View from Mexico: A roadmap for relations with Canada

Mexico's Ambassador to Canada lists the top 10 issues we need to face together.
By: /
June 30, 2015
Mexico's President Enrique Pena Nieto (C) and Canada's Prime Minister Stephen Harper (R) review the honour guard during an official welcoming ceremony for Harper, at the National Palace in Mexico City February 18, 2014. Harper is on a two-day visit to Mexico. REUTERS/Henry Romero

Mexico’s Ambassador to Canada, Francisco Suárez Dávila, spoke to the House of Commons’ Standing Committee on Foreign Affairs and International Development on June 2, discussing what he saw as priorities for the next North American Leaders’ Summit.

While he questioned why more Canadian students do not study in Mexico, and why Canada’s third-largest trading partner has been given such low priority for easing mobility,  “the good news,” he said, “is that Canada and Mexico, acting together, are making progress to reverse U.S. protectionist measures on COOL, working together on TPP negotiations, and there is also progress on visas.”

Going forward, here are the 10 topics Ambassador Suarez says are “essential for the North America agenda” — in his own words.

1. Energy Cooperation

The Energy Revolution in North America should continue to be a fundamental topic that has become a real driver for trilateral cooperation. Our countries, with new discoveries and technology, have substantial reserves in oil and gas (in shale gas three out of the six largest), and the potential for new investment is huge. Mexico’s energy reform opened the industry to the private sector, which had been closed under NAFTA. The new factor is, of course, the fall in oil prices that in the short term has reduced the appetite for investments in deep water drilling and shale oil fracking. However, Mexico’s energy reform is in the process of full implementation.

The Energy Ministers met for the first time in Washington at the end of last year to put in place a working agenda: the need for a shared outlook to assess our medium-term potential, and the work on a regional connectivity grid both to distribute energy within and export outwards. Mexico sees energy as a driver to push a reindustrialization process. Particularly, with cheap gas, the region has a vast competitive edge in manufacturing in automobiles and aerospace, and as much investment has taken place in these sectors, as in the energy field.

An encouraging note is the agreement announced in May regarding the establishment of a ministerial-level working group on climate change and energy by the U.S., Canada and Mexico. The working group will focus on low carbon electricity grids, clean energy technologies, energy efficiency, carbon-capture, climate change adaptation and resilience emissions from the oil and gas sector.

Although Mexico is the third largest exporter of oil to the U.S., after Canada and Saudi Arabia and will be a significant exporter in the medium term, in the short term a key objective is to be able to import cheap gas for the industrial sectors, and to convert electricity generation from dirty and expensive fuel-oil, to clean and cheap gas. Opening electricity generation to private sector investment also represents a huge investment opportunity of about US$90 billion dollar in the next decade.

Another area for cooperation with Canada is best regulatory practices in shale gas, avoiding water pollution and waste, and protecting the rights of the First Nations. Work is advancing together with the Energy Regulator of Alberta.

Large investments are currently being made in the oil and gas pipelines within our country and linking them to our borders. There will be a total of 10,000 kilometres of new pipelines, an investment of about $20 billion.  Already there are investments in close to 2,000 kilometres (about the size of Keystone) in which Canadian companies like TRANSCANADA and ATCO are participating. Canadian services industries and shale gas knowledge will be very useful.

2. Trade Negotiations

We have joined efforts with Canada to reverse the U.S. protectionist and discriminatory practices against our meat through certificates of origin (COOL).

We are also working closely with Canada to advance in the TPP negotiations. Mexico has a cautious optimism and is prepared to conclude an agreement by the end of the year. But we want an ambitious, meaningful, comprehensive new treaty. We see two advantages: a) Expanding trade with Asia, which is Canada’s goal also, and b) as a way to update and upgrade NAFTA to make it a second generation “state-of-the-art” treaty. There are many new issues like “e-commerce” and others that were unimaginable 20 years ago. On the other hand, we do not want to downgrade or reverse NAFTA, for example on rules of origin, on the automobile sector.

We have two concerns, however: first, that U.S. Congress does not grant “fast track authority”; second, that the U.S. Congress overburdens the negotiations with issues which are important in their own right, are related to its domestic agenda, but have little to do with trade (like religious freedom), and which would elevate the political cost of approving it for many countries. Reasonable labour and environmental standards have a relationship with trade, if they do not really mask protectionist and vested interests. We do not want to have “intellectual protectionisms” that establish excessive and unnecessary intellectual property conditions, for example in pharmaceuticals. There are of course the “usual suspects” — sensible products, like dairy products, apparel, etc. However, we are confident that we will come to an agreement by the end of the year.

