Democratic backsliding harms the potential of a US-Mexico supply chain pivot

Excerpt

Mexico remains one of the United States’ most important allies and trading partners, but its engagement with the U.S. is cycling between two seemingly opposing trends: the desire to attract more U.S. investment to Mexico on the one hand and President Andres Manuel Lopez Obrador’s democratic backsliding and political distancing from the U.S. on the other. It will be difficult for the Obrador government to have it both ways. The Biden administration should pursue a refreshed economic security strategy reinforcing a democratic alliance with Mexico.

The timing could not be better for a relationship reset. U.S.-China trade tension, overstretched supply lines, and a corporate appetite for moving supply chains closer to home could be a windfall for Mexican industry. A rejuvenated U.S.-Mexico relationship could prove to be an unexpected silver lining from the pandemic’s impact on tightly woven, just-in-time supply chains.

Mexico is a logical and, in many ways, ideal destination. It is already a hub for U.S. manufacturers, with deep transport networks, infrastructure, skilled workers, and 30 years of NAFTA-driven integration. If it can seize the moment, Mexico could reap a once-in-a-generation U.S. manufacturing, innovation, and investment infusion in semiconductor manufacturing, solar technology, and electric battery production — and a deepening of investment in legacy areas like agriculture, automotive, medical equipment, and textiles.