North America at a Crossroads: Advancing Economic Security

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As geopolitical tensions and trade disruptions reshape the international landscape, North America stands at a critical crossroads. Will Canada, the United States, and Mexico retreat into protectionism, or will they deepen their economic ties and strengthen North American economic security?

By deepening North American partnership in strategic areas—such as critical minerals, energy, defense, and advanced manufacturing—Washington, Ottawa, and Mexico City can better position themselves to compete globally and defend their shared interests in the face of strategic and economic competition from authoritarian powers.

Join Hudson for a discussion about the future of the continent and how the North American states can increase economic cooperation to strengthen the continent’s security.

Event Transcript

This transcription is automatically generated and edited lightly for accuracy. Please excuse any errors.

Luke Coffey:

Ladies and gentlemen, welcome to Hudson Institute for today’s timely event titled North America at a Crossroads: Advancing Economic Security. I would like to extend a warm welcome to those watching online.

As geopolitical tensions and trade disruptions continue to shape and reshape the international landscape, the North American continent stands at a pivotal moment. Will Canada, the United States, and Mexico retreat into protectionism or will they deepen their economic ties, embrace economic freedom and strengthen North American economic security?

By expanding cooperation in these strategic areas such as critical minerals, energy defense, and advanced manufacturing, Washington, Ottawa and Mexico City can better position themselves to compete globally. But the benefits of closer economic cooperation go beyond economics. A stronger North American partnership can help us defend our shared interests amid growing, strategic and economic competition from authoritarian powers, competitors, and adversaries around the world.

To lead today’s important discussion, I’m pleased to introduce our moderator, Candace Laing. Candace is the president and CEO of the Canadian Chamber of Commerce, a role that she assumed last September 1st. Her career spans more than two decades across both the private and public sectors. And she has leadership experience in mining, manufacturing, farming, education, and healthcare. She joined the Canadian Chamber’s Board of Directors in 2019, served as the vice chair from 2021 to 2022, and then later that year became the chair of the board.

During her time on the board, she played a key role in developing the Chamber’s 2025 Strategic Plan, a transformational initiative to reimagine and renew the Canadian Chamber’s mission and impact. So it must be very rewarding to have played such a crucial role in developing that document and now being able to lead and implement that strategic plan. So please join me in welcoming our moderator, Candace Laing. Thank you.

Erin O’Toole:

Oh, go ahead.

Candace Laing:

Thank you so much, Luke. And welcome everyone. Really happy you could all join us. We have a number of people in the room and we have a lot of people online today as well.

I’m so excited about this conversation. In the last few months, I have been talking myself about the importance of North American economic security, and so looking at that in a deeper way, digging in, especially during these uncertain times. And perhaps even after hearing from our distinguished panelists, we’ll have a couple moments for questions at the end.

I can say, and I have to say there’s a lot of people in the room who I know share my curiosity, but also my passion for how we should be focused on North American economic security. And I’d be remiss if I just didn’t give a shout-out to the dozens of Canadian business leaders in the room who are on a mission in D.C these couple days to promote the collaboration, the work we can do together across North America, between Canada, the United States, and Mexico.

So to our speakers, I just want to thank you all for taking the time and being willing to share your insights with us today about North America’s future. First to my left here, next to me, we have Erin O’Toole, distinguished fellow at the Hudson Institute, president and managing Director of ADIT North America, and former leader of the Conservative Party of Canada. Next we have Thomas J. Duesterberg. Oh, sorry, nope, different order. I will correct myself.

Thomas J. Duesterberg:

That’s me.

Candace Laing:

Yes, I’ll get you in a minute. Just be patient.

Sergio Gómez Lora:

He looks more like Thomas than I do.

Candace Laing:

Next to Erin, we have Sergio Gómez Lora, the executive director for the US Office of the Business Coordinating Council of Mexico or CCE known to most of us. And at the end we have Thomas J. Duesterberg, senior fellow right here at the Hudson Institute, who is hosting us today.

So without further ado, we’re going to get right into the discussion and just give each of you some time for some opening remarks around the concept of North America and economic security. I, as I said, have been very curious and passionate about this topic over the last number of years. When you look at global risk, the geoeconomic confrontation is just shot right to the top. But even if you haven’t been tracking that, what we’re living through day to day with the uncertainty is just put this question in mind, what do we need to be thinking about in terms of economic security in North America? And perhaps how did we get here and where are we headed? So I will turn to you, Erin, to kick us off and go first.

Erin O’Toole:

Well, thank you, Candace. Thank you to the Canadian Chamber. And thank you very much to my friends here at the Hudson Institute for really engaging in a dialogue like this at a critical time. I will pick up on how you phrased it. How did we get here, Candace? Because economic security is evolving. We’re seeing a great realignment, we’re seeing de-globalization. We’re seeing tariffs and sanctions after decades of free trade and free trade agreements that I was a part of in the conservative government of Prime Minister Harper.

