making into the realm of prohibited violations of USMCA fair treatment rules. With leaders scheduled to meet next week, there is still room for these budding issues to be put to rest and confrontation to be avoided.”

Neil Brown, senior fellow at the Atlantic Council’s Global Energy Center, formerly senior advisor for energy at the Senate Foreign Relations Committee.

Further reading:

New Atlanticist Jun 29, 2020

NAFTA’s successor is about to take effect. Here’s why it will be good for North America—and bad for the WTO

By Hung Tran

While the USMCA preserves free-trade flows among the three member countries, its use by the United States as a template for future trade negotiations, starting with the EU and the United Kingdom, would have a far-reaching effect on future developments of world trade.

Mexico Trade

New Atlanticist Apr 24, 2020

USMCA needs TTIP

By Marc L. Busch

Upgrading NAFTA was a long time coming, but things are different than they were in 1994 because Canada and Mexico have bilateral trade agreements with the European Union, and the United States doesn’t. The United States needs TTIP to make the most of USMCA.

European Union Mexico

New Atlanticist Dec 13, 2019

How the USMCA impacts transatlantic trade policy

By Barbara C. Matthews

The attention today rightly sits with the breakthroughs regarding the labor and environment provisions of the USMCA. But trade policy strategists in Europe and the United States should not delay in using the USMCA’s digital trade chapter as a catalyst to define new foundations for cross-border trade in data and services which will drive economic growth and innovation for the foreseeable future.

Digital Policy European Union

The post Start of USMCA brings hope amid COVID-19 economic crisis appeared first on Atlantic Council.

The United States-Mexico-Canada Agreement (USMCA) will take effect on July 1, 2020, replacing the North America Free Trade Agreement (NAFTA). The USMCA features several important changes while maintaining trade flows worth $1.2 trillion among the three-member countries.

It is the latest of the 303 regional trade agreements (RTAs) currently in force—whose rank is likely to increase in the foreseeable future. The RTAs have hollowed out the World Trade Organization (WTO), and this process is likely to accelerate going forward. About half of world trade is now covered by the RTAs, reducing the scope and relevance of WTO rules and tariff schedules, as well as its dispute settlement and appeal mechanism.

If the USMCA is used as a template for future US trade negotiations, that would hasten the regionalization of world trade, fragmenting the global trading system based on the WTO and marginalizing the organization.

Below are key features of the USMCA, most of which are new in a US trade agreement.

• Auto parts rules of origin: raising the threshold from 62.5 percent to 75 percent (and 70 percent for steel and aluminum used in making parts).

• Use of quota: while being frowned upon by the WTO, the USMCA contains side letters to exempt 2.6 million passenger vehicles each from Canada and Mexico from potential Section 232 tariffs (of the US Trade Expansion Act of 1962, threatened by the United States on national security ground) on an annual basis, and roughly current annual volumes of auto parts.

• New labor requirements: 40 to 45 percent of auto parts must be made by workers earning at least $16 per hour by 2023—to be more comparable to the US average wage levels in this sector. Mexico has also passed labor reform law promoting the unionization and collective bargaining rights of their workers.

• Agricultural markets: US farmers can have better access to Canada which has agreed to raise its tariff-free quotas on dairy, poultry, and egg products under its supply management regime.

• Digital trade: for the first time, there is a full chapter on free digital trade in an FTA. The chapter prohibits import duties and other charges on electronically transmitted digital products; discriminatory treatment of cross-border data transfers; and forced data localization.

• Dispute settlement: state-to-state disputes regarding a matter which arises under this agreement, or under another international agreement, including the WTO agreement, to which the disputing parties are party, are to be settled in a forum selected by the complaining party—giving it a choice of forum most favorable to its position, instead of automatically referring WTO disputes to the WTO dispute settlement system. Furthermore, if the formation of the arbitration panel (in a chosen forum) is being blocked by noncooperative responding parties, the USMCA Implementation Act (US Public Law 116-113) allows the United States to use its domestic laws to impose safeguards on any surges in imports from Canada and Mexico.

• Dealing with state-owned enterprises (SOEs) and subsidies: requiring SOEs to compete on commercial basis and that any advantages such as subsidies enjoyed by the SOEs do not have adverse effects on US companies and workers. These provisions are more comprehensive than the WTO’s rules on subsidies and countervailing duties.

• Dealing with a non-market economy: any member wanting to negotiate a free trade agreement with a non-market economy (as defined by a member—primarily aiming at China) has to keep other members informed; and upon conclusion of such agreement, the other members can withdraw from the USMCA with a six month notice.

• Including a chapter on currency manipulation: this is the first time currency manipulation is included in a trade agreement. Traditionally, currency issues are dealt with by the US Treasury, normally in consultation with the International Monetary Fund (IMF) and its members.

Potential impacts of the USMCA

Several features of the USMCA can be viewed as representing the US template in future trade negotiations. Many of those features enjoy bipartisan political support and therefore are likely to stay beyond US President Donald J. Trump’s presidency. Specifically, US emphases on free digital trade, reducing tariff and non-tariff barriers to its agricultural exports, dealing with SOEs and subsidies, dealing with a non-market economy, preserving the US ability to enforce its trade laws in trade remedies—including the anti-dumping, countervailing duties and safeguards laws, and currency manipulation can be found in the US Trade Representative’s negotiating objectives vis-a-vis the United Kingdom and the European Union (EU).

In addition to agriculture, there are new areas of frictions concerning the upcoming trade negotiations with the United Kingdom and the EU. The free digital trade emphasis in the USMCA would be at odds with the plan of many European countries (Austria, France, Hungary, Poland, Turkey, the United Kingdom, and others) to proceed with their national versions of a digital services tax after the United States pulled out of the multilateral negotiations sponsored by the Organization for Economic Co-operation and Development (OECD). The United States has threatened retaliatory tariffs on any country imposing digital taxes.

