North American Siblings
America shares a continent with its two siblings: Canada and Mexico. The US has fought or partnered with each of its neighbors at different points for different reasons, but in the coming age, the U.S. will pick a favorite. The United States is primarily an economy of upper-mid to high skill labor and services, so it would pair best with a low to medium skill economy. Between Canada and Mexico, one is a competitor, and one is a partner. The Trump administration was no fan of the North American Free Trade Association and decided to craft a new North American trade deal that it called USMCA. We got here because during the Cold War, the US was forced to care about the whole world since it was a global battle against Communism. This was especially important in our two neighbors since the US could not tolerate socialism on its doorstep. But, since the Cold War is no more, US interests have slowly been retreating closer and closer to home, as the US is becoming less interested in propping up countries and economies, it does not see a direct benefit in. Mexico is a country of over one hundred million people with a young low to mid-skill workforce that would pair perfectly with the US economy. On the other hand, Canada has a population comparable to California with an old, aging, upper-mid to high skill workforce that is more of a competitor than a beneficiary. In the 2020’s and 2030s, Mexico will be a dynamic economy that will increase the quality of life for almost all of its citizens, and Canada will struggle to maintain itself.
But before we can go into more detail, we must understand where each country is now. Mexico has some of the worst geographies on the planet (Gallup et. All), no navigable rivers, largely mountainous, and large regions of deserts and jungles, but it is not a failed state because it borders the most powerful country in the world (Lustig). Not to discredit the efforts of various Mexican governments, and to clarify the US was/is not nearly a universal good for the Mexican people, but Mexico’s geography is not only not conducive to economic growth but also not conducive to political stability. Mexican proximity/access to the American market and American interest in Mexico not collapsing in on itself, obviously only after the US took half their land, is why Mexico has seen some prosperity (Díaz-Bautista). Mexico is primarily made up of arid mountainous regions or tropical jungles with no navigable rivers (Britannica). It is difficult to generate capital or construct infrastructure in Mexico (Blankespoor), to say the least. The only way to make money is to have money (Hanson). All that being said, Mexico is in for one of the most significant economic surges of the 2020s and 2030’s. A few notable changes are coming to Mexico, and the shift in American focus from the broader world to North America will create an environment where the standard of living in Mexico will explode.
First, the developed world is aging quickly, but so is the developing world, they just happen to start at a younger age, so manufacturers are having to change where they make things. The median German is already 47.7 years old, and by 2040 will be 51 years old (Statista), and the median Chinese person is already 37.7 years old, but by 2040 will be 47.3 years old (Statista). Because of this, average monthly wages in China are now almost double what they are in Mexico (Stenzel), and Mexico is closer and much less of a political headache. Wages will become too much of a cost to warrant keeping production in China since the Chinese aren’t getting any younger. Manufacturers will find China too much of a hassle to deal with since China is not in for a nice two decades, and the US is no longer interested in keeping it stable; in fact, the Trump admin will take active steps to assist in China’s collapse, and companies with the option of moving out of China will. But there aren’t that many places for them to go. The whole world is getting older and getting older quickly, so the only places that have substantial populations under 35 years old, some level of infrastructure, and positive US relations are in South Asia and Mexico. Today the median Mexican is 28.2 years old and will be 46.1 in 2040 (Statista). While yes, it is difficult to build infrastructure, after years of investment, Mexico has a serviceable rail, road, and pipeline network, and Mexico is not a part of the world the US can allow to fall into disarray.
These three criteria may seem broad, but they don’t really appear anywhere else in the world. Europe is already turning into a retirement home, so is East Asia, Africa is, by in large, not stable enough and too difficult to develop to warrant investment. North Africa is still trying to deal with the Arab Spring as well as managing the many migrants who want to seek refuge in Europe. Most countries in the Sahel and West Africa are making progress but are either not ‘there’ yet or have too many local problems; exceptions might be Ghana, Liberia, and Nigeria. Central Africa is famous for its instability, think the DPRC and CAR, so yeah. South Africa is a similar story to West Africa in that significant progress has been made, especially in Botswana, but they still need to figure out some local politics. East Africa is the region doing the best on the continent with countries like Kenya and Rwanda seeing significant growth, but they need significant infrastructure investment before international manufacturing makes its way there. The Middle East is too preoccupied with the oil market and simply does not have the population to absorb all of the needed manufacturing. Central Asia is landlocked and surrounded by a cadre of powerful countries that may not be sympathetic to American interests, Russia, Iran, and China to name a few, and South America is a mixed bag so that only really leaves South East Asia (who we will get to eventually) and Mexico. Thus, Mexico will succeed where others will fail due to its connection with the US.
