Good afternoon,

Honorable Lincoln Díaz-Balart,

Executive Director Mary Ann Gómez,

Ladies and gentlemen,

I would like to thank the Chair of the Board of Directors Lincoln Díaz Balart for the kind introduction and for this invitation to speak about our bilateral relationship.

By convening this conference, the Congressional Hispanic Leadership Institute continues to promote the advancement of Hispanics in all sectors of the economy, and a better understanding of international trade and investment opportunities.

This timely event has covered a broad array of topics, from STEM to trade agreements, tax policies, financial policies and trade, Western Hemisphere competitiveness, and growth of the US economy. The previous sessions have shown the vast array and complexity of issues that fall within what is commonly referred to as international trade policy and the domestic policies that support it.

I have been asked to make a few remarks, and I will take this opportunity to outline my vision on Mexico-US trade relations, and more generally on the future of North American economic integration, highlighting some of the assets we have and where we must work harder to turn this vision into a reality.

The future of economic integration in North America

  • I strongly believe that North America, with its combination of geography, demographics, energy resources and capabilities, can become the most competitive region in the world.
  • PricewaterhouseCoopers estimates that in 2050 the US and Canada will have the world’s highest per capita GDP. Mexico will rank as 7th largest economy in the world and will lead Latin American in per capita GDP.
  • In 2050, the North American region will have about 530 million inhabitants, more than the European Union. Mexico and the US will have a low dependency ratio of 35.4 for the US and 31.3 for Mexico.
  • We have a demographic bonus and our demographic profile is complementary. In contrast, other countries in Europe and Asia will face very serious challenges in declining total population and sustaining an aging population. In demographics, North America has one of its strongest assets.
  • According to the latest BP Energy Outlook, by 2035 North America will be a net oil exporter, accounting for 6% of global energy exports, and by 2017 the region could become a net exporter of natural gas.
  • North America will be the only region of the world over that period that moves from being a net energy importer to a net exporter, so while China and Europe become more dependent on energy imports, North America will become self-sufficient.
  • North America thus has all the necessary energy resources to fuel its economic growth for a long time, and reliable and affordable energy will be a key component in ensuring a very competitive North American manufacturing base

ENERGY

  • The past two decades have deepened Mexico-US economic integration. The dramatic increase in bilateral trade and investment over the past two decades, from less than 80 billion dollars in 1993 (the year before NAFTA entered into force) to more than 500 billion, was partly the result of the clear and stable rules established by NAFTA but, more importantly, by the decisions taken by businesses.
  • Beyond the establishment of a free trade area, something more significant happened these past 20 years —North America became a region of shared production. We are jointly producing goods through the deeply integrated production and supply chains that have developed as the result of the clear, stable and transparent rules established by NAFTA, and are increasingly engaging with the global economy as a single region.
  • The paradigmatic example of North American production is the auto industry, but aerospace production is also becoming increasingly regional. Bombardier, the Canadian aerospace company, is a good example of an integrated North American operation where design and manufacturing are shared among the three countries. Bombardier Aerospace manufactures the fuselage and cockpit of the Learjet 85 business jet in Querétaro, which uses Pratt & Whitney turbines made in Québec, and final assembly takes place in Wichita, Kansas.
  • Growing intra-regional investment can be seen in the percentage of US value-added in US imports: it is 2% from Japan and from the European Union, 3% for imports from Brazil, and 4% for Chinese imports. It is 25% for imports from Canada and 40% for imports from Mexico. That is to say, US imports from Mexico have ten times more US value-added than US imports from China.
  • However, we cannot afford to take each other for granted precisely because of our high degree of interdependence and the great potential that still lies ahead. Two decades of increased trade and investment can only mean that there is so much more that needs to be done.
  • If we are to take North American economic integration and competitiveness to the next level, we will need to have much stronger and proactive engagement between the public and private sectors, and to truly think and act as a region.
  • The world economy has changed radically over the last two decades: services loom much larger now, as does e-commerce. And advanced manufacturing (including 3-D printing) means that a highly skilled workforce, streamlined regulations and vastly improved infrastructure and logistics, both at border crossings and throughout North America, will be critically important to take full advantage of our economic complementarity.
  • Mexico is doing its part through a series of far-reaching economic reforms, engaging with the US through the High-Level Economic Dialogue (HLED) and with North America through the North American Leaders Summit process.

Mexico’s Economic Reforms

  • Since December 2012, President Peña Nieto´s Administration has spearheaded a flurry of reforms encompassing labor, education, financial services, fiscal policy, competition policy, and telecommunications and, of course, energy.
  • The common aim behind these reforms is to increase the productivity of the economy. Taken together, these reforms set the basis for sustained high rates of growth of the Mexican economy.
  • These reforms are complemented by the National Infrastructure Plan, which contemplates approximately 590 billion USD in public and private investment in over the next five years in more than 700 projects encompassing energy, communications, transportation, housing, urban development, health and tourism. The showcase will be the recently announced new airport for Mexico City, which will be the largest airport in Latin America and a key hub for our connectivity for passengers and cargo to all regions of the globe. We are thinking big, and acting accordingly!

The HLED and the NALS

  • And while we are doing our homework, we must continue to engage with the US (and Canada) to fully unleash the power of the Mexican economy.
  • The rules established by NAFTA, which ensured a predictable framework for business planning and investment, were state of the art in the early 1990’s, but we need to take into account transformations in technology, production and trade over the past decades to ensure that North American economic governance and infrastructure keep up with economic realities. As a former US Assistant Secretary of Commerce put it, we have a 19th Century infrastructure, with 20th Century rules, to deal with a 21st Century economy.
  • We need to streamline customs procedures and invest in infrastructure to reduce border wait times, which cost us billions of dollars per year. We must also work with the private sector to develop world-class logistics that reduce the costly friction of cross-border trade and boost the competitiveness of the region. We should not simply increase the number of border crossings by fiat, but focus on improving the efficiency of crossings where trade flows are concentrated and trade volumes warrant improved infrastructure, more personnel and longer operating hours.
  • Through the Mexico-US High-level Economic Dialogue (HLED), which was launched during President Obama’s visit to Mexico City in May 2013, we are pursuing initiatives in areas strategic logistics corridors, customs and border master plans, and air transportation, which will increase the competitiveness of the region.
  • We are also fostering economic growth and entrepreneurship through joint investment promotion, advanced manufacturing, and deepening regulatory cooperation. As production becomes increasingly regional the transaction cost posed by different national regulations must be tackled head-on.
  • In addition to the HLED, in May 2013 Presidents Peña Nieto and Obama agreed to create the Bilateral Forum on Higher Education, Innovation and Research (FOBESII, for its Spanish acronym). Through FOBESII we are developing a shared vision for educational cooperation, with a view to expanding economic opportunities in both countries, and developing a workforce attuned to the needs of the 21st century economy. Further increases in productivity in the automobile and aerospace industries and across the value chain of the energy sector will require skilled North American workers that can meet the demands of the 21st Century economy.
  • Though the North American Leaders’ Summit (NALS), which President Peña Nieto hosted last February in Toluca, we are aiming to take what we began through the HLED from the bilateral level to the trilateral level.
  • These initiatives are an acknowledgment that our economies are not in a zero-sum game with each other, but rather are competing together as one unit in the global marketplace.
  • With the right vision and the decisive actions, we can turn North America into the most competitive region in the world.

Thank you very much and please join us for the reception that will close this remarkable conference.