Things are changing dramatically. You could say the rules-based international order is being rewritten. And a lot of people will question why the United States, in many ways, started the rules-based global order and has benefited greatly from it, as has other countries like Canada and Mexico. And usually Bretton Woods is looked at in 1944 as the start of that. But I’m going to argue for a moment that it actually started in 1941 when the Canadian Prime Minister Mackenzie King traveled to see President Roosevelt at his home in Hyde Park. And it was shortly after the Lend-Lease program was initiated by the United States to help the allies in World War II while still maintaining a neutral position not entering the war.

And the Canadian Prime Minister was worried that the production would cause a destabilization of the wartime economy. Canada was in the war. As I remind my friends, we were in both wars before the United States. And so there was an agreement on making the production of war materials and really machinery and things that led to the auto-pack decades later was all started in President Roosevelt’s home in Hyde Park in 1941. And when Prime Minister King came back to Canada’s House of Commons, he said it was about the common economic security of the Western Hemisphere, in 1941.

And that’s why Canadian aluminum was used to build almost every Mustang the US Air Force flew during that war. And the US entry into the war following Pearl Harbor really defended the liberty we all still enjoy today.

The US marshaled the Arsenal of Democracy, a great podcast name hosted by the Hudson, but a concept that when the US stood up, liberty was going to be assured because the war was to be won both in Europe and in Asia. So building on that economic security coming out of the war where rules were freer trade were the exchange and the sort of modernization of the North American economy leading to Canada-US free trade, and then later the addition of the third amigo, Mexico into NAFTA, so where are we now? Aren’t those same common security values, optimizing trade, optimizing opportunity, creating wealth together, aren’t those still things we should aspire to?

I think we have to make sure in this time of realignment, of questioning of trade, of rewriting bilaterally or multilaterally the rules of engagement on global trade and security, we can’t lose sight of that history. And I think I’ll just end with yesterday, Canada’s new Prime Minister, Mark Carney, announced a very ambitious plan to really embark on not just meeting Canada’s 2% of GDP NATO commitment, but to go further. And I think that’ll be welcomed on both sides of House Commons in Canada, because for too many decades we’d been a laggard in that. So there’s opportunities for us to remember the past and leverage that to build a shared and prosperous future.

Candace Laing:

Thank you, Erin. Remembering what brought us to this focus in the first place. Thank you. Sergio, what are your opening thoughts?

Sergio Gómez Lora:

Well, six months ago, five and something months ago, we started a conversation that has been disruptive in terms of the concepts of economic security that we use to work with. And Erin referred to the Second World War, and he reminded me of a speech that Churchill made that I think is very relevant today to explain where the conversation between Mexico, US and Canada is on economic security. And this was in 1942. It was the first important battle that the allies won. There was in the north of Africa. And Churchill made this speech to his population, trying to give them courage, but to understand what was going to happen. And he said basically, “We are not close to the end of the war. We are not close to the...”

Erin O’Toole:

Beginning.

Sergio Gómez Lora:

... beginning of the end of war. But maybe, maybe we are getting close to the starting of that discussion.”

And I think this is where we are today. We’ve been talking for five months with the US administration. We have two pillars, at least on the Mexican front, two pillars in our conversation. One is security and political issues, and one is trade. On the political front, we have two conversations. One is migration and one is drug trafficking.

On migration, I think we’ve done a pretty good job. I think today, and President Trump has said it repeatedly, migration is back practically fully controlled. US has record numbers of illegal crossings in the border. Drug trafficking is a different animal. It’s much more complex. So there’s a lot of things to do there.

And on the trade front, we are really, as would Churchill would say, at the beginning of the end. We are having two discussions. One is tariffs and one is the review of the USMCA. And on tariffs, Mexico and Canada are privileged. The US has 14 free trade agreements. All of their partners on free trade, but Mexico and Canada have tariffs all over the place. Mexico and Canada, free trade is harm, damage, but it’s still alive. In our case for 78% of our exports, if we are able to demonstrate compliance with the rule of origin, we have free trade, zero tariffs. Even countries, allies such as Israel has tariffs for all products. And our battles today have three names; autos, steel, and aluminum, which are the 232 tariffs. And there are some 232 investigations ongoing so we might have more products there.

And the other part of our discussion is going to be the review of the USMCA, and that has not start yet. And maybe by the end of the summer we will start that discussion. The US officials are basically too busy negotiating with every country in the planet, so they don’t have any capacity to sit down with Mexico and Canada and talk seriously and talk with their industry about the review. So that will come at the end of the... So we have still, I think at least till the end of this year, if not till the formal date of the review, which is July next year for a discussion on how our economic security would look like.

Candace Laing:

Thank you, Sergio. Tom?

