President-elect Enrique Peña Nieto’s visit to Ottawa this week offers a major opportunity to upgrade bilateral relations between Canada and Mexico to the level of a strategic partnership.
Although Canada joined the North American free-trade agreement talks to preserve the gains from the earlier Canadian-U.S. free-trade agreement, this “reluctant” decision has proved to be remarkably rewarding. Canada not only succeeded in protecting its primary market with its most important trading partner – the United States – but it also found a new partner in Mexico. Since NAFTA, Canadian trade with Mexico has grown nearly sixfold. Mexico is now Canada’s third-largest trading partner, with two-way trade reaching $34.4-billion in 2011.
The growth in the bilateral economic relationship has not been limited to trade. Canadian investments in Mexico have more than doubled since the late 1980s, as Canada has become one of Mexico’s largest sources of foreign direct investment. More than 2,500 Canadian companies have offices and operations in Mexico. Many have used their Mexican operations as launch pads to reach other markets in Central and South America. Mexican firms are now also showing greater interest in Canada.
After the United States, Mexico is now the most popular foreign destination for Canadians. The majority of these are short-term visitors, but there are also a growing number of business people, students and other long-term residents living in Mexico. In the other direction, Mexico is the second-largest source of temporary foreign workers for Canada, boosting the productivity of Canada’s agricultural sector through the Seasonal Agricultural Workers Program. As Canada’s labour force continues to age, Mexico offers a rich source of younger workers upon which to draw.
Despite these growing interactions, most Canadians and Mexicans still hold largely stereotypical images of each other. Many Canadians see Mexico as sun, sand and margaritas, while others focus on criminality, corruption and drugs. Our two countries still have much to learn about one another. There is a tremendous opportunity to increase that knowledge by, for example, increasing exchanges between Mexicans and Canadians through labour and student mobility agreements and initiatives.
As global competition becomes more intense, Canada and Mexico could each benefit from taking a broader view of North American relations. An enhanced economic partnership among Canada, Mexico and the United States would make North America as productive and competitive as any other major economic area. To make this a reality, Canada and Mexico must first strengthen their own bilateral bonds.
To that end, the two countries should realize that, despite the growth in bilateral trade and investment, they are leaving major economic opportunities on the table. Today, Canada’s economy is larger than Mexico’s, but within a few decades, their relative positions will switch. PricewaterhouseCoopers projects that, on a purchasing power parity basis, Mexico’s GDP will be $6.6-trillion by 2050 – the seventh-largest economy in the world, with twice Canada’s projected GDP of $3.3-trillion. Additionally, by 2050, one in six Americans will be of Mexican ancestry. In short, the Mexican economy and the Mexican diaspora will provide new and compelling opportunities for trade and investment far too large for Canadians to ignore.
In the immediate future, there are opportunities for Canada and Mexico to collaborate on regional and international issues. Both boast large hydrocarbon industries and both have relatively carbon-intensive economies. With Mr. Peña Nieto’s promise to allow foreign investment in the Mexican petroleum sector, Canadian energy firms can look for opportunities in Mexico. Mexican-Canadian co-ordination on some continental issues could help even the playing field. This applies, for example, to pursuing greater alignment in their regulatory regimes.
Strengthening Mexico’s economy will not only help the 52 million Mexicans who live in poverty, it will enhance Canada’s ability to service Mexico’s growing middle class. In the longer term, Canada should support efforts to further reform the Mexican economy and to deal with organized crime. Ultimately, turning the bilateral relationship into a strategic partnership will mean realizing that what’s good for Mexico is also good for Canada.
Perrin Beatty is president and CEO of the Canadian Chamber of Commerce. Andrés Rozental is Mexico’s former deputy foreign minister and a member of the Centre for International Governance Innovation’s operating board. They are co-authors of the just-released report Forging a New Strategic Partnership Between Canada and Mexico.