In addition, the USMCA emphasis on free cross-border flows of data would need to be reconciled with the EU General Data Privacy Regulation (GDPR). Obviously, the difference between the US position and China’s security-driven restrictions on cross-border flows of data is much more glaring.

Also problematic is the USMCA chapter dealing with non-market economies—this would complicate the EU’s effort to negotiate a Comprehensive Agreement in Investment with China as well as the United Kingdom’s desire to seek a trade deal with China. On top of those issues, the US threat of imposing Section 232 tariffs on automobiles and auto parts remains a major irritant in the negotiations.

For developing countries, in the context of its effort to tighten the self-designation as “developing countries,” if the United States makes regular use of its demands contained in the automobiles chapter, for example the requirement that 40 to 45 percent of auto parts have to be made by workers earning at least $16 per hour, that would dilute the comparative advantages enjoyed by developing countries in their efforts to promote foreign trade to industrialize their economies.

More generally, the emphasis on tightening rules of origin for auto parts will strengthen emerging trends toward regionalization. Many companies have taken advantage of technological advances, especially in automation, and followed a desire to be close to their customers by setting up local production facilities to supply large national or regional markets such as North America. Recently, this regionalization trend has received strong impetus from the US-China trade war and from efforts to diversify and streamline complex global supply chains due to disruptions caused by the COVID-19 pandemic.

Finally, quite detrimental to the integrity of the WTO is the USMCA use of quota in side letters (exempting current volumes of automobiles and parts imports from Canada and Mexico fro potential future tariffs); provisions for a complaining party to select the forum to settle disputes even if the matters arise under the WTO agreement; and preserving the US ability to use its domestic laws to remedy trade complaints. These will lead to a further marginalization of the WTO dispute settlement mechanism. Already the WTO Appellate Body has been rendered inoperative due to lack of the necessary quorum to hear cases since the beginning of the year. Furthermore, the United States has signaled its opposition to using WTO resources to support the alternative trade dispute appeal system recently launched by the EU, China, and eighteen other countries. The US opposition to the use of WTO resources to support activities benefiting a subset of the membership can also have a detrimental effect on the plurilateral approach—increasingly used by many WTO members trying to make headway in new trade negotiations with like-minded countries since the global multilateral approach has failed over the past decades.

In short, while the USMCA preserves free-trade flows among the three member countries, its use by the United States as a template for future trade negotiations, starting with the EU and the United Kingdom, would have a far-reaching effect on future developments of world trade. The global trading regime based on the WTO would shift more and more toward regional trading arrangements, in the process further fragmenting world trade and marginalizing the role of the WTO. This is all happening at a vulnerable moment for the WTO, which is going through a process of selecting a new director-general.

Hung Tran is a nonresident senior fellow at the Atlantic Council and former Executive Managing Director at the Institute of International Finance.

Further reading:

New Atlanticist Apr 24, 2020

USMCA needs TTIP

By Marc L. Busch

Upgrading NAFTA was a long time coming, but things are different than they were in 1994 because Canada and Mexico have bilateral trade agreements with the European Union, and the United States doesn’t. The United States needs TTIP to make the most of USMCA.

European Union Mexico

New Atlanticist Dec 13, 2019

How the USMCA impacts transatlantic trade policy

By Barbara C. Matthews

The attention today rightly sits with the breakthroughs regarding the labor and environment provisions of the USMCA. But trade policy strategists in Europe and the United States should not delay in using the USMCA’s digital trade chapter as a catalyst to define new foundations for cross-border trade in data and services which will drive economic growth and innovation for the foreseeable future.

Digital Policy European Union

New Atlanticist Dec 11, 2019

With bipartisan support, USMCA “can stand the test of time”

By Jasper Gilardi

“It is absolutely crucial for USMCA to be ratified with bipartisan support, and hopefully by including the Democrats in the process it will be an agreement that will serve the interest of all three countries for years to come,” said Jason Marczak, director of the Adrienne Arsht Latin America Center.

Mexico Trade

The post NAFTA’s successor is about to take effect. Here’s why it will be good for North America—and bad for the WTO appeared first on Atlantic Council.

In the city of Oaxaca, Mexico—known for its vibrant primary colors, iconic folk art and markets—one social enterprise has taken its relationship with local artists to a new level in the coronavirus pandemic, collaborating with them to create and design sustainable handwashing stations that serve as artistic sustenance as well as a public health measure.

Cosa Buena (which means “a good thing”) is a social enterprise in Oaxaca, Mexico that works with local artists to support the preservation of storied artistic traditions, and “to represent the depth of their cultural heritage and craft to outsiders.” Vera Claire founded Cosa Buena five years ago, with the aim of empowering Oaxacan artists and indigenous communities to navigate the international art and craft market without compromising the integrity of their beautiful work.

In normal times, they run critical literacy programs, gender equity workshops for female artisans, and art-focused cultural exchange programs and retreats. But when the coronavirus pandemic hit, travel ground to a halt, and the global economy took a hit. Soon the economic ripple effect also reached artists and artisans in Oaxaca.

Like many of us, Claire wondered if there was a way that she and Cosa Buena could help. “Personally, I was feeling a bit helpless but wanting to do something to support our community here through this crisis,” she said. “Preserving ancient crafts is a part of Oaxaca’s identity,” said Claire. “It’s not just what these communities do to make a living. It’s who they are.”

Mexico lacks equitable access to clean running water. “And so, you know, what does that mean in a pandemic when we’re being told washing your hands is one of the most important ways to protect yourself and others?,” asked Claire.