Thomas J. Duesterberg:

Okay. Well, I’m pleased that the early part of the discussion has dipped into history a little bit. I’m trained academically as a historian, and so I’ve spent a lot of time last 40 years working on international economics. So let me dip a little bit into history, go just a little bit further back than these guys did to the Great Depression.

It is believed largely that the trade played a major part in the Great Depression and in the rise of the autocracies that led to the Second World War. So during the war, President Roosevelt’s Secretary of State, Cordell Hull, started to think about what would come afterwards. And so given the perceived origins of disarray and rise of fascism in the 1930s as a result partly of trade tensions, and that leading back to the Smoot-Hawley tariffs in the United States and reactions to that, Hull had the idea that after the war we had to set up a global order, which is based on free trade. And the idea was that free trade, if people were trading, countries were trading with each other, then that would not inevitably, but eventually lead to better, more cordial, non-confrontational relations.

Well, so that was the origins of the Bretton Woods system, if you will, which is based mostly on free trade. These things are never perfect. But it worked for a while in the ‘50s and the ‘60s, partly because our major competitors at the time, or at least in the Second World War, Japan and Germany, were on their knees. And the United States, Canada for that matter as well, were dominant in the world. We didn’t have to worry as much about it. But as time went on, the dominance of North America waned somewhat and eventually became displaced. One of the major factors in-

Thomas J. Duesterberg:

One of the major factors in leading to a rethink of what has been called the rules-based order at a global level was the rise of China, which is a big country. They’re very good. They’re very strong economically. They sign up to the rules of the WTO, but they don’t pay attention to them unless it’s in their own interests. Another personal historical fact, I was involved, in the early 1990s, in the origins of the NAFTA agreement. I was a trade official in the first Bush administration, and I still to this day believe that there ought to be close economic relations in North America and we need to pursue that. But I think at this point in time, the global rules-based order is basically dead and what we ought to be looking forward to preserve the good economic results of as open a trade system as we can get, we need to look at regional agreements as one of the pillars of that. We need to figure out a way to move forward next year with strengthening of what now is the USMCA.

Just a word about the United States. I’m not sure at this point in time there’s a clear path that is seen by our administration to getting to the new order that we have all talked about needing. But a couple of things I think are clear, and one of them is the focus of this little discussion today. Economic security has a broader implication than just economic efficiency as the driver of all trade relations. That concept I think has been broadened now. We’ve realized that there are problems with just pursuing pure economic efficiency as the basis of our relations. As we go through our discussion, perhaps we can deepen some of these ideas, but global order is no longer with us. Trade relations are going to have to take into account perceived vulnerabilities. So economic security has this pure defense dimension to it that is going to have to be incorporated in any sort of trade agreement that we have going forward. So let me stop there.

Candace Laing:

Thank you, Tom. You talked about the path forward, the new order, and some of your comments, I think highlight ... and we framed this up when recently the business group of seven came together to put recommendations forward to the G7 discussions that promoting something like North American economic security, continental security is not in defense of the status quo because we do have a lot of insights into, global trade isn’t perfect, there are things that need to be addressed. And that brings me into a question of how do we frame up shared interests around certain shared external challenges that are there? Aaron, you made a comment about the coming together to defend liberty. Someone recently said to me, “Candace, we can’t defend our values if we don’t look after our interests.”

To me, it’s so clear when you look at North American continental economic security, there are shared interests around these shared external challenges that could be looking at making sure we have really reliable supply chains when it comes to critical minerals, that there is some coherence around strategic competition or non-market practices when it comes to big economies like China and others. Digging into that, and Thomas, if maybe I could just come back to you to go into that in a bit more depth, how do you think these three countries should be looking at these external challenges that are in fact shared?

Thomas J. Duesterberg:

Well, I think the starting place is where we have become vulnerable economically, but also in terms of national security. The big factor in driving, I think, a lot of these changes is China, which is a mercantilist country. It’s looking out for its own interest. It wants to upend and replace the Bretton Woods system. But it’s a danger to us economically because they’ve, in many ways, displaced some of our leading industries. We have all these problems with steel and it’s historical, but the major factor now is that China produces enough steel to export about 50% of global output. They’re doing that industry after industry. They’re an economic challenge to us, but we’ve also noticed that things that you mentioned like critical minerals are key, we have discovered, to national defense as well, because so much of modern weaponry depends on stuff that China has cleverly, but systematically over the last 20 or 30 years, come to dominate, buying up mines, doing the processing that environmentally sensitive countries like ours, all three of ours don’t want to do anymore.

