February 22, 2017
US-Mexico and Canada Trade Ties: What is the Way Forward? The Economic and Strategic Imperative of Getting It Right
By Mario Zampaglione
In order to assess the economic and strategic importance of the relationship between the North American countries, the Atlantic Council’s Adrienne Arsht Latin America Center hosted a timely lunch with distinguished experts. Following introductory remarks by Senior Vice-President for Strategic Initiatives and Director of the Adrienne Arsht Latin America Center, Peter Schechter, Former Secretary of Commerce Carlos Gutierrez gave opening remarks on the current situation of the US-Mexico relationship and the shroud of uncertainty that masks the future of an integrated North America.
Gutierrez stated that the doubt that lays ahead for the North American countries primarily revolves around Trump’s harsh critiques of the North American Free Trade Agreement (NAFTA). NAFTA has had resounding effects in engaging cross-border security initiatives and is vital in providing a way of life for millions in all three member countries. Gutierrez emphasized the importance of geographic proximity in creating successful trade deals, pointing to the increasingly liberalized and economically prosperous East Asia as an example. However, when examining the integration and cooperation in the Americas, he noted that “we’re fragmented, splintered…there is not one [regional trade deal] in the Americas. The crown jewel that we do have is NAFTA.”
Jason Marczak, Director of the Latin America Economic Growth Initiative at the Adrienne Arsht Latin America Center, then moderated a discussion between Peter MacKay, Former Canadian Minister of Justice and Attorney General, Minister of Defense, and Minister of Foreign Affairs; Paula Stern, former Chairwoman of the US International Trade Commission and Founder and Chairwoman of the Stern Group; and Rafael Fernández de Castro, professor at the Instituto Tecnológico Autónomo de México (ITAM) and Maxwell School of Citizenship and Public Affairs, to discuss the importance of linkages between the three North American countries and assess the path forward for continued regional integration.
The benefits that the three countries have reaped from NAFTA were repeatedly highlighted by all speakers throughout the discussion. Economic integration in the continent was able to harness the volatile economy of Mexico and allowed for the US and Canada to remain globally competitive producers despite higher costs. All of this took place whilst lifting millions out of poverty and employing 14 million people throughout the continent.
That is not to say NAFTA is perfect. Written more than two decades ago, the trade agreement is undoubtedly in need of modifications, as it has not seen any major updates in light of the rapid advances in technology over the past twenty years. Stern argued that recent technological improvements place the trade agreement out of its original context. “In the US, our manufacturing production is the highest it’s ever been, but the number of manufacturing jobs is the lowest,” she stressed.
Looking to the future, Stern recommended that NAFTA pick up on the less controversial topics included in the TPP agreement. Although it was recently scrapped by the Trump administration, TPP was groundbreaking in addressing economic integration on contemporary issues such as digital trade, intellectual property and environmental regulation. Incorporating these provisions would strengthen and better re-contextualize NAFTA in an increasingly automated world. With such a shifting economic framework, NAFTA must adapt so that it can better benefit its three member countries. “To make America great again, you have to make NAFTA great again,” MacKay asserted.
Fixing NAFTA will not be enough in restoring the once healthy relationship between the US and Mexico. As MacKay noted, while President Trump has targeted NAFTA, his arguments have been “undoubtedly directed at Mexico.” Coupled with controversial rhetoric on immigration, President Trump has been able to create an irregular political tenor within the Mexican electorate. “Trump is creating the perfect consensus in Mexico, from the far-right to the far-left…Mexicans are rallying behind the flag” said Rafael Fernández. The Trump-induced uptick in nationalism is affecting next year’s Mexican presidential election, strengthening the chances of anti-establishment populist Andrés Manuel López Obrador.
In lieu of the uncertainty between US-Mexico relations, this week’s visit of US Secretary of Homeland Security, John Kelly, and Secretary of State, Rex Tillerson, to Mexico was seen with a degree of concern. Despite the anxiety, MacKay offered a reassuring message. The meeting in Mexico City will serve to “smooth and deal with the national backlash… and recast what has been, perhaps, a wrong-footed approach and go back to the basics of security,” argued MacKay.
Expanding on the visit, Marczak highlighted that “these are two men that know Mexico very well, who have deep relationships with the Mexican government, stemming from Secretary Tillerson’s time as head of Exxon Mobil and Secretary Kelly’s time as the helm of US Southern Command.” Having worked in bilateral negotiations between the US and Mexico in the past, Castro stated that these early trips by officials are important for both parties “to understand the complexities of these [issues].” These trips serve to build respect and understanding between officials, argued MacKay, adding that “the ability to have open and honest discourse, develop trust among ministers, governors and, chambers of commerce… matters.” Only with such a relationship will it be possible to move away from the personal and focus on the practical.
See the entire discussion here.