The idea to create handwashing stations to install at markets grew out of the reality of daily life in Oaxaca, where, Claire said, it was apparent from the beginning that many people do not have the privilege to be able to stay home and still be able to feed their families. “I began thinking, well what can we do to help support them, and handwashing was the number one recommendation. We immediately thought about local markets. Here in Oaxaca, local markets are a way of life, and people visit them very frequently, especially those who are living day to day. We zeroed in on markets as an area where risk could be high for transmission.”

Claire researched models of handwashing stations that had been implemented in densely-populated and low-resource settings, such as refugee camps. In consultation with recommendations from the World Health Organization (WHO) and the U.S. Centers for Disease Control (CDC), she and her husband developed a prototype that was approved by local authorities.

The model is operated by a foot lever, reducing the likelihood of COVID-19 transmission. The user only touches a bar of soap suspended by a rope.

In a matter of days, Cosa Buena pivoted from educational, art, and critical literacy progams to becoming a grassroots handwashing station factory. “We’re being given an opportunity now to really be creative and think of these solutions. We just hope that that inspires people — these are resources that are accessible and can be replicated across the world. It’s so needed now.”

Here, illustrator Cathryn Rose presents the materials needed for communities to build their own handwashing station, shown here in the Mixteco language from Tijaltepec.

“In early April, there were some public health officials going around with pamphlets listing the symptoms of coronavirus and preventative measures — and even those kind of public health advisories were not always reaching many communities because they’re only offered in Spanish,” said Claire.

In response to the gaps in access to public health information, Cosa Buena developed instructional materials in Mixteco and Zapotec languages for remote and rural communities wishing to build their own handwashing stations. The stations can be built with locally-sourced materials, at little cost: wood or branches, string, soap, and a container for the water. One model can be built into the earth, using tree branches and sticks.

On April 7, they installed the first handwashing station at Oaxaca’s Mercado la Merced, a food market famous for its delicious antojitos, ‘small cravings.’ Later designs would involve local artistry, but this one was simple and functional.

“Because that was the very first one, we wrote instructions in Sharpie on the actual station,” said Claire. The writing, in Spanish, translates as, “step on the pedal, wash your hands.”

Since installation, between 2000 and 3000 people have used the handwashing station.

“Oaxaca is a really unique place with an incredible amount of talent in terms of the traditional craft and artistry that’s being preserved here in all of these indigenous communities, and we also have a lot of contemporary artists and street art – it’s a huge part of the identity of the community here,” said Claire. With a view to creating a space for social expression, she asked local artists to paint the stations. “The response was really wonderful, and there were a lot of artists writing, saying “I would love to do this.” It’s become a beautiful way to connect with our community.”

Each artist prepared a short text to accompany their handwashing station, which also serves as a message for community solidarity and support. Here, the artist Bouler has created a piece entitled “Renacer” (“Reborn”), inspired by the spirit mezcal, produced in Oaxaca through a process handed down through generations; a process that is a labor of love.

“Reborn from the ashes like the heart of the maguey plant (agave) in the making of mezcal,” the text reads. “Thus humanity will be reborn from within, leading from the heart.”

Artist Yesca created this handwashing station, entitled “Unidad y Esperanza” (“Unity and Hope”). “We are the disease, we are the cure, unity and hope is the vaccine,” the text reads.

Alongside creating handwashing stations, Cosa Buena has also run a campaign informing people how to correctly wear, remove, and dispose of masks. “We’ve been really conscientious about representation and making the drawings look like people in the communities — using their languages, making the content feel familiar. I think that’s so important in public health messaging,” said Claire.

This drawing of a grandmother correctly wearing a mask was based on a photo of one of Cosa Buena’s community partners. “When I sent the drawing to her family, they were just thrilled about it,” she said.

Public health crises are not only crises for science and medicine, but crises of human connection. In the midst of them, we should not overlook the healing quality of art. Cosa Buena’s handwashing stations offer both form and function, meeting an important public health need while also providing artistic sustenance.

“We are all going through so many different emotions, internally trying to understand our place our role in this pandemic,” said Claire. “I think a lot of us understand that while all in the same storm, we’re not in the same boat. This pandemic has made disparities and inequalities within society very apparent. And I think art is a way to bring us together. Really, this was just an idea that popped in into my head and I’m so pleased with how it was received. People here have reached out and said, Oh, it’s so lovely to see them painted, and in our city that’s so full of color, it’s become another way for people to process and communicate what they’re feeling and what they hope for our community.”

To illustrate that last idea, here’s a handwashing station by artist Karel Muñuzuri. “Life is fragile, we hang from a pendulum with a thread of water,” the text reads. “The global situation that threatens us today presents a reality none of us could have imagined. Let us never forget that in difficult situations, development and community participation is the essence of our nature to solve problems and art, to sensitize the community and thus create sensible solutions. A community without art ends up destroying itself. “The ends and the means are not separable,” insisted Gandhi. “The means are the ends.”

This is a project from the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center and the Digital Forensic Research Lab. 

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The post Cosa Buena: A good thing for art and public health in Oaxaca appeared first on Atlantic Council.

The post Busch in The Hill: A vote against the WTO is a vote against Trump’s trade priorities appeared first on Atlantic Council.

The rumor is that the United States-Mexico-Canada Agreement (USMCA) will enter into force in the United States on July 1. The occasion will be met with a sigh of relief, giving its predecessor, the North American Free Trade Agreement (NAFTA), a new lease on life.

But the work is just starting. That’s because the success of the USMCA will require that the United States sign yet another agreement: The Transatlantic Trade and Investment Partnership (TTIP).

This is the untold story of USMCA. Upgrading NAFTA was a long time coming, but things are different than they were in 1994 because Canada and Mexico have bilateral trade agreements with the European Union, and the United States doesn’t. The United States needs TTIP to make the most of USMCA.

This reality has been hiding in plain sight for years. The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) went into force in 2017, cutting 99 percent of tariffs. One year later, the EU and Mexico upgraded their 1997 Global Agreement with a deal on goods, services, and government procurement, among other issues. This leaves the United States as the missing link. Why does it matter?