But that makes us vulnerable and we see it now as China’s cut off our rare earths and some of the stuff that goes into batteries. That’s an economic problem, but it’s a national security problem as well. So that’s the starting point. As we look ahead, we need to build on the common strengths. I think, we could, especially between Canada and the United States, we’ve got plenty of critical minerals if we have the political will to get them out of the ground. Probably, we’re going to have to subsidize the processing industries because it’s so important all across the board economically and in terms of national security. But Aaron mentioned the arsenal of democracy idea. We’ve talked about the arsenal of energy democracy as a concept that we ought to think about. It’s partly because the authoritarian nations that are banding together, those being Russia, Iran, Venezuela, China, are a source of energy.

Europe, because of the war on Ukraine and the support they get from China, has become even more of a net importer of energy. Collectively, between Canada and Mexico and the United States. We got plenty of energy that’s exploitable now and can be helpful in making sure that Europe is not vulnerable to the Russians and to the Chinese. So areas like that critical minerals, energy, that I think we need to start with as we think about our collective path forward.

Candace Laing:

Go ahead, Aaron. I know you have holds on this.

Erin O’Toole:

I agree with Tom entirely, and because it’s the most popular podcast I think in the world, I’m sure some of you heard the Dailies podcast this morning, which was on rare earths that China dominates, which if you include rare earths and then the critical mineral set, if we’re going to have the energy transformation electrification of our economy right now, our global adversary controls most of the critical elements of that. This has been a slow build, since as Tom said, in 2001, China acceded to the WTO, but then still continued central control of their economy and used the economy as a foreign policy lever. But I think he hit the nail on the head, is this regionalism we’re going to see in terms of trading blocks, North America could be the example. When I was a new politician, the first job Prime Minister Harper gave me was Parliamentary Secretary for Trade. And because we were doing the European trade deal and so many other things, I had this file of regulatory harmonization with the United States.

We were harmonizing things a decade or so ago, not dividing things. The Council on Foreign Relations did this incredible study led by General Petraeus and Robert Zoellick, about reimagining North America and central to it was energy security. Not just uranium from Saskatchewan and oil and gas from Western Canada, but also hydroelectricity nuclear so we could decarbonize a shared, more resilient energy grid. I think one thing that the North American alliance can talk about is continental security, energy security, and food security, which you add in potash, you add in the agricultural capabilities of the three countries, and Mexico and Canada as allies to the US, those are critical items in a geopolitics of a fragmented, less free trade world, having security on all those fronts, combining on critical minerals. It’ll see some of the investments the US were going to make in Canadian critical mineral mines, well, now, Prime Minister Carney and many of the premiers are saying, “We’re going to approve those mines faster.”

They have Bill 5, Bill 15, these are bills that both from the left in British Columbia, a new democratic premier to Premier Ford in Ontario, progressive conservative, are all pushing projects to be built faster. This will help, I think, build a bit of a reliance. If the Inflation reduction act funding for some of these mines disappears, our willingness to fund them and accelerate them could allow us to use this energy security piece again as a linchpin to a new North American relationship.

Candace Laing:

So Joe, yeah, I’m wondering if you can build on that and take us into some of the opportunities that we should be looking at more deeply between our three countries.

Sergio Gómez Lora:

Yes, of course. I would start saying that President Trump, we have to recognize he had the right diagnosis, in the sense that China abused the system. China was accepted into the multilateral trading system and was offered access to international markets with the promise or with the expectation that China would discipline itself in terms of the subsidies and in terms of the market rules. That never happened. And to President Trump’s argument, nobody did anything about it. He is taking this matter in his hands and probably is the first world leader that is acting against that. But it’s a very complex challenge. The conversation in North America, or part of the conversation in North America is do we have a common approach or can we have a common approach towards China? That’s pretty difficult because on the one hand, we all agree in North America that we need to put some limits to Chinese unfair practices and to state intervention that is generating over capacity and affecting industries in the region. That moves us to act together.

But on the other hand, this has been going for such a long time that now, China is probably the only reliable source for so many key inputs, that if we as North America, abruptly stop importing from China, we will harm North American competitiveness. If we create a North American fortress and Europe and Japan continuing benefiting from subsidized imports from China, in 10 years they’ll have an increase in competitiveness vis-a-vis North America. In some sectors such as electronics, for example, China is basically the only reliable supplier. If North America cuts the supply from Chinese electronics, we are in big trouble. To add complexity to this equation, industry is different in some areas in the three countries, for example, the US and Canada practically does not produce any longer clothing and shoes, Mexico does. Mexico is harmed by Chinese subsidies and textiles while the US could benefit from those.

This discussion that we’re currently having, and that’s why I was referring again to Churchill, that we are only probably at the beginning of the end because we just have set the issues on the table. But we have a long way to go into finding solutions to these very complex challenges that we’re facing. If we do this wrong, we’re going to harm the future of North American competitiveness.

