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Time to reset the NAFTA agenda

Time to reset the NAFTA agenda

Posted by PanamericanWorld on February 17, 2014

On Sept. 11, 2001, in the eyes of most Americans, Canada’s geography underwent a radical transformation. Once a strategic asset providing depth of warning and response to Russian missiles, our vast territory became a serious security liability. Overnight, 8,000 kilometres of “undefended” border were seen to provide a gateway for terrorist actions against the U.S. homeland.

To relieve pressure on the border and to facilitate trade, officials from both countries are now engaged in mind-numbing exercises to seek regulatory “alignment” (mutually accepted levels of sugar in Cheerios), in legal tussles over differing definitions of privacy rights (grounds for detention at the border) and in debates over how to assess border threats.

This is not the NAFTA I knew.

Despite bureaucrats’ activities, the state of the Canada-U.S. relationship is stagnating. After eight months, Canadians await the arrival of a new ambassador. The White House is distracted by domestic economic challenges, a gridlocked Congress and geostrategic shifts in the Middle East and Asia.

Despite the Declaration of Leaders of February, 2011, during U.S. President Barack Obama’s visit, the Canada-U.S. border remains sticky and expensively uncompetitive for shippers. The Canadian share of the U.S. market has declined relative to other exporters such as China and Mexico, while the composition of exports has shifted significantly from value-added manufacturing to resource-based commodities, principally energy.

White House stalling over Keystone XL and Congress’s protectionist legislation against Canadian meat exports have created rising levels of frustration not seen since the days of the softwood lumber disputes.

Meanwhile, an economically resurgent and politically maturing Mexico has earned an influence once reserved for Canadians in Washington. Important shifts of population from the states of the U.S. northeast to the south and southwest, as well as the growing Hispanic vote, have raised Mexico’s stock in Congress.

And Canadians have been slow to appreciate that Mexico has become a more equal partner, politically and economically, in the North American dynamic. This rebalancing of North America has been accompanied by the individual NAFTA countries engaging in negotiations to conclude separate trade agreements with third parties – for example, Canada and the European Union, the U.S. and South Korea, Canada-Colombia, Mexico-EU, U.S.-EU.

While Canada and Mexico have been included in the Trans-Pacific Partnership talks, the NAFTA members are not negotiating as partners, but as individual states with markedly different agendas. Political inattention, persistent border stickiness, and the effects of non-NAFTA trade agreements risk overwhelming the vision of closer North American economic integration envisaged by the Three Amigos some 20 years ago.

In Washington, it appears increasingly possible that President Obama will not receive fast-track trade authority from Congress, thereby chilling the interest of participants in the Trans-Pacific Partnership to enter into meaningful negotiations. Working within the accepted framework of existing NAFTA legislation would offer the President greater prospects of success for his trade agenda, because the possibility of effective congressional opposition is limited.

This is the time to reset the NAFTA agenda. The three partners should work toward the further removal of tariff and non-tariff barriers, progress on border facilitation, including regulatory alignment among the three countries, regulated labour mobility and measures to establish a North American regime to manage the symbiotic, if contentious, relationship between energy and the environment.

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