Imagine a US company that manufacturers widgets. USMCA ensures this company zero tariffs in Canada and Mexico. But if the company were to move to Canada or Mexico, it would also enjoy zero tariff market access to the EU under CETA or EU-Mexico, while still being able to ship back to the United States at zero tariff under USMCA. This is called an “inversion.”

The answer is TTIP. Think of TTIP as completing a transatlantic free trade area. Without it, you get USMCA-inspired inversions from the United States.

The risk of this incomplete triangle has been staring Washington in the face for years. The first round of TTIP negotiations took place in 2013 and ran through 2015, only to fall victim to the politics of 2016. The shame in this, quite apart from fears of inversions, is that the agreement was shaping up to be the best the United States has ever negotiated. Indeed, given the nature of US-EU trade, the deal myopically set its sights on correcting the most vexing market access problems.

EU politics didn’t help things. The realization that TTIP would allow US firms to compete on par in Europe, and even have a greater voice in regulatory politics across member states, did much to undermine Brussels’ negotiating authority, which has since lapsed.

Is there a way forward? Skeptics will insist that there is no political appetite for TTIP on either side of the Atlantic. Perhaps. But the reality is that not signing TTIP will be more costly for both sides, both commercially and politically. After all, EU firms have the same incentive to relocate to Canada or Mexico as US firms.

A new narrative will be needed, one that moves away from concerns about competing against low-wage labor and instead focuses on state-of-the-art concerns, like services and intellectual property.

The text of CETA can help in this regard. It contains provisions that will appeal to trade skeptics worried about labor and the environment, and win over trade proponents looking for modern obligations that go well beyond those of the World Trade Organization.

Is this the time to talk honestly about USMCA’s need for TTIP? The easy answer is no, first and foremost because the United States is gearing up for elections in November. That said, the coronavirus pandemic is raising axiomatic questions about how to reopen the economy, in addition to concerns about the proliferation of export restrictions.

USMCA brings predictability and stability to the supply chains that crisscross North America. Yet given CETA and EU-Mexico, the fact is that USMCA will fall short without TTIP. US politics is no more immune to international pressures than US commerce. The case for TTIP reflects the confluence of both.   

Marc L. Busch is the Karl F. Landegger professor of international business diplomacy at the Edmund A. Walsh School of Foreign Service at Georgetown University and a nonresident senior fellow in the Atlantic Council Scowcroft Center for Strategy and Security’s Transatlantic Security Initiative.

Further reading:

New Atlanticist Apr 15, 2020

Sanitizing supply chains can jumpstart coronavirus-ridden transatlantic economy

By Barbara C. Matthews

Transatlantic policymakers must urgently find new ways to address this deepening crisis at the core of the interdependent economy that delivers economic growth and jobs. This requires finding ways right now to reactivate supply chains and increase confidence in supply chain control processes throughout this crisis.

European Union International Markets

Insights & Impact Feb 5, 2020

Europe to take center stage in global trade talks

By Hung Tran

With the “phase one” trade deal behind them, the United States and China will now probably shift attention to sorting out their economic and trade relationships with Europe. Caught in the middle of the US-China trade war and geopolitical competition, the European Union (EU) has tried to steer an independent course, balancing security and geopolitical concerns with economic and business needs. Doing so, however, has exposed many differences vis-a-vis the United States as well as China.

China European Union

New Atlanticist Jan 27, 2020

How the transatlantic trade agenda can get its groove back in 2020

By Barbara C. Matthews

Transatlantic policymakers should not waste this opportunity to redefine the transatlantic relationship. Leaders looking for traction should learn from the recent past and chart a different trajectory this year. In particular, they should acknowledge that different interests exist, focus on economic areas where interests align well, and pragmatically maximize efforts to align commitments.

European Union Trade

The post USMCA needs TTIP appeared first on Atlantic Council.

In the post-coronavirus (COVID-19) world, US-Mexico security cooperation will continue to be critical for North America’s stability and prosperity. Leading thinkers are debating whether the post-pandemic world will be more globalist or nationalist. In North America, a collaborative approach to improve security is key for a peaceful, prosperous, and competitive region.

The current health and economic crises might impact Mexico’s security in three ways: first, by causing social instability; second, by straining law enforcement resources in marginal regions; and third, by flaring up the migration crisis.

Scarcity and discontent may cause social unrest. While this is unlikely to affect the whole country, some areas—like densely populated suburbs—are particularly vulnerable. Some have used social media to call for massive store-lootings, a practice that began in 2017 when participants robbed nearly 250 stores after the government raised gasoline prices. Besides, the presence of violent groups—often hired by political operatives—that infiltrate and delegitimize peaceful protests to trigger violent police responses increases the risk of clashes between government forces and protesters.

This year, Mexico will have fewer fiscal resources to strengthen its rule of law. According to the International Monetary Fund (IMF), Mexico’s gross domestic product (GDP) will decrease by 6.6 percent in 2020, whereas Bank of America forecasted a contraction of eight percent. Meanwhile, Mexico’s Secretariat of Finance estimated that the federal government is expecting a reduction of 4.4 percent in tax revenue this year. These figures suggest that Mexico will have fewer economic resources for security, even after the enhanced security budget for 2020.

Moreover, law enforcement agencies will also suffer from staffing strains. On April 14, elements of the Mexican armed forces were deployed to support public security in Mexico City, where more than 2,184 police agents were sent home due to health concerns.

As law enforcement focuses on the pandemic, homicides reached a new monthly record in March. Eduardo Guerrero, a security analyst based in Mexico, argued that while crime trends may vary due to the quarantine, the most relevant criminal organizations in Mexico will be able to resist the short-term losses of the quarantine and they will be key players in the coming months.