Candace Laing:

I think just to link what you’ve just shared with other discussions, especially when it comes to China, just like this I moderated, one of the best points, if I can summarize what you shared is we can’t look at the complexity of China as black or white, good or bad trade or don’t trade, it’s a matter of how and on what terms and that has to be navigated. Whether you’re looking at a North American strategic competitiveness on steel or pick it, there’s a shared interest and there’s good strategy there, in terms of how that looks, with all those complexities factored in. One of the other, and I’m looking at you, Tom, the other big questions on this that comes up is, okay, there’s obviously shared interests, shared views on some of the external challenges. The status quo is not going to serve us well. We have to move forward in a way that shapes a-

Candace Laing:

We have to move forward in a way that shapes a new order, dealing with those complexities. And then you have 232 tariffs. My question to you, Tom, I’m going to try to word this in a way. I’ve been trying to wrap my head around that because I get asked all the time, well, this makes no sense, 232 tariffs just undermine North American collaboration and cooperation. But I’m trying to understand the U.S. administration’s perspective and aims, and is there a scenario here where these things aren’t mutually exclusive, that one doesn’t actually undermine the other. We can have economic cooperation collaboration in North America find that path forward as we’re dealing in parallel with something like 232 tariffs.

Thomas J. Duesterberg:

Okay, well, I’ll put my cards on the table. I’m not a big fan of the 232 tariffs and I haven’t been a fan of steel and aluminum and tariffs for quite some time. Those are areas where if we could figure out a way to cooperate between the three countries represented on this dais. I think we could efficiently produce most of what we need. President Trump has a different approach to this. He seems to think that if he threatens friend or foe alike, eventually they’ll have to come down and negotiate with him. Looking at it realistically, I don’t know how much he’s going to change, I think that there’s probably some scope to think that the extent of the tariffs that we have imposed, if they continue will probably do some real economic harm to the United States.

I think Trump will recognize that and be a little bit more flexible, if you will. But I think our trading partners could advance the ball by, as Trump says, making offers. Look, those of us who’ve been around for a while know that there are all kinds of irritants in the relationship that ought to be resolved. I mean, I’ve been thinking about lumber disputes for 40 years or more. Dairy disputes with Canada. These are somewhat minor. There ought to be ways where adults can address these issues in something of a balanced way. I don’t think that every problem has to be solved.

I think Aaron mentioned, for instance, that Prime Minister Carney just yesterday made a good advance on one of the beefs that Trump and others have had with Canada, which is not contributing, if you will, to the global commons of national defense as a member of NATO that he would like to see and all of NATO would like to see. I have some questions about the numbers and the achievability of Mr. Carney’s promise, but he’s moving in the right direction. One can conceive of broad talks which include non-tariff, non-economic sorts of things. After all, what Trump, in as much as he and his advisors have articulated a coherent idea of this, it’s rebalancing once or another. There’s an obsession with pure numbers of trade balances, but it’s much more than that.

It’s contributing to, as a member of NATO, as I just said, the overall contribution to keeping the sea lanes open, to keeping the Chinese and other aggressive authoritarians from moving too far in threatening the political, economic or sovereignty interests of others. So it’s a long way of saying there ought to be ways that we can talk with each other and reach broad solutions that don’t have to solve every problem, but at least can solve some of them. I think that would go a long way with this American administration to finding ways to get beyond the pure blunt threats.

Candace Laing:

Go ahead.

Erin O’Toole:

Yeah, to build on Tom’s points, before I was the opposition leader in Canada, I was the critic or shadow minister for the NAFTA negotiations and I saw the method and what the Trump administration was doing and could understand it. I thought it should not have been applied in North America, but a lot of people don’t realize the 232 tariffs actually came from an act, the Trade Expansion Act that was about globalization. It was I think from the ‘60s or ‘70s, it was about more trade. The issue was is it gave the ability that if there was national security concerns to deviate from the intention of the act, which was free trade.

And there are serious concerns for the domestic defense capabilities of the United States. Use shipbuilding as an example. Right now, China has a 200 time advantage in shipbuilding. In fact, there’s one shipyard a few years ago, I think in 2024, 2023 built more ships in one year than the United States had since World War II. That capacity to build back up the arsenal of democracy is something that atrophied over decades. The post-Cold War peace dividend, all countries took a slice of that peace dividend. No one more so than Canada. But how does the U.S. maintain that capability? I actually think rather than tariffing Canada and Mexico with 232s, we could be part of the solution. If you are going to want to rebuild that shipbuilding capacity or build more tanks or aircraft, you need reliable resilient supply chains with sources of specialized steel products from Canada, aluminum from Quebec and British Columbia.

The challenge I found for our Mexican friends during NAFTA was their free trade agreement with China. Aluminum in particular was being trans-shipped into Mexico and at one point people were sitting on aluminum ingots in the desert in Mexico. China was using that market strategically to impact the North American balance on aluminum. How do we, as you said, not flip a switch on China, as Candice said, but control these abuses of a state-led economy that is gaming the rules-based system? Although Tom said it’s dead, I think we should have a moment of silence for the rules-based international order and then come back and come up with ways that we can-

Candace Laing:

Revitalization.

