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Summary
North American integration has been running on autopilot for years, but the March 23 meeting of Canadian, Mexican and U.S. leaders appears to be the beginning of a new trade round with potential to reach further than the North American Free Trade Agreement. But that does not mean the new round will be completed any time soon.
Analysis
Canadian Prime Minister Paul Martin, Mexican President Vicente Fox and U.S. President George W. Bush met March 23 in Texas to discuss NAFTA-Plus, a new multilateral agreement that seeks to enhance security as well as trade.
North American integration has been stalled for years, most recently because of a series of extremely specific and limited issues. However, governments from all three North American Free Trade Agreement (NAFTA) powers are making great efforts to resolve those issues, enabling them to address more critical interests. While no landmark deals emerged from the March 23 talks, the discussion did lay the groundwork for the next round of NAFTA accords and a deepening of North American political, economic, energy and security relations.
The three international conflicts that have stood in the way of an upgraded NAFTA are either resolved or being promptly addressed: the Mexican water debt, the Canadian lumber disagreement over U.S.-imposed duties and the Canadian mad cow disease issue that resulted in a Japanese ban on U.S. beef.
* Mexico and the United States have been squabbling over water quotas in the Rio Grande Valley since 1990. But that ended March 10, after U.S. Secretary of State Condoleezza Rice secured a promise from Fox to transfer the water Mexico owes the United States.
* Similarly, the United States and Canada have been arguing over lumber. Since 2001, the United States has collected duties on Canadian lumber exports as punishment for what Washington sees as Canadian subsidies. So far some $3.5 billion is in the duties account. Luckily, U.S. lumber companies already have endorsed a Canadian proposal to resolve the situation, and Grant Aldonas, the Commerce Department undersecretary and lead U.S. negotiator has made it his overriding priority to resolve the issue before leaving office March 31.
* The mad cow disease issue also is nearly resolved. The United States has put massive pressure on Japan to end its ban on U.S. beef, which is directly responsible for the U.S. ban on Canadian beef. Even though the Japanese government so far refuses to provide a date for lifting its ban, the number of outstanding issues barring progress on the issue has shrunk dramatically, and now Rice is spearheading U.S. efforts.
With the removal of these three obstacles, and with the Bush administration enjoying trade promotion authority -- the ability to freely negotiate trade treaties without needing to worry about Congressional interference -- the stars appear to be in alignment to move forward on larger issues.
Two issues that were on the table March 23 were immigration and energy. Mexican immigrants make up the largest group of immigrants into the United States in both legal and illegal categories. The Fox administration wants Washington to treat those immigrants better and allow a more fluid border -- a 40-year guiding goal of Mexican foreign policy. The United States, in contrast, is interested in Mexican energy. Washington wants Mexico to allow foreign firms to invest in new production in order to secure long-term supplies to the United States.
On the surface, this represents a Catch-22. Bush, while supporting Fox's idea in principle, does not think he could sell it to Congress because of security, debt and illegal immigration fears. Similarly, Fox thinks foreign investment in Mexican energy is a decent idea -- at current rates of decline, Mexico will be an energy importer within 10 years -- but national ownership of the energy complex is enshrined into the Mexican Constitution. Changing it will be an uphill battle.
So the two have struck a deal. They will work in tandem to sell the immigration and energy package to their respective populaces and legislative branches. It is a tall order, but both sides stand to benefit immensely. And both sides will potentially offer precisely what the other side wants.
Other, less intrusive items also were on the agenda. The three North American states have agreed to a gaggle of smaller deals that will improve supply chain connections throughout the continent, tighten border security, harmonize visa regulations and get rid of what the Canadians call "nuisance regulations." Had issues such as mad cow disease or water debt still been on the agenda, it is extremely likely that these seemingly minor, but in actuality extremely important, issues would have been stalled.
They will be the only issues agreed to for now. Bush and Fox agreed to a 90-day deadline for pushing forward the energy and immigration issues. Such a timeframe is woefully unrealistic. Amending the Mexican Constitution is something that will take years, and convincing the U.S. Congress to alter the status of the millions of Mexicans living in the United States illegally could breach the Republican Party's already shaky unity.
But the ball is moving again. For all practical purposes, North American integration has been stalled since 2000 -- and it has been on ice for the past three years. Yet NAFTA proved successful enough to nearly triple trilateral trade to $712.7 billion in 2004. With the niggling issues out of the way, NAFTA now can be updated and expanded -- just do not count on its happening fast.
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