Ukraine comments underscore how NAFTA trade partnership is drifting
02/19/2014 11:30 AM
02/19/2014 9:16 PM
President Barack Obama met Wednesday with his Mexican and Canadian counterparts but little tangible came out of the Three Amigos summit, a further sign that the world’s largest trading bloc is on autopilot, hobbled by spats between members.
Indeed, Obama spent his first moments of an abbreviated eight-hour stay focused on a public statement about turmoil in distant Ukraine – a country with which U.S. annual trade doesn’t equal even two days’ worth of business with Mexico.
In one sign of consensus, Obama, Canadian Prime Minister Stephen Harper and Mexican President Enrique Pena Nieto agreed to harmonize a “trusted traveler” program, synchronizing a handful of different programs to speed border crossings around the hemisphere.
But the overall atmosphere in Mexico’s fifth largest city was cool, a sign of the strains that separate the leaders and have slowed momentum to modernize the North American Free Trade Agreement, or NAFTA, which celebrates its 20th anniversary this year.
A bilateral spat between Mexico and Canada, and anger in Ottawa over U.S. indecision on whether to build the Keystone XL pipeline from western Canada to the U.S. Gulf Coast did not appear to get resolved