Erin O’Toole:

Achieve the same things, which is security, prosperity and a renewed sense in our institutions and our governments are for us. Again, going back, we can help the U.S. with those deficits in shipbuilding and a defense preparedness by having a North American approach to economic security.

Candace Laing:

Go ahead, Sergio.

Sergio Gómez Lora:

You ask about some opportunities. First, let me react very quickly to Aaron’s comment. We don’t have a free trade agreement with China. We don’t even have a trade agreement with China. It would be impossible for Mexico to have any agreement in trade with China. The reason is China and Mexico compete directly and frontally in manufacture. We have similar structure of costs and the most affected country in the planet. When China got into WTO with Mexico we lost a lot of share in the U.S. market. I remember because the president of my firm today was the minister of trade at that time, Mexico was the latest country in the world to accept China’s accession to WTO. And we only did that because the president of Mexico was called by the president of the U.S. and tell them, “What are you guys doing? Let China into WTO.” But if it was for us, China would never be in the trading system.

Thomas J. Duesterberg:

I was on your side.

Sergio Gómez Lora:

But with that comment, let me try to get on some of the opportunities because I agree with the panelists that there are a lot of opportunities. And let me go to areas where the U.S. is looking now strategically such as semiconductor, you mentioned aerospace, and there are others like electric. In semiconductors, basically the structure of the supply chain is where the key element, where the most value is is the wafer. That is billion dollars of investment and billion dollars in research and development that is already moving to the U.S. And you see TMCA, the Taiwanese world leader investing in Arizona, but also the Intel’s of the world. So there’s plenty of investment.

For that supply chain to work, we need testing, assembly and packaging, ATP. And that is basically done in the southeast of Asia and it’s very important to have that close where the wafer is done. Mexico started to do ATP a few years ago with Intel and others that were manufacturing in Mexico. And now there is a great opportunity for the North American semiconductor industry where the wafer can be built in the U.S. and ATP can be done in Mexico. And we are working even with the U.S. government on such kind of program. So that is one example of an opportunity. Another opportunity is Aerospace. Canada is a world leader in that sector, but Mexico is growing very rapidly. I have to look at my note for the figures, but I just showed you a couple of them.

Mexico today in terms of parts for commercial aircraft is fifth-largest supplier in the U.S. But we are now in a 45% growth from 2022 to 2024. Parts of aircraft engine, we’re the third largest now, 40% growth in the last three years. If we are able to achieve a legal framework with the U.S., probably following the example of Canada, what you did in your procurement agreement on aerospace, then North America can also be a fortress in aerospace. The other is electric. I’m very happy to see here that we have one of the companies that leads the production in the region, which is Xignux. One of the members of the family is here with us, David Garza Herrera, good to see you, David. And what these guys are doing is they produce transformers.

30% of the transformers, large transformers that are providing electricity to the United States are built by them. This is a Mexican firm that has investment in Mexico and in the U.S. and are providing a national security service to the U.S. There are a lot of opportunities if we do this right, if we handle appropriately the challenge of Asia, if we don’t put rules in North America, that would limit the economic growth and the competitiveness and the integration that we have done in the past 30 years, there are a lot of very interesting opportunities.

Candace Laing:

Sergio, I want to stick with you and get your thoughts on USMCA. But first, before we go there, I myself was reflecting on Tom’s comments because you and I represent so many businesses and there’s this impatience and anxiousness, understandably about the path forward for USMCA. But Tom, you shared today, which is also what I’ve been thinking about. There’s probably this first phase where our countries deal with these broad terms and get those established before we take that deeper dive into USMCA. Sergio, curious about your perspective on that, if you agree with that and what you see coming next for the USMCA agreement.

Sergio Gómez Lora:

Yes, and I’ll go back again to that Churchill speech about being at the end of the beginning. And when I say we are at the end of the beginning is because, and believe me, I don’t think any trade officials in the planet have been more frequently in the US that last four months than Mexicans. I mean, our minister and our undersecretary of trade have been in Washington almost every week the past three months. And so the table I think is set in terms of the key, the strategic issues that we’ll see at the review. Obviously one is the 232, whatever we are not able to solve and address before the review has to go into the 232 because we cannot have a free trade agreement with a 232 in place.

Where we as private sector are putting forward is we recognize that the world has changed. We recognize that the US has a different trade policy, that US is no longer the number one promoter of free trade in the planet. We are willing to look at the criteria, establishing the agreement to benefit from free trade. We are able to look at rules of origin that have to be different, that have to avoid trans-shipping from China and from others, that have to promote more North American integration. But every product that complies with such criteria that we established in this process has to have the right to benefit of our zero tariff or free trade.

