Time for a North American Trade Policy

When the leaders of Mexico, Canada and the United States meet for a summit in Mexico this weekend, the agenda will include a largely predictable list of topics ranging from the presidency of Honduras to the swine flu. The historic significance of the meeting, however, will flow from what is said, or not said, about the still-undefined U.S. trade policy. [IMGCAP(1)]Mexican President Felipe Calderon will protest the U.S. administration’s failure to honor its North American Free Trade Agreement commitment (now 14 years overdue) and permit Mexican trucks to operate on U.S. highways. At the same time, Canadian Prime Minister Stephen Harper is likely to press the President Barack Obama on “Buy America— provisions in the U.S. stimulus package that discriminate against non-U.S. suppliers and violate a host of U.S. international commitments — from the Word Trade Organization to NAFTA. But the crucial issue will be whether there will be a new vision and consensus for a North American trade policy. The past decades have seen many bilateral agreements. Increasingly, however, the problems to be addressed and solved are larger than the individual capabilities of such bilateral agreements. If there is to be success in solving major problems, then there needs to be close collaboration between the three nations in recognition and acceptance of their interdependence.In conjunction with their legislatures, each of the three governments has drawn up important plans. The goals range from improved competitiveness to energy independence, leadership in green technologies, migration control and health care reform. All of these issues require close cooperation between the North American partner.The talks in Mexico must become a teachable moment on the subject of trade policy and, specifically, how trade liberalization and open markets are key to building a new kind of competitiveness. In the past, any definition of competitiveness depended on whether the perspective taken was that of the government, the firm or the individual. Typically, the government was mainly concerned about tax revenue, companies were worried about profitability and individuals were focused on keeping their jobs. Today’s definition of competitiveness newly includes and reflects one’s neighbors. Even though such transborder perspective may be difficult for Congress — and for legislators in Mexico and Canada — there needs to be a recognition that it is geographic proximity that affects housing prices, trust and perceptions of risk and prosperity. If several houses in a neighborhood go up for public auction, prices of all other houses suffer. Collaboration creates jobs, promotes energy independence and environmental sustainability, and makes use of the economic power of the world’s largest regional market. Proximity matters. Obama, Calderon and Harper have a unique approach to articulate a new vision of global competitiveness based on a North American platform Major elements should include:• A credible commitment to reject protectionist measures. One step in this direction would be a solution to unjustified restrictions against the Mexican trucking industry and to Buy America issues. Congress needs to overcome parochialism and accept local’ politics that are inclusive of our neighbors. Given the complementary nature of the three countries — in terms of human, capital and technological resources — we need new ways to deepen economic integration, not to raise barriers. • Recognition of the critical role that energy plays in our collective competitiveness through an action plan which eliminates distribution inefficiencies and creates a more effective integration of the North American energy grid. • A plan for a single North American effort for clean energy development, a common approach to carbon offsets and the use of energy leadership as a key joint competitive tool. • An insistence on joint leadership in the creation and enforcement of global standards for corporate veracity, public accountability and decisions regarding what’s for sale and what shouldn’t be. • A Congressional acknowledgement that migration flows and economic success are linked. Doing so will redefine return on investment calculations for economic development spending. It will also broaden the Congressional perspective when tradeoffs between international economic liberalization and national security are considered. • Options for health care treatment for patients on a North American basis. Here Congress can find new options that maintain quality of care standards while giving proper consideration to variations in cost structure within the region. While one does not want to see the emergence of unregulated and unrestricted regional medical tourism, it is important to make use of existing regional health technology assets and capabilities. Economic and trade concerns have grown in size. We need a cluster of collaboration that enables us to find solutions which are reflective of North American needs, accepted by the local culture and affordable with regional resources. Congress and the administration should consider a tie-in with our North American neighbors to broaden the horizon of possible improvements in our society. Michael Czinkota researches international business and marketing at Georgetown University and the University of Birmingham in the United Kingdom. He served in trade policy positions in the Ronald Reagan and George H.W. Bush administrations.

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