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North American Solutions

By Stephen Blank

This year marks NAFTA’s 20th anniversary, and we can look back on impressive (if widely unknown) achievements in building a more integrated North American economic system. But to cope with looming continental issues, Canada, the United States, and Mexico need to work even more closely togethersimply revamping this two-decade-old agreement won’t be enough.

NAFTA wasn’t the beginning of North America’s more integrated economic system. Rather, NAFTA recognized and formalized changes in the structure of the North American economy already underway. Today Mexico, Canada, and the United States are deeply interconnected and interdependent, with an unprecedented degree of collaboration among them. What is particularly important are not just increases in trade in raw materials and finished goods among the three nations, but rather the striking growth in the cross border movement of parts and components. We don’t just sell stuff to each other. We make stuff together.

We share integrated energy markets, use the same roads and railroads to transport jointly-made products, fly on the same integrated airline networks, and increasingly meet the same standards of professional practice. This is the true North American “reality.” By the 1990s, key elements of North America’s economy could be visualized as deeply integrated continental supply chains linking production centers and distribution hubs across the continent. No one planned these developments. The most powerful drivers of change were “bottom-up” changes in corporate strategies and structures rather than “top-down” government plans or decisions.

This “bottom-up” approach worked well in the 1980s and 90s, when excess capacity existed in our freight transportation system, as new technologies (like doubt stacking containers) came on line, and governments deregulated rail and trucking industries. But that era is over and the bottom up approach no longer suffices to tackle new issues.

The problems didn’t begin with September 11th, although post 9-11 regulations have “thickened” borders, making business more expensive and complex. The fundamental flaw in the NAFTA structure has been the failure of the three governments to acknowledge that the trade agreement was only one element of this North American reality, and only a first step toward achieving a stable foundation for continental collaboration and growth. But Ottawa, Washington, and Mexico City continue to emphasize that the three “NAFTA partners” are trading partners, nothing more.

This failure of a trilateral vision inhibits efforts to upgrade the NAFTA system. Calls to renegotiate NAFTA after 9-11 led nowhere, and the collapse of the more serious effort to enlarge the scope of North American regulatory and security cooperation in the Security and Prosperity Partnership in 2009 revealed that leaders were not prepared to confront wild accusations that this was a step toward a “North American Union.” The work of the U.S.-Canada Regulatory Cooperation Council has been more successful but still modest—bilateral rather than trilateral and focused essentially on making the border more efficient and secure rather than on the issues coming at us. While trade restrictions and border issues remain vital concerns, we must be prepared to face these new, pressing problems:

Energy, for example, must be viewed in continental terms. We all benefit from North America’s deeply integrated oil, gas, and electricity systems. In this new energy-rich environment, we must determine an energy mix that optimizes availability, cost, and sustainability for the next generations.

Environmental threats cannot be discussed as three separate national issues. We have given surprisingly little attention to building collaborative adaptation mechanisms for dealing with climate change.

We have not thought about how to improve our continental supply chains—and, indeed, what shape these might take in the next decades. We need to focus serious attention on learning more about how North America works and on the factors that drive or inhibit our competitive advantage.

North Americans face a tremendous infrastructure crisis. Competitiveness requires efficient, safe, and sustainable transport (road, rail, air, and water); logistics systems; border crossings; and energy infrastructure. We have not thought about a 21st century continental infrastructure of roads, rails, and ports.

We are all undergoing extensive demographic changes that limit economic growth and fiscal balance and create political, economic, and social turmoil. The issue is not just Mexican immigration to the United States, but aging in all three countries. All three countries experience high levels of internal migration as people follow jobs; all three face growing imbalances of the supply of medical and educational resources and changing levels of demand for these services.

As we begin to focus on these issues, efforts to revitalize the movement toward economic integration in North America should not be directed toward the negotiation of a new grand bi- or tripartite trade deal. We cannot think of trying to build a North American version of the European Community. What we need to launch is not a new trade negotiation but a political campaign.

First, we must begin with a vision of what North America might look like in the mid-21st century—how efficient, sustainable and secure energy, climate change, supply chain, infrastructure, and demographic-health systems might operate in another 30 or 40 years.

Second, instead of compressing many different issues into a single negotiation, discussions must be separated and treated individually. We should begin with a view of three sovereign nations seeking means to confront common, often shared problems. An integrated “North America” should be a vehicle for collaboration rather than the goal of collaboration. We do not suggest that every problem that exists has a North American solution. But we have to stop being afraid to consider continental ideas and approaches to some of our most pressing problems. It should be natural—not unusual—to think of continental collaboration as a tool to deal with particular issues.

Third, we must build a much broader base of informed and active constituencies. The NAFTA approach confined discussions about North America to a small number of beltway trade experts. But the issues we face today are large and difficult, and we are burdened with a history of misinformation (for example, about a massive, secret Mexico to Canada trade corridor) and deeply embedded fears (eroded sovereignty in a North American Union).

Large constituencies that support North American integration do exist. They consist of companies that run continental production, supply, and marketing systems; cities where jobs depend upon efficient North American transportation and logistics networks; and communities living on the borders. Many government, business, and civil society groups are aware of their roles integrating communities across Canada, the United States, and Mexico. Still for even the most informed, the concept of an integrated North America is limited to more traditional pan-national tasks of getting parts on to loading docks, keeping oil and gas flowing in pipelines, matching electrical demand and supply, considering how weather might affect water flows, and tracking threatening invasive species. The aim should be to mobilize these disconnected groups into coherent communities that recognize interests in continental collaboration.

We must stimulate continual conversations among these groups, build ongoing ties with research and teaching institutions, and mobilize constituencies in energy, climate change, supply chains, infrastructure, and demographics. We need to think about how to institutionalize these conversations and thus climb beyond the repetitive, ad-hoc approach that has characterized discussions of North America over the past three decades.

Discussions must involve perspectives from different regions, different economic and social sectors, and from those who oppose further integration. If efforts to build a new North American system rest solely on the creation of a new Ottawa-Washington-Mexico City corridor, they will lack legitimacy in many parts of the continent. The issues that we now face cannot be conducted under the legislative and media radar. We must stop being afraid of public debate on the future of North America. If we act like conspirators, we will surely be accused of conspiracy.

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Stephen Blank has enjoyed a long career in the academic, government and not-for-profit communities. In 2012-13, he served as Fulbright Research Chair in Governance and Public Administration at the University of Ottawa. (www.stephenblank.info)

[Photo courtesy of michal812]

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