I think one key part of the discussion is going to be where the tariff are. 232, we also have Mexico and Canada at disadvantage with the rest of the world on the goods that do not comply with the rule of origin because we have this IPA tariff today under legal challenge in the courts where we pay 25% while the rest of the world pay 10%. So that’s another element that we’ll have to discuss during the USMCA review. Rules of origin are key. Key because today we are the only two countries again in the world that benefit from partial fuel trade, but at least in our case, I haven’t seen the Canadian numbers, but in our case, 78% of what we export, if it complies with the rule, it can benefit from zero tariffs. But obviously if the rule is stricter and if we move the rule too much-

Sergio Gómez Lora:

And if we move the rule too much, then it’s like putting a tariff because companies will not be able to comply with it. So rules of origin is another key discussion of the review. China and the perimeter is the other one. How is the North American perimeter going to look like? What are we doing? Which actions are we taking together as a region, which are we keeping each country the ability to move forward? But it is clear that as a result of this process, we have to send a signal to China that we are acting in some way as North America. And what I think being very pragmatical, I think it would be very useful to wait to see what the U.S.-China deal looks like because that would give us a hint of what we can do as a region and that is moving forward as we speak.

So that is another. And the other element is obviously what you mentioned, the irritants that we have had. And if you remember in Liberation Day, President Trump was waving a book in his hand. This book was the National Trade Estimates, the tariff barriers that the U.S. government, the USTR has identified in all the countries. And I haven’t seen lately the Canadian chapter, but the Mexican chapter is fairly big. 28 measures that the U.S. exporters and investors are, and I see some of my friends that have been in Mexico smiling about the experiences that they have had there. So that is going to be part of the discussion too.

So I think these elements are the cocktail. I think if we add to that cocktail and a candy, that would be what legal framework we can put together to promote these opportunities we talk about. What can we do in semiconductors, in aerospace, in other areas that we will compete. Let’s do something also to push that forward. So that is in general terms what I see as the key elements of an agenda for the review.

Candace Laing:

For the review.

Thomas J. Duesterberg:

Can I respond?

Candace Laing:

Yes.

Thomas J. Duesterberg:

Just real quickly? On IEEPA, I’m convinced that the U.S. courts are going to strike down the IERPA tariffs. I had an article on the Wall Street Journal Friday, last Friday, I think making that argument, and I’m not, by far I’m the only one. So I think that’s going to eventually have to go away.

You mentioned a thought about what the perimeter is with China, and I believe that we need to think more broadly, even from USMCA and think about perhaps allowing other countries into what is now the USMCA in our hemisphere perhaps, but maybe not just the hemisphere. It’s a good agreement. If we can improve it, then why can’t that be one basis for a broader approach? I don’t think that China is going to change its stripes and it’s going to continue to try to attract others to its system. But I think about the trade system of the future as being a lot broader than just regional agreements. I mean it could be a series of regional agreements, but I think USMCA is one good place to start and maybe we can expand it as well.

Candace Laing:

Okay. I’m going to just check if there’s from our audience here in person, is there a burning question that anybody is sitting with? Oh, a couple. Okay. Okay. I’m going to ask you to be super brief in your question and if there’s a certain panelist you’d like to answer, please do that. There’s going to be a microphone coming to you. We’ll start up here maybe in the front. And then to Ron. And please identify yourself when you ask your question.

Dr. Gonzalez:

Yes. I’m Dr. Gonzalez from CIfAI private sector. I have a question for the Mexican representative. You mentioned, well, and one joint question quick for both Canada and Mexico. You mentioned that China doesn’t have any trade agreement with Mexico. So my question is why China has tons of maquiladoras in the state of Nuevo León and Tamaulipas? Is this just business as usual? I thought they were there because they want to evade trades, the tariffs that are imposed by the U.S. And my other question is since the free trade agreement is not coming back anytime soon, what do you think it will be a fair tariff that not just complies with the U.S. administration, but also that is fair for the trifecta that is Canada, Mexico and U.S.? Thanks.

Erin O’Toole:

If I could take the broader question first. I’ve said for some time President Trump’s in a bit of a race against the reality of inflation and market shortages. So the high tariff rates through different mechanisms of applying tariffs are leading to bad supply chain issues, inflation, all this sorts of things. So I’ve been suggesting that least for North America, for Canada, Mexico, we’ll probably be by fall get down to kind of a general tariff, much around the approach that he took for Canada on energy at first, a lower tariff rate, it would still eat into people’s margins. Nobody wants tariffs at all. But if there was like an 8% tariff with the uncertainty and with market currency fluctuations, people could probably live with that. That’s what I think will happen, at least for countries that enter into some sort of bilateral deal like the UK and the president’s been encouraging. That might take a bit of pressure off the inflationary pressures.