Governance may be hindered in marginal areas due to diminished resources. This can have tremendous social and political consequences since the delivery of health and development services to the poorest communities can be compromised. In turn, non-state actors such as Transnational Criminal Organizations (TCOs) can fill the gaps left by governments and increase their political capital—a perilous scenario for the Mexican federal and state governments, since TCOs could control humanitarian aid or compete with the state to deliver it. This can happen in some areas of Michoacán and Tamaulipas, where media outlets reported that drug cartels are distributing aid packages. Government authorities must be present in marginalized areas during the COVID-19 outbreak and its aftermath, and Mexican President López Obrador’s high approval ratings can be an opportunity to strengthen the bonds between underserved communities and the state.

Finally, the pandemic might affect migrants stranded in Mexico, adding human damage and compromising social harmony in border areas. Migrant shelters in Mexico often operate over capacity and face particularly high risks of contagion. If migrants are not safe in Mexico, the risk of contagion in border areas will significantly increase. Thus, the United States and Mexico must find creative solutions to shelter migrant communities, both for humanitarian reasons and for social stability.

Post-COVID-19 US-Mexico security cooperation

To help avoid these scenarios, the United States and Mexico must strengthen their security ties and continue with their security agendas. As former US Ambassador to Mexico Earl Anthony Wayne recommended before the COVID-19 outbreak, both countries should maintain and expand their bilateral security task forces, increase intelligence sharing to reduce the flow of weapons and illegal drugs across the border, and maintain the flow of US aid destined for security and rule of law.

The current situation presents an opportunity to explore other areas of collaboration. For example—as a US-Mexico Security Cooperation Task Force led by the University of California San Diego suggests—both countries could increase subnational security cooperation. Additionally, maintaining and enlarging collaboration and aid programs with Central America could improve the whole region’s stability by reducing migration flows.

After the COVID-19 crisis, the United States and Mexico might be more connected. Supply chains may become more regionalized, reducing dependence on China and other regions. Securing those supply chains will be critical for North American competitiveness. Moreover, the looming shocks of the current crisis will remind us of the transnational nature of security in North America. TCOs operating in Mexico are not a “Mexico-only” issue, they are also dependent on US illegal markets and the flow of guns to the south.

US-Mexico security cooperation after COVID-19 can be a positive-sum game. The coming environment will be challenging and will require stronger cooperation. Mutual security threats remind us that—regardless of historical or ideological differences—the bilateral security agenda is, after all, a shared project.

Pablo Reynoso Brito is a program assistant with the Atlantic Council’s Adrienne Arsht Latin America Center, where he focuses on Mexico.

Further reading:

New Atlanticist Mar 25, 2020

What Mexico’s response to H1N1 can teach us about coronavirus and future pandemics

By Pablo Reynoso Brito

While the A(H1N1) and novel coronavirus (COVID-19) crises are different in magnitude and were caused by viruses with different levels of lethality, Mexico’s experience with the A(H1N1) can offer valuable lessons for current disruptions.

Coronavirus Mexico

New Atlanticist Apr 14, 2020

President Duque outlines how Colombia is handling dual coronavirus challenges

By David A. Wemer

For most countries around the world, the spread of the novel coronavirus (COVID-19) has strained resources and demanded singular attention from policymakers. For Colombia, this new crisis must also be juggled with the ongoing collapse of neighboring Venezuela, which has already seen 2 million Venezuelans seek refuge in Colombia. “We have had to manage two crises at the same time,” President Iván Duque explained on April 14, which forced Colombia to take drastic measures to contain coronavirus earlier than many of its neighbors.

Colombia Coronavirus

New Atlanticist Mar 23, 2020

What Latin American countries are doing to confront coronavirus

By David A. Wemer

As governments in North America, Europe, Asia, and around the world continue to combat the spread of the novel coronavirus (COVID-19), Latin American leaders are stepping up their efforts as cases are beginning to be documented in their countries. Although the number of cases across the region remains mostly lower than the epicenters in Europe and the United States, “we are not letting our guard down,” El Salvador’s Minister of Foreign Affairs Alexandra Hill Tinoco said on March 23. “No one can guarantee us that it is not going to hit us,” she explained, so every Latin American government is taking the threat seriously.

Colombia Coronavirus

The post US-Mexico security cooperation after the COVID-19 shocks appeared first on Atlantic Council.

Donald Trump has called himself a “war-time” president, referring to his campaign as commander-in-chief against coronavirus. In past days, he has taken on a new role as negotiator-in-chief trying to end the oil-price war that is endangering U.S. shale producers and hundreds of thousands of jobs.

This week’s result is an emergency, virtual meeting of OPEC leaders with Russia, Canada and Mexico. It was delayed from Monday until Thursday due to an ongoing Saudi-Moscow dispute about how to address the biggest collapse in global demand and prices since the discovery of the world’s first viable oil well in the mid-19^th century.

What’s decided at that meeting will say much about the limits to the leverage President Trump wields as the world’s leading oil and gas producer and with two authoritarian leaders in whom he’s invested so much – Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman.

It was the bitter Riyadh-Moscow battle for market share since early March that had prompted a record two-thirds decline in oil prices to $21.65 per barrel, the lowest point since 2002. Yet Trump’s intervention with both men last week, as described to CNBC’s Joe Kiernan, had seemed to pay off.

Trump said that he expected OPEC and the Russians to announce cuts of as much as 15 million barrels off the global total of 100 million. Markets rallied on Thursday and Friday to their biggest one-week gains ever of nearly 37% – only for investors to wake up this weekend to continued Saudi-Russian sniping and the possibility of a renewed price plunge this week.

What markets are missing in these radical swings is that a greater power than these three alpha males – Trump, Putin and MBS – is at work. They face the inescapable force of COVID-19, which for weeks and perhaps months to come will depress the global economy. April demand is thought to have dropped by more than 20 million barrels and perhaps by as much as 30 million – a far greater sum than any cuts producers may announce this week.