3. Border Competition

A key area is to strengthen our internal competitiveness. To do this, work must be done at our borders. We have to work on the Regulatory and Border Commissions that we both have with the US. But, while some issues are specific to one border, others are common to both. We must build a certain convergence of “best practices” to eliminate excessive transactions costs due to regulations and administrative barriers. There are practical, specific suggestions made in a great report by the Canadian Council of Chief Executives.

4. Infrastructure Investment

Our three countries are lagging in infrastructure investment in and within their borders. Infrastructure investment stimulates growth and employment. Mexico has a new program totalling $600 billion to invest in ports, railroads, roads, and a mega project for a Mexico City airport, with a Norman Foster design. Canadian companies like Bombardier are active in this field. The so-called logistic corridors require investment in infrastructure. There is Mexican interest in CentrePort in Winnipeg along those lines. NADBANK is North American in name only. With Canadian participation it could become involved in infrastructure and environmental border projects.

5. Innovation and education

To increase the competitiveness of our region we need to promote innovation, joint research and linkages between universities and business, supported by scholarships. Relevant programs have recently been launched by our three governments. But, the educational links lag substantially below the trade and investments links. Only 5,000 Mexicans study in Canada. A new scholarship program, Proyecta 10,000, aims to double the number. On the other hand, we must attract more Canadian students to Mexico. It is necessary to establish joint chairs at universities. A Special Forum has been launched to define the comparative advantages and priorities in innovation and research and those institutions that can match them in both countries. We will be working with Canada International Education and the provinces. There is the proposal for a Science and Technology agreement with Canada, like the ones that exist with Chile, Brazil, China and India.

6. People mobility

This is a more ample concept than labour mobility, less politically sensitive. It involves joint efforts, to match people flows with trade, investment and technology. People mobility is about students, teachers, researchers, businessmen, tourists, workers (highly skilled, low-skilled, agricultural). A major change has been the recent decision by your government “to eliminate visa requirements for a very large number of Mexicans.” As you know, this means that visas will be replaced by the new trend of the “electronic travel authorization” (eTA). We welcome this. We have mentioned that there are still some outstanding issues. Towards March of next year, “visa-free countries,” about 50, will join the eTA. Mexico, it is said, will follow “soon after,” since the budgetary funding has been assigned. It will be interesting to see what “soon after” means, and it’s difficult to understand why 50 countries are given priority over your third largest trading partner. Similarly, Mexico expects that the North American Trusted Traveller Program will be signed in the near future, given that it has been ready since last December, that connects Nexus, Global Entry and Sentri.

7. Agricultural workers program has been a success

Canada has made some changes to the temporary foreign workers program. We know that some provinces with labour shortages are affected and want to maintain flows. Mexico has expressed its willingness to discuss the possibility of providing skilled and semi-skilled labour for specific sectors in provinces with demand. We have a very good precedent with the Seasonal Agricultural Workers Program, which boasts 41 years of success. Nearly 18,000 Mexican agricultural workers travel to Canada each year to stay as long as eight months before returning to Mexico in the winter.

8. Diplomacy

It is clear that in many areas we cannot make progress if we do not involve provinces in bilateral and trilateral diplomacy. We welcome the Meeting of Governors and Premiers to be held in Colorado, which will contribute to their agenda.

9. Cooperation with the Americas

We require North American cooperation not only within the region, but cooperation towards our continent. Negotiations are ongoing to approach Canada to work more closely with the Pacific Alliance. Cuba represents great potential for the only two countries that have maintained ties since the revolution: Mexico and Canada. There is a need to collaborate with Cuba in its transition process. Cooperation with the three northern countries of Central America is necessary not only with regards to strengthening the police and judicial system, but to support broad economic development. Haiti also deserves special attention. Something similar in vision to the Marshall Plan.

10. NAFTA, our common platform

Finally, I want to emphasize that our starting point, our basic economic platform is North America itself. Trade within North America is more than $1 trillion, additional trade with TPP countries is $800 billion. Like Canada, we have a Free Trade Agreement with Europe, but trade with Europe is less than trade within North America. Our key priority, we believe is within the region, to make it more dynamic and competitive. The North American countries are obviously among the largest and most dynamic world economies; in 2030 Mexico will be the 8th largest. We have a likeminded institutional framework, political stability, strong macro fundamentals. We are the most attractive market. For us, it is no longer just trade, it is about integrating production value chains! Our exports represent intra-regional trade: 40 percent of exports to the U.S., are imports from them, for Canada it is 25 percent; with others countries it is four percent. A biased trend is emerging viewing Mexico not as a complement, but as a competitor in the automotive sector. The real issue is not labour costs but overall productivity and a host of other factors. North America automotive and aerospace industries are integrated. A car produced in Mexico has Canadian and U.S. parts.

We need more productive integration, not less.

This article is based on remarks made on June 2. They have been edited and condensed.