Ally-Shoring is the process which a country rethink critical supply chains and source essential materials, goods, and services among trusted democratic partners.
The US-Mexico Foundation is promoting the Ally-Shoring between the United States and Mexico to strengthen and deepen joint manufacturing, R&D, trade, security, and governance ties
According to the binational organization, ally-shoring can boost both countries and make them more competitive. The foundation highlighted four areas for the cooperation between Mexico and the United States:
- COVID-19 pandemic containment and treatment
- Critical supply chain rework, with a focus on transformational export and emerging sectors
- Smart border infrastructure, trade facilitation, and data-driven supply chain management and security systems
- Rule of Law Enhancement: US-Mexico institution-building and trust strengthening
From walls to bridges
New Biden administration is refocusing the foreign policy of the United States, working in its International engagement.
As the US and Mexico have shared interests in enhancing cross-border economic development, the relationship is the best example of Ally-shoring. The United States-Mexico-Canada Agreement provides a stronger trading framework between both countries and can help them to reduce the dependence of any particular country.
From China to Mexico
In 2020, Mexico received 31,000 million dollars in foreign direct investment, however, the willingness of States to decouple their production chain from the Chinese supply represents an opportunity to double the amount of investment that it can receive each year due to the trend called allied underpinning.
In an interview with Forbes Mexico, Enrique Perret, an internationalist expert in the Mexico-United States relationship and director of the US-Mexico Foundation, explains that the decision of the United States to reduce dependence on Asian suppliers is related to the risk of exposure unreliable or non-intellectual property products.
He points out that, in the face of paralysis generated by the pandemic, many industries have seen the arrival of critical components reduced, which evidenced opaque and fragile supply chains in industries such as biotechnology.
“The search process for the supply chains to be more integrated with Latin America has accelerated. A few years ago there was talk of off-shoring, which was the search for the installation of some production processes in locations that were competitive. from near-shoring, which meant doing the same thing but in nearby countries, then re-shoring came, which was going back to the process. In the case of ally-shoring, it is about relocating these processes in countries that coincide in fundamental aspects, that is why the opportunity is so great for Mexico ”, he details.
Trends in the US-Mexico trading
Mexico sends 80% of its exports to the US market and, for every dollar, Mexican exports contain 40 cents in US components.
In the automotive, aerospace, defense, telecom, medical device, driver, and chip industries, the opportunity for Mexico is vast in the face of the ally-shoring trend; also, it has the T-MEC as a factor in favor.
“We might think that today we have a 4-year window, but it is only the beginning, there is a longer window because the technological race will last a couple of decades and Mexico not only has proximity, but also a commercial agreement that sets clear rules in labor matters, compliance. Mexico has great advantages, a young workforce, a productive manufacturing base, and a lot of experience in key sectors ”, he affirms.
For taking advantage of this opportunity, Mexico needs to behave like a commercial ally.
“For companies, there are factors that weight making investment decisions, such as access to cheap and clean energy, logistics access, export regulation. We have everything to take advantage of this moment ”Enrique Perret.