The United States, Canada, and Mexico make up the world's most prosperous trading block under the North American Free Trade Agreement (NAFTA). But relations between partners have cooled since September 11, with both Canada and Mexico declining to support the United States in liberating Iraq, and Canada opting out of America's missile defense shield.
Despite this, progress is still possible when President George W. Bush, President Vicente Fox of Mexico, and Prime Minister Paul Martin of Canada meet in Texas on March 23 to discuss how to strengthen security while making the region more prosperous.
Economy, Security & Energy
On the table is a draft "Initiative for North America," a plan that seeks to enhance economic integration under NAFTA, establish more effective border security, and assure members' access to energy. Achieving these goals will help the three nations compete economically against rising Asian powers like India and China where labor costs are a fraction of those in the Americas.
Economic Integration. President Bush would like to preserve the economic benefits of NAFTA without excess regulation or financial commitments. Both Canada and Mexico, however, favor turning NAFTA into a regulated customs union, like the European Common Market, where rich partners help the poor.
For North America to be more competitive, Mexico-especially-needs economic reform. Despite 10 years of increased trade under NAFTA, Mexico has recently generated only about 20 percent of the jobs it needs for the 1 million new workers that enter its labor force annually. Mexico's underdeveloped capital market still provides little credit to small start-ups and a weak education system prepares too few citizens for modern jobs, while state and private monopolies thwart growth in the energy and telecommunications sectors.
Border Security. President Bush seeks equal inputs to border security to keep out terrorists and criminals. Both Canada and Mexico would like help paying for security enhancements and President Fox has made the free movement of labor into the United States the centerpiece of his foreign policy.
All three countries face threats from transnational crime, drug trafficking, and terrorism. Canada has military and police forces that function at similar levels as those in the United States. But generous immigration and asylum policies permit easy entry for potential criminals. Despite improvements, Mexico lacks adequate security forces to protect its shores and borders. Its military has an outdated mission to suppress internal unrest and its poorly trained and paid police are no match for criminals with Blackberries and cell phones.
Access to Energy. President Bush seeks to develop local energy supplies to reduce dependence on potentially unreliable vendors such as Venezuela, whose president, Hugo Chávez, has threatened to halt oil exports to the United States. Both Canada and Mexico need foreign investment to tap their reserves.
Rising energy demand means exploiting new reserves as older ones become depleted. The United States consumes about 19 million barrels of petroleum per day compared to about 4 million between Canada and Mexico. Together, Canada and Mexico are America's top providers, exporting half of their output to the United States-3.8 million barrels per day.
U.S. development of the Arctic National Wildlife Refuge could add about 1 million barrels per day. Canada's tar sands that rival Saudi Arabia's reserves, and Mexico's potential, could be increased through foreign investment. Yet new fields will take time to develop, and inefficiency and corruption still scare off investors in Mexico's state petroleum industry.
Finding Common Ground
Turning this mix into a tri-national strategy for prosperity, border security, and energy independence might seem daunting. Fortunately, Canada and Mexico can be willing partners. In fact, it was Mexico that originally advocated NAFTA.
To help build a better North American community, the three leaders should agree to:
Promote prosperity, competitiveness, and job growth by accelerating tariff reductions, eliminating remaining trade barriers, and cutting tax and regulatory burdens. By helping Mexico extend education to more of its citizens and adopt free market reforms, Canada and the United States could help relieve pressures that cause hundreds of thousands of Mexicans to migrate north each year.
Bolster security by developing common security protocols and joint training opportunities for law enforcement and military personnel employed where tri-national cooperation is essential-such as on border patrol and maritime interdiction missions. More effective local governance can help. Already some Mexican state authorities, U.S. municipal authorities, and Central American police are sharing information on migrants and gangs. National leaders should welcome these local initiatives.
Meet energy challenges by urging the development of viable resources in Alaska and Canadian tar sands and encouraging Mexico to de-monopolize and privatize its state energy industry to attract investment. On the demand side, all three countries should work toward dismantling various energy subsidies and let markets guide the development of renewable resources.
Putting past disagreements aside, President Bush should praise his partners' achievements. Canada has implemented Smart Border technology and made efforts to improve ports of entry. Mexico's President Fox pushed through congress a civil service reforms that will help curb public corruption. He has moved aggressively against narcotics trafficking and crime. Despite low job growth, his country is fiscally sound-paying bills and accumulating record reserves.
Now is a good time to draw North America's three giants closer by expanding free markets, coordinating security, and adopting a common strategy to assure energy resources for the future. If the proposed "Initiative for North America" shows promise, it should be extended to Central America and the Caribbean, smaller nations that share both the neighborhood and similar interests.
Stephen Johnson is Senior Policy Analyst for Latin America at the Kathryn and Shelby Cullom Davis Institute for International Studies at The Heritage Foundation.