Never has the world experienced such a double whammy of demand shock and supply surge. In the end, it could be limits to global storage more than Trumpian intervention that shut off the spigots.

Writing in Foreign Affairs, Pulitzer Prize-winning author and energy expert Daniel Yergin calculates that “virtually every available gallon of storage space in the world will be full by late April or early May.  When that happens, two things will result: prices will plummet and producers will shut down wells because they cannot dispose of the oil.”

However this remarkable chapter in energy history ends, it’s revealing to study what was behind President Trump’s dramatic course reversal on how to approach the record decline of oil prices, which he on March 31^st called “the greatest tax cut ever given” the American consumer.

Some factors behind this U-turn were the persistent influence of 2020 electoral politics, the little-known role of former Energy Secretary Rick Perry and a threat to a Saudi-owned Texas refinery, and the lobbying power of the American energy industry (and some 2.5 million jobs it’s estimated to create).

President Trump began to reverse course when confronted by aggressive lobbying by American oil companies and shale producers that he should apply more pressure on his Russian and Saudi friends to cut their production. His concerns grew further when confronted by the potential impact of energy company bankruptcies on U.S. employment and his own November electoral chances, particularly in Texas.

Most intriguing, as the Financial Times reported Friday, a key individual behind the President’s apparent turn was former Texas Governor Rick Perry, who was Trump’s energy secretary until the end of last year.

Though Perry had established good relations with his Saudi partners, he advocated that the U.S. block Saudi crude from reaching North America’s biggest refinery in Port Arthur, Texas, which is fully owned by the Saudis.

Speaking to Fox News on March 31^st , Perry said he would advise Trump to tell U.S.-based refineries to use only American-produced crude for the next two to three months. That would send a “clear message that we’re just not going to let foreign oil flow in here,” Perry said.

Shale producers had been lobbying the White House at the same time to suspend U.S. military aid to Saudi Arabia and impose further sanctions on Russian energy until the new countries cut their production. They also argued that the President should consider lifting some existing Russian sanctions should Putin play ball and back off his campaign to put them out of business.

However, it appears to have been the threat to the Saudi refinery and to its overall relations with the United States that got Riyadh’s attention. When confronted by the possibility that Putin and the Saudi crown prince might not deliver on their production cuts this weekend, Trump upped the ante on Saturday and said he would impose tariffs on oil imports to “protect” U.S. energy workers from an oil price crash.

This would be a win for the smaller and mid-sized producers versus the United States’ oil majors, who have opposed punitive tariffs.  

At the same time, President Trump may need to determine how he can deliver on Saudi demands for U.S. production cuts, lacking any direct ability to influence American producers. The two likeliest options would be a voluntary decision of the Railroad Commission of Texas, which regulates the state’s oil and gas industry, or a shutdown of Gulf of Mexico platforms and their 1.8 million barrels daily, using the threat of coronavirus to their workers as the reasoning.

The uncomfortable fact for President Trump is that despite his long-standing criticism of the OPEC and his support for free energy markets, he needs the cartel’s market intervention to keep shale producers afloat.

President Trump doesn’t have good options. He lacks easy leverage over the players, domestic and international, and he’s got even less control over the COVID —19 economic hit.

In the end, it is more likely that a U.S. government bailout will save the industry, rather than a global market intervention.

This article originally appeared on CNBC.com

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on Twitter @FredKempe.

Inflection Points

Mar 7, 2020

Coronavirus is already changing the world

By Frederick Kempe

The first returns are in regarding how the coronavirus episode might change the world. No doubt the virus is a curse, but it also could be a blessing if politicians and voters heed its lessons. As Winston Churchill said on the cusp of World War II, “Never let a good crisis go to waste.”

Coronavirus Crisis Management

MUST-READS FROM A WORLD IN TRANSITION

This week’s must-read comes from Henry Kissinger, who at age 96 delivers the most powerful mission statement for the Atlantic Council and warning for the United States simultaneously.

“The historic challenge for leaders is to manage the crisis while building the future,” he concludes. “Failure could set the world on fire.”

Also, don’t miss former FT editor Lionel Barber’s reflections on our changing world in the UK Spectator, Dan Yergin’s brilliant guide to the oil price war in Foreign Affairs, and Ana Palacio’s concerns about COVID-19 and democracy in Project Syndicate.

If you don’t think saving lives and the economy can be done at the same time, read Rajiv Shah and Paul Romer’s novel look at a different sort of testing from the Wall Street Journal.

#1. KISSINGER’S MUST-READ WARNING          

The Coronavirus Pandemic Will Forever Alter the World Order
Henry A. Kissinger / WALL STREET JOURNAL

Speaking with a friend this week, I said that the voice we most needed to hear right now was that of Henry Kissinger. Then in the Saturday Wall Street Journal I found one of the most significant statements he’s made in his 96 years.

Read every word, starting with his time as a young infantryman during the Battle of the Bulge, but the two most important paragraphs are the following:

“No country, not even the United States, can in a purely national effort overcome the virus. Addressing the necessities of the moment must ultimately be coupled with a global collaborative vision and program. If we cannot do both in tandem, we will face the worst of each.”

Building off this, he concludes with a warning:

“We went on from the Battle of the Bulge into a world of growing prosperity and enhanced human dignity. Now, we live an epochal period. The historic challenge for leaders is to manage the crisis while building the future. Failure could set the world on fire.” Read More →

#2. NOTHING WILL REMAIN THE SAME

How will the world be changed by the war against coronavirus?
Lionel Barber / THE SPECTATOR

It was good to see my friend of many years, the former FT editor Lionel Barber, reflecting in the UK’s Spectator on how “the world as we have known it for the past 40 years has come to a stop.”

