US and Mexico Join Forces to Enhance Investment Screening to Combat Chinese Influence

The Biden administration has reached an agreement with Mexico to prevent countries such as China from investing in Mexican companies as a way to circumvent U.S. sanctions and tariffs. Treasury Secretary Janet Yellen revealed the signing of a “Memorandum of Intent” between the two countries to establish a bilateral working group to exchange technical information and best practices on screening foreign investment.

The goal of the agreement is to bolster supply chains and safeguard national security in critical industries. Yellen emphasized the importance of both countries working together to protect against foreign investments that pose national security risks, as well as the close partnership between the United States and Mexico in trade and national security matters.

The Biden administration aims to assist Mexico in strengthening its foreign investment screening process by sharing insights and best practices from the U.S. Committee on Foreign Investment in the United States. In recent years, the U.S. government has stepped up its regulations on foreign direct investment to protect national security and economic interests against potential acquisition by foreign entities, particularly those from China.

During a news conference in Mexico, Yellen stated that increased engagement with Mexico will help maintain an open investment climate and address security threats. She concluded her three-day visit to Mexico City, during which she discussed various bilateral economic issues and challenges related to combating illicit drug trafficking.

Stephen Ezell, vice president for global innovation policy at the Information Technology and Innovation Foundation, believes that the new agreement will help crack down on Chinese efforts to evade U.S. tariffs and sanctions by relocating manufacturing to Mexico. Chinese companies have been flocking into Mexico in recent years, particularly since 2018 when then-President Donald Trump initiated a trade war with China. President Joe Biden has maintained these tariffs, encouraging companies to decouple from China and consider “nearshoring” in North America.

The initiative announced by Yellen aligns with the longer-term objective of ensuring that North American companies maximize the North American production environment. However, the White House declined to clarify whether the new pact specifically targets Chinese investments in Mexico. The White House spokesperson emphasized that sovereign nations have the right to make their own decisions regarding economic opportunities and investments.

The spokesperson also referenced the Partnership for Global Infrastructure and Investment (PGI), aimed at competing with China’s Belt and Road Initiative, providing an alternative to the high-interest loans offered by other nations. The Biden administration’s focus on developing global infrastructure investment emphasizes the importance of partnerships and competition with China in the international economic arena.

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