This year, the US-Mexico Foundation (USMF), a binational non-profit committed to improving business cooperation between the United States and Mexico, initiated a new economic & trade program with the aim to have the United States work with its allies to optimize and reconfigure its supply chains so that all neighboring nations benefit from their commerce and trade. The name of this program: Ally-shoring.
Taken as a pun of the term “nearshoring” the concept of Ally-shoring is simple: The United States and its closest neighbors, Mexico & Canada, are rethinking critical supply chains and sourcing essential materials, goods, and services to benefit their most-trusted democratic partners.
The US-Mexico Foundation believes Ally-shoring between the United States and Mexico will strengthen and deepen joint manufacturing, R&D, governance ties, trade and security which will make both nations more competitive. According to Elaine Dezenski, writing for The Hill:
“On the home front, ally-shoring would bring good jobs, new economic opportunities and optimism to many of our own citizens, who even before the pandemic were feeling ignored and left behind by globalization and demographic and social change.”
Building An Economic Relationship With Our North American Neighbors
The US-Mexico Foundation calls attention to the following areas of cooperation that Ally Shoring can benefit the US & Mexico:
- 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
The foundation reports the US and Mexico have common interests in strengthening relationships on the southern US border and not just with economic development:
“A robust ally-shoring program with Mexico can deliver a number of benefits consistent with mutual economic, national security, and foreign policy goals: … Enhance institutions, reduce corruption, and strengthen rule of law in Mexico to promote greater FDI and US-Mexico economic integration.”
Mexico Today also echoes this sentiment:
“Partnering more, not less in production and distribution of critical goods and services between the U.S. and Mexico makes sense on many levels. It creates more good-paying jobs on both sides of the border as we recover from Covid-19, and provides a reliable, predictable and transparent trading partner for the U.S.”
Strengthen USMCA Supply Chains & Decouple from China
The COVID-19 pandemic revealed weaknesses in critical U.S. supply chains – mostly by over-reliance on China. Consequently, one of the primary goals of Ally-shoring is to strengthen the supply chains between the US & Mexico; the US is prepared to offer incentives to companies that are willing to run their supply chains through Mexico and discover opportunities for co-production & sourcing in that country. This strengthening of supply chains will have several advantages outside of better inter-country commerce, according to Barrons:
“This strategy achieves multiple U.S. foreign policy objectives including accelerating pandemic recovery, re-forging alliances, as well as checking China’s malevolent intentions. Ally-shoring, by providing an option for countries who would rather work with a U.S. and allies-led trade and economic development regime, also affords an attractive alternative to China’s corrupting offers of “assistance”. By doing so, ally-shoring serves to undergird the long-term economic success and stability of democracies across the globe.”
In an interview with Forbes Mexico, Enrique Perret, director of the US-Mexico Foundation, explains the decision to reduce the need Asian suppliers is linked to two large problems of sourcing through supply chains in Asia: unreliable products and theft of intellectual property. These problems have accelerated the integration between the US and its neighbors.
“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. ”
The Ally-shoring strategy is less about making the supply chains more efficient here in North America, and more about taking control of the flow of goods, as well as sourcing into our country. The partnership between the USMCA countries would be very beneficial not only from a manufacturing standpoint but also from a political and security standpoint. As Elaine Dezenski writes in an Opt-Ed in The Hill:
“An ally-shoring strategy recognizes the interdependent nature of the global economy and trade and the reality of globalized information and supply chains. This is not to suggest that we will not have any economic engagement with China (we will, and we should in many arenas). But it leans into our relationships with those we trust. By centering our economic and trade relations with our friends, we can drive a more powerful collective recovery and facilitate larger scale economic activity across the American Heartland.”
Read the Case Study: The Case and Path of Development for Ally-shoring: Mexico