He raises the provocative question: “Will March 2020 be remembered like the Great Crash of 1929 or the end of World War Two in 1945, events which catalyzed radical changes in the way economies and societies were organized across the world.”

He considers the potential answers from the future of globalization and the European Union to the potential impact on America’s election and emerging markets. What’s clear: nothing will remain the same. Read More →

#3. “A MARKET OVERWHELMED”

The Oil Collapse
Daniel Yergin / FOREIGN AFFAIRS

Emerging-Market Petrostates Are About to Melt Down
Amy Myers Jaffe / FOREIGN AFFAIRS

If Henry Kissinger is the person to whom one turns on threats to the global order, then Dan Yergin is my author of choice in navigating the energy world.

“The global oil market has never in history collapsed as precipitously as it has right now,” he writes in Foreign Affairs, brilliantly guiding the reader through the events of the past weeks that have landed us there.

“With much of the global economy at a standstill, the oil crisis is going to get worse in the weeks ahead,” he writes. “Some of that might be the result of the coronavirus infecting and disrupting operations in different parts of the world. Some if it might be the result of decisions by countries despite an era of fractious global politics. But the bulk of the decline will be the result of a market overwhelmed by the sheer fury of the coronavirus and the shutdown of the world economy.” Read More →

Also, don’t miss Amy Myers Jaffe, also in Foreign Affairs, dissecting the threat to emerging-market petrostates. Keep your eye on Ecuador, Iraq, Nigeria, and Mexico – and oil-linked debt woes that “could explode across the Middle East, Latin America, and Africa in 2020.” Read More →

#4. THE THREAT TO DEMOCRACY

Can Liberal Democracy Survive COVID-19?
Ana Palacio / PROJECT SYNDICATE

Former Spanish Foreign Minister Ana Palacio, also an Atlantic Council board member, contributes to the urgently needed conversation on how to defend democracy while conquering COVID-19.

“….the coming economic crisis will deepen doubts about western liberalism and weaken its position in the global contest of ideas that is currently underway,” she writes. “It is thus imperative that Western leaders not only limit the spread of COVID-19, but also foster social cohesion, devise a credible path back toward growth and normalcy, and reinvigorate the values and institutions that underpin liberal democratic societies.” Read More →

#5. NEW THINKING ON TESTING

Testing is Our Way Out
Paul Romer and Rajiv Shah / WALL STREET JOURNAL

Nobel Prize-winning economist Paul Romer and Rockefeller Foundation President Rajiv Shah suggest a novel approach to COVID-19 testing that could manage the virus in a more targeted manner and thus avoid a depression.

“Two types of testing will be essential,” they write. “The first test, which relies on a technology known as the polymerase chain reaction, or PCR, can detect the virus even before a person has symptoms. It is the best way to identify who is infected. The second test looks not for the virus but for the antibodies that the immune system produces to fight it…”

The authors argue that the two tests together will give policymakers the data to make smarter, faster decisions and better target efforts. Read More →

(They’ll speak on Wednesday at 11 am at an Atlantic Council virtual event, explaining their approach.)

PERSON OF THE WEEK

ATLANTIC COUNCIL TOP READS

New Atlanticist Mar 31, 2020

Europe’s economic emergency is also a geopolitical one

By Benjamin Haddad and Josh Lipsky

European leaders are deciding the future of European power on the world stage. If Europeans can’t ensure solidarity with each other after so much pain and sacrifice, it will not only be a devastating loss for Europe. It will also be a blow to a world looking for the political shape of a post-coronavirus world.

Coronavirus European Union

New Atlanticist Apr 3, 2020

American disaster, American resilience

By Daniel Fried

As we contemplate the road back from the coronavirus depression, we need to think big and fix things, at home and abroad. We’re still going deeper into an American disaster. But American resilience can get us out of it.

Coronavirus Economy & Business

New Atlanticist Apr 1, 2020

The coronavirus economic crisis: Supporting the weak links

By Hung Tran

In the present pandemic crisis, major countries have moved more quickly, offering more substantial monetary and fiscal support packages, including better targeted programs than in 2008-09. The challenge now is to quickly deliver the help to the weak entities which need liquidity the most. After all, any system is only as strong as its weakest link.

Coronavirus International Financial Institutions

The post Trump lacks options in oil price war; Kissinger warns of “world on fire” appeared first on Atlantic Council.

In early April 2009, several cases of “atypical pneumonia” were reported in Mexico City, caused by influenza type A, sometimes called the swine flu and denominated as A(H1-N1). While the A(H1N1) and novel coronavirus (COVID-19) crises are different in magnitude and were caused by viruses with different levels of lethality, Mexico’s experience with the A(H1N1) can offer valuable lessons for current disruptions.

On March 23, Mexico officially entered phase two of COVID-19’s outbreak, which means that the virus is now locally spreading and not imported from other regions. In response, the current administration is taking measures such as releasing public funds to enhance the National Defense Plan III (DN-III)—which allows the use of military assets against natural disasters—credits for small businesses, and agreements with the private sector to alleviate effects on workers. During the COVID-19 crisis, it is important to look back on the A(H1N1) experience.

The 2009 A(H1N1) pandemic had devastating economic implications in Mexico, just as COVID-19 is having on the global economy. In 2008, Mexico’s gross domestic product (GDP) grew by 1.14 percent. A year later—after the A(H1N1) crisis—its GDP growth fell to -5.28 percent. Moreover, the A(H1N1) outbreak coincided with the effects of the 2008 financial crisis, when Mexico lost a significant amount of exports to the United States. Both events contributed to a tough year for the Mexican economy and a report from the Economic Commission for Latin America and the Caribbean (ECLAC) estimated that the A(H1N1) outbreak triggered $9.1 billion in losses. Ninety-six percent of that amount was due to lower production and consumption of goods and services, while the remaining 4 percent accounted for the expenses to address the crisis. The cost of the pandemic was estimated at 1 percent of Mexico’s GDP in 2008.