Sergio Gómez Lora:

Okay, so first of all, the Chinese investment in Mexico has been growing importantly in the past years. Steel is a very small portion of foreign direct investment in Mexico. What has been growing a lot is imports of Chinese goods, particularly in the auto sector. China has already over 20% of the Mexican auto market today. But having said that, I would say that it’s very clear for me that four actions in terms of relation with China are going to be taken as part of this conversation. Number one is some kind of action in the border in terms of tariffs for Chinese products, either jointly as in North America or individually, but we will change our tariff strategy with China, that’s for sure. Number two is much more ways of monitoring potential Chinese goods coming into Mexico and getting to the U.S. market with a small transformation, so that will go into stricter rules of origin. We will see new issues in the rules of origin. I think we will see for the first time nationality of the investment as a concept in a rule of origin.

And number three, and we are already working on this, we will establish, and we were talking about this in the room before the meeting, we will establish our own CFIUS or whatever name is in Canada, which is this committee that looks at the investment and their impact in national security.

And number four, I think we’ll also look at export controls. We might mirror U.S. strategy in terms of what is critical in terms of technologies since we have so many U.S. and Canadian firms in Mexico.

So I would say there’s much more noise than what really is going on in terms of Chinese investment in Mexico. But nevertheless, I think Mexican, both government and sector, we are committed at taking the actions to send a clear statement to Washington and Ottawa that we are going to play with the rules and China is not getting through Mexico to North America, at least not [inaudible 01:00:11].

Candace Laing:

Thank you. Next question.

Lopez:

Well, I am Lopez from Johns Hopkins University and I just would like to have more clarity about the concepts because you talk about the complexity of the issues. Well [inaudible 01:00:28] starting when we talk about economic security, that’s emphasizing, at least as I see it, military security. But Mexico is not in a position to look for some dominance in military matters. Actually, the president of Mexico has proposed an idea of a certain contribution of the budget to the peace of the world and you have not mentioned that. And you cannot mention what is the idea of the president of Mexico, Ms. Sheinbaum about all this relation because here it seems that we are going to be constrained only and that’s not the complexity of the matter to only three nations, U.S., Canada, and Mexico. What about the rest of the world? And then we have the other matter that we said, “Oh, China is our enemy and-”

Candace Laing:

Do you have a question?

Lopez:

Well, my question is how are we going to deepen the complexity of the matter? How are we going to include other countries, number one and second, what kind of other issues are we going to include in this matters? Thank you.

Candace Laing:

Thank you.

Sergio Gómez Lora:

Let me get quickly on the other countries because you also [inaudible 01:01:51] mentioned that. I wanted to mention this and I didn’t in my remarks, but it’s a good opportunity to do it. Before thinking about getting other countries in these arrangement, I think we want to make sure that this conversation is fully trilateral and we don’t do two bilaterals in terms even of the conversation. I think the position of the Mexican private sector has been very clear that we need Canada to be part of the conversation all the time. And I think we are much better in having a conversation of rules of origin with the United States, Mexico, and Canada together than each one by ourselves. So our position, and we have been seen with a lot of concern governments at some point not having this fluent dialogue. Our position is this needs to be trilateral. We are in this process with Canada and we want Canada, Mexico, and the U.S., the three of them to be at the table at all times.

Candace Laing:

Thank you, Sergio. And since you did the duty of taking the questions, I will give last word to Aaron and then Tom to wrap up our panel today.

Erin O’Toole:

Yeah, I just want to, part of the way to go deeper is to have more conversations like this, so I think the fact that we’re talking about the history importance of these trade and security relations, the better. There are going to be times when the trilateral discussion have to be central. I agree with Sergio totally. But in terms of NORAD and certain things that just Canada and the United States are in, how can we maybe expand that or build that as part of it? Because from our standpoint, economic security includes that continental security, it includes investments in the Arctic. So sometimes the border issues at the south are different than the border issues at the north. But the three-amigo approach is what we should always, we’re friends, we’re allies, we’re partners.

Candace Laing:

Thank you, Aaron. Tom.

Thomas J. Duesterberg:

I’ll just briefly try to address this gentleman’s question. The concept of security is not just military security in the sense that when we’re thinking about the prosperity, the sustainability of our economies, we have to remember, and I seem to be picking on China, but they’re the biggest offender. There’s a defensive angle to this because you look at the Chinese Made in China 2025 program, which is dominating the high-tech, the 10 leading high technologies of the future. And they’ll do whatever they can to not only build their own, but undermine ours through subsidization, through dumping and other, limiting access to their own market. So we have to think about the defensive dimension of this. We don’t want to be vulnerable in the sense of our own economic future to mercantilist predatory economies like China.

Candace Laing:

Well, I think on that statement, which provides a bit of clarity to the entire topic, addressing our vulnerabilities and those shared external challenges, I want to thank each of you for being willing to be here and share your insights and thoughts. So please help me thank our panel for today.