Now to move north, Canada is the second-largest country in the world, but most of that is entirely uninhabitable. Canada has a population of about 37.6 million people, and you can split that population into three large chunks. First are the eastern St. Lawrence River and Atlantic Ocean population, which includes Ontario, Quebeck, and the Maritimes, which together have about 23.9 million people(World Atlas). Then the Canadian Shield and tundra block the east off from the central provinces of Alberta, Manitoba, and Seschawan, which together have 6.4 million people (World Atlas). And lastly, British Columbia is separated from everyone else by the Rockies and has a population of 4.6 million people (World Atlas). A map of population density shows this the best where you can see three distinct blocks of people with minimal contact with each other (Monnier) (also there is a single road connecting Ontario with the entire Western part of the country(Lemos)). So, for most of its history, Canada has always been a federation with little big government where the provinces have the most control over the citizen’s lives. So solely thinking of Canada as an individual nation-state is not necessarily the best course of action when considering its future. To that end….
Canada is famous for its generous social programs. It has fantastic healthcare, pensions, retirement help, and other benefits. Back in the 1990’s, when Canada was young and had guaranteed access to the American market, they could afford all these benefits, but, twenty-five years later, that is no longer the case. The global trend of developed countries aging will hit Canada soon as their median age is already 40..8 years old (Statiata), and it will be 43 years old by 2030 (Office of the Chief Actuary). With an aging population, that means that more and more retirees will have to be financed by fewer and fewer workers, and with fewer young people, that means fewer consumers, which means the country has to export more. 32.1% of Canada’s GDP comes from exports (World Bank), and 75% of that is with the US (World Exports), but that is before USMCA. It should be evident that Canada needs to trade with the United States now, but with its coming demographic changes, it will need to trade with the United States even more. However, at the very same time, the United States is losing its interest in trading with Canada. Remember, the United States is now only interested in a trade relationship if it can directly benefit either strategically or financially, and Canada no longer offers a strategic advantage and is a competitive economy to the United States. So USMCA forces Canada to open up more Canadian markets to American competition (Powell) and encourages more manufacturing to move to the United States (Coletta). Is it a better deal for Canada than NAFTA, no. Is it a better deal for Canada than nothing, yes.
Americans are an isolated people; they don’t typically care about the rest of the world because they don’t have to. The historical exception has always been our continental neighbors, and the same thing is true for this next stage of international interest. Mexico is a complementary system that will take the low to mid-skill labor that Americans are no longer interested in doing and will become a valuable partner for American industrial and agricultural companies. Canada is a competitive system that is almost entirely dependent on America and no longer provides much in exchange for that support. One of these countries will see American cooperation in the next decade, and one won’t. I’ll let you figure out which is which.
Bibliography:
Coletta, Amanda. “For Canada, USMCA Ends Uncertainty, but Concern Lingers for the Dairy and Aluminum Industries.” The Washington Post, WP Company, 11 Dec. 2019, www.washingtonpost.com/world/the_americas/in-canada-relief-at-a-north-american-trade-deal-but-concerns-for-the-dairy-and-aluminum-industries/2019/12/11/dd53c514-1c24-11ea-977a-15a6710ed6da_story.html.
Lemos, Eirini. “Canada 'Cut in Half' after Bridge Connecting East and West Splits.” The Telegraph, Telegraph Media Group, 11 Jan. 2016, www.telegraph.co.uk/news/worldnews/northamerica/canada/12093206/Canada-cut-in-half-after-bridge-connecting-east-and-west-splits.html.
Monnier, Marie-Louise. “Mapped: Canada's Incredible Population Density.” Matador Network, 7 Apr. 2017, matadornetwork.com/read/mapped-canadas-incredible-population-density/.
Office of the Chief Actuary. “National Population Projections Actuarial Study No. 4.” Office of the Superintendent of Financial Institutions, May 2005, www.osfi-bsif.gc.ca/Eng/Docs/popcdn.pdf.
Powell, Naomi. “Half of Canadian Executives Say Old NAFTA Better for Our Economy than USMCA.” Financial Post, 22 Feb. 2019, business.financialpost.com/news/economy/half-of-canadian-executives-say-old-nafta-better-for-canadian-economy-than-usmca.
Statista: https://www.statista.com/statistics/232265/mean-age-of-the-chinese-population/, https://www.statista.com/statistics/624303/average-age-of-the-population-in-germany/, https://www.statista.com/statistics/275555/median-age-of-the-population-in-mexico/.
Stenzel, Gustavo. “Reforms Could Bolster Latin American Economies: Franklin Templeton.” Investment Adventures in Emerging Markets, 14 May 2018, emergingmarkets.blog.franklintempleton.com/2018/05/11/latin-american-growth-players/?utm_medium=Email&utm_source=ExactTarget&nicamp%3D%26nichn%3D%26niemailseg%3D758781718%3AFebruary82018%3A7340670&nicamp%3D%26nichn%3D%26niemailseg%3D631556815%3AMay112018%3A7485810.
World Atlas: https://www.worldatlas.com/articles/canadian-provinces-and-territories-by-population.html
World Bank: https://data.worldbank.org/indicator/NE.EXP.GNFS.ZS?locations=CA
World Exports: http://www.worldstopexports.com/canadas-top-import-partners/