At a Dec 15 panel discussion at the Woodrow Wilson Centre, Antonio Ortiz-Mena, Christopher Sands and I debated the fate of trilateralism as the driver of progress in the NAFTA. None of us were unbridled optimists, but neither were we ready to bury the body either. Since the Chatham House rule applied to our discussion (and I was in charge of enforcing it), I’ll only report on my conclusions.
The NAFTA is a 17-year old trade agreement that does a pretty good job governing traditional goods trade and dispute settlement but the lack of a mandate for political integration means there is no mechanism to override short-sighted local interests. It also means any progress must be incremental.
I argue that there are a lot of small but important improvements we could be making (borders, rules of origin, regulations, labour mobility, transportation, infrastructure). These work areas are politically sensitive, technically complex or both, but because we cannot achieve everything, we cannot refuse to start anything. We don’t need a grand initiative to launch NAFTA 2.0, but we do need political leadership to sustain the myriad competitiveness-building improvements that must be made.
The trilateral cooperation model has fallen away in favour of dual bilaterals. In environment, energy, borders, and regulatory issues, the United States negotiates with Mexico and Canada at separate tables. Yes, this provides an opportunity for progress on smaller subsets of issues, but it also means that Canada and Mexico cannot work together to counter-balance an asymmetrical bargaining arrangement. The United States talks; Canada and Mexico listen.
The NAFTA is yesterday’s agreement. Asia is the future. This may be true to the extent that intra-NAFTA trade has declined in relative terms but all three countries are strengthened in negotiations with third countries when we are united on objectives and principles. NAFTA is two small fish and one big fish. When we are negotiating with Pacific sharks and whales, access to a competitive, integrated North American block is a much more powerful bargaining chip than access to three fragmented national markets.
It is time to take the shroud off NAFTA and stop blaming this agreement for economic ills for which it bears no responsibility. If the patient is dead then bury it, but if not, call in the life supports and do it quickly.
Thanks to the Canada Institute and the Mexico Institute for organizing this event. Thanks also to David Biette and the Canada Institute for incredible support during my 2011 term as a public policy scholar.