Written by Dave Graham and Garrett Renshaw

MEXICO CITY (Reuters) – U.S. President Joe Biden and his Mexican counterpart discussed stronger economic ties, fighting the illegal drug trade and approaches to curbing illegal immigration at a meeting in Mexico City on Monday, the White House said in a statement.

The White House said Biden and Mexican President Andres Manuel Lopez Obrador also discussed incentives to boost investment in semiconductor manufacturing along the border at the bilateral meeting.

“There are unparalleled conditions for launching a new policy of economic and social integration on our continent,” Lopez Obrador said at the start of the meeting, urging Biden to invest in the region.

López Obrador hosts Biden and Canadian Prime Minister Justin Trudeau Monday through Wednesday in the first summit between the three since late 2021.

Talk of a closer partnership comes even as disagreements persist over López Obrador’s national energy policies, prompting the launch of a formal trade complaint in July by Washington and Ottawa.

López Obrador said the trade agreement has proven to be a valuable tool but there has been continued growth in its Pacific ports with goods from Asia, indicating that countries are still dependent on Asian industrial production.

“Can’t we produce in America what we consume? Of course, it is a matter of joint definition and planning for our future development,” he said during a meeting with Biden.

Since the COVID-19 pandemic hit supply chains, policymakers have stepped up calls for companies to move business out of Asia to boost economies covered by the US-Mexico-Canada Regional Trade Agreement.

The two leaders also reaffirmed their commitment to using “innovative approaches” to reduce irregular migration, after the Biden administration recently introduced a policy to expel migrants from Cuba, Haiti and Nicaragua who cross the border illegally into Mexico.

Mexico urged the United States to allocate funds to Central America and southern Mexico to promote development and stop immigration from one of the poorest regions of the hemisphere, and make it easier for immigrants to find jobs in the United States.

The White House said the leaders discussed more cooperation to prosecute drug traffickers and disrupt supplies of chemicals used to make fentanyl, with the synthetic opioid blamed for the deaths of thousands in the United States.

At its core, the plan would involve Mexico reducing fentanyl smuggled across the border in exchange for the United States reducing the number of weapons smuggled into Mexico, two Mexican officials, speaking on condition of anonymity, told Reuters.

Mexico last week arrested a prominent cartel leader, Ovidio Guzmán, who is wanted in the United States. One Mexican official said that the weapons used by Guzmán’s cartel came into the country from the US border states.

local politics

Despite talk of strengthening ties, tensions remain. López Obrador has worried the US about a plan to ban imports of GM corn, though Mexico has agreed to delay the ban until 2025. The three trading partners have also been at odds over rules of origin for cars.

“Trade tensions over automobiles, tariff rules, GM corn and energy policies in Mexico are already high and could intensify,” said Jake Colvin, president of the Washington-based National Council on Foreign Trade.

“To create a corridor in North America to beat China, the United States, Canada and Mexico have to be on the same economic page,” he added.

López Obrador, an anti-leftist, says his energy policy is a matter of national sovereignty, arguing that previous governments have skewed the market in favor of vested interests.

The United States and Canada say their companies have been hurt by Lopez Obrador’s campaign to give market control to cash-strapped state energy firms, and the row has dampened investment prospects.

Trudeau told Reuters on Friday that he will make the case that resolving the energy dispute will help bring more foreign capital into Mexico, and he is confident progress will be made.

As part of that campaign, López Obrador — who in June declined Biden’s invitation to the Summit of the Americas in Los Angeles to protest his exclusion of the leaders of Cuba, Venezuela and Nicaragua — wants to discuss his plan to boost solar power in the north. Mexico and securing American financial support for it.

Christopher Landau, the US ambassador to Mexico under former President Donald Trump, said domestic politics mean finding compromises on energy as well as immigration will be difficult.

“There is no clear-cut deal that satisfies all of their domestic interests,” he said, “but I think it is in their domestic interest to say they agree.”