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The A(H1N1) outbreak particularly impacted tourism—an important component of the Mexican economy due to its magnitude and its importance as a source of foreign currency; the tourism industry lost an average of 80 percent of its sales. After the first weeks of the quarantine, 90 percent of the country’s hotel and transportation reservations were canceled, along with 290 cruise ship arrivals. It was estimated that in 2009, Mexico lost $3.4 billion from touristic activities due to the pandemic. The most affected sectors after tourism were commerce and transportation with $3.2 billion and $1.2 billion in losses respectively.

Despite the economic sacrifice, Mexico was instrumental in containing the virus, and the World Health Organization (WHO) praised Mexico’s response for its international cooperation, its effective management of the crisis, and its transparency. For example, Mexico created an effective risk communication plan, launched a health promotion campaign, took measures to guarantee the supply of healthcare goods—including the reinforcement of a strategic stockpile—and promoted research and development. 

Former President of Mexico Felipe Calderón wrote in his memoirs that government officials feared that the A(H1N1) could have had the lethality of avian influenza: around 60 percent. By early April of that year, Mexico City—then with 22 million inhabitants and a population density of approximately 5,900 inhabitants per square kilometer—had become the outbreak’s epicenter. A slow response to a virus with those levels of lethality would have been catastrophic.

On April 17, the Mexican government decided to act rapidly, issuing an epidemiological alert across the country. A few days later, all events that gathered large groups of people were canceled for at least thirteen days. In a country where more than 58 percent of the workforce depended on the informal economy, the measures threatened not only to devastate the economy, but cause tremendous social upheaval.

Macroeconomic policies in response to A(H1N1)

To mitigate the economic harm, the Mexican government responded with a set of fiscal measures, reducing business and individual taxes, cutting social security rates for workers, sending tax rebates of 25 percent to hotels and restaurants, discounting 50 percent of taxes for using airports and ports, creating a special fund for tourism promotion in coordination with state governments, and increasing financing for small and medium enterprises (SMEs).

In the following years, the Mexican economy recovered, growing by 5.1 percent in 2010 and an average of 3.2 percent from 2010 to 2015. Although many factors caused the recovery, sound government policies to mitigate the shock were paramount.

Lessons learned for COVID-19 and future outbreaks

There are at least four measures taken by Mexico during the A(H1N1) outbreak that are worth recalling for the COVID-19 crisis. First, international collaboration to conduct scientific analysis on samples, establishing protocols, and preparing for a more extended pandemic, is crucial.

Margaret Chan, then director-general of the WHO, mentioned in a high-level meeting on A(H1N1) in Cancún that “Mexico gave the world an early warning, and it also gave the world a model of rapid and transparent reporting, aggressive control measures, and generous sharing of data and samples.” It is worth highlighting cooperation between North American countries, Chan acknowledged, explaining that “Canada and the United States supported the early control measures in Mexico, and then followed this model of transparent reporting and generous collaboration as their outbreaks began to spread.”

Second, as argued by José Córdova—then-secretary of Health—the Mexican government was right to follow the National Preparedness and Response Plan for an Influenza Pandemic, a multisectoral plan established in 2003, anticipating an influenza outbreak under various scenarios. This plan was issued after the Mexican government included health security as a component of its national security doctrine and was developed by a high-level working group that included the secretary of National Defense and the secretary of Navy. The plan contained a multisectoral operating strategy with specific actions for each institution. By following this plan, the Mexican government signaled institutional coordination and maturity, which can provide order and certainty in times of crisis.

Third, a willingness to provide Mexican citizens with the best information available—and on time. By publishing statistics about the A(H1N1) outbreak, the Mexican government earned society’s trust, which allowed a responsible social reaction during the quarantine. Although criticisms have been made about overreaction, the Mexican government acted on the side of caution with the available information.

Finally, after managing the outbreak, the government implemented a series of targeted measures to stimulate affected economic sectors—especially tourism and SME’s.

In times of uncertainty, it is important to turn to historical experiences and critically evaluate what others did. Although the A(H1N1) and COVID-19 are different crises with different effects and scale, recalling previous experiences is illustrative. In 2009, Mexico erred on the side of caution, and while this generated criticism, it also showed how a responsible actor limited what could have been a much wider human and economic shock.

Pablo Reynoso Brito is a program assistant with the Atlantic Council’s Adrienne Arsht Latin America Center, where he focuses on Mexico.

Further reading

New Atlanticist Mar 18, 2020

How the coronavirus will impact Panama’s economy

By Cristina Guevara

Panama’s economy—currently precarious and stagnant—depends on infrastructure megaprojects, international trade, and financial services, making it especially vulnerable to external changes like coronavirus.

Coronavirus International Markets

AfricaSource Mar 24, 2020

What does the coronavirus mean for Africa?

By Bronwyn Bruton

Will the novel coronavirus prove even more deadly and disruptive in Africa? It depends on the country. Bronwyn Bruton identifies the key questions and sets the stage for the Africa’s Center’s ongoing commentary on the crisis.

Africa Coronavirus

New Atlanticist Mar 23, 2020

What Latin American countries are doing to confront coronavirus

By David A. Wemer

As governments in North America, Europe, Asia, and around the world continue to combat the spread of the novel coronavirus (COVID-19), Latin American leaders are stepping up their efforts as cases are beginning to be documented in their countries. Although the number of cases across the region remains mostly lower than the epicenters in Europe and the United States, “we are not letting our guard down,” El Salvador’s Minister of Foreign Affairs Alexandra Hill Tinoco said on March 23. “No one can guarantee us that it is not going to hit us,” she explained, so every Latin American government is taking the threat seriously.

Colombia Coronavirus