Ally-Shoring emerges as a new strategy to strengthen the link between the economies of the US and Mexico

The US-Mexico Foundation (USMF), a binational non-profit organization dedicated to promoting bilateral cooperation and understanding between the United States and Mexico, recently initiated a campaign to promote the concept of Ally-Shoring.

This is a new economic approach and commercial trade strategy that aims to encourage the United States to work only with ideological allies in its efforts to reconfigure its supply chains. As a result of the coronavirus pandemic, the US administration has become acutely aware of the danger of a deep reliance upon China as a primary source of vital economic inputs.

The USMF introduced the campaign recently with the publication of The Case and Path of Development for Ally-Shoring: Mexico.  The document was produced by American economists Elaine Dezenski and John Austin, who developed the concept. It has been adopted by the US-Mexico Foundation to support the promotion of the organization’s goals.

In addition to the USMF, companies such as Prologis, 3M, and Arca Continental, which are leaders of the CEO Dialogue’s investment group, have acknowledged the benefits of promoting this commercial approach to the relationship between Mexico and the United States. Another high-profile organization that is supporting the initiative is the US Chamber of Commerce. Together, these organizations have agreed to move the Ally-Shoring concept forward and examine the benefits that Mexico brings to the United States in terms of its strategy of relocating important supply chains. Once their research is finished, the USMF will go out and sell these benefits to the U.S. government to establish strategies that are beneficial to the two nations’ economies.

Enrique Perret, CEO of the USMF and a former regional director for North America of Mexico’s now-defunct international investment promotion agency, ProMexico, recently spoke on the topic of broadening the US-Mexico economic relationship at a virtual forum that was held by the Mexican Association of Private Industrial Parks (AMPIP). During the session, he provided information on the benefits of Ally-Shoring to both Mexican and U.S. government officials that were in attendance. It is expected that both countries will seek to implement the strategies that were discussed during the meeting.

The US-Mexico Foundation’s proposal comes when the supply chains between the United States and China have been adversely affected by the complications created by the COVID-19 pandemic and by the “trade war” that both countries have sustained in recent years. Perret argues that in addition to a trade dispute, the two sides are waging a “technological war” in areas such as telecom, fintech, automotive, aerospace, pharma, biotech, semiconductors, among others.

The USMCA will catalyze Ally-Shoring

It is noteworthy that the USMF presented the concept of Ally-Shoring to US and Mexican officials 8 months after the entry into force of the new free trade treaty between the United States, Mexico, and Canada (USMCA), which also aims to strengthen regional supply chains by requiring greater local content in several industries, such as automotive, so that suppliers are incentivized to migrate to this part of the world. This movement is known as nearshoring and reshoring.

The former ProMexico official also noted that one important strategy is to take advantage of relatively recent changes that have been made at the U.S. International Development Finance Corporation (DFC).  Two years ago, the U.S. Senate allowed this government entity to make capital investments in foreign companies without having to have U.S. partners.

“We have to make an effort to develop a strong relationship between AMPIP and the DFC to find specific projects within members’ industrial parks that need an infusion of capital to gain a kick-start.  We see opportunities to enhance the relationship between the two organizations in sectors such as agriculture, automotive, and aerospace,” he said.

Additionally, Perret noted that companies such as Ikea and Amazon had approached USMF to find ways to develop potential Mexican suppliers.  This is an opportunity that the support of government agencies would enhance.

The US-Mexico Foundation CEO sees a positive outlook in the Mexico-U.S. relationship with Joe Biden’s arrival at the White House.  He believes that the Biden Administration will demonstrate clear signs of institutional approaches.  This is a situation that President Andrés Manuel López Obrador’s government must take advantage of not only in the commercial sphere but on other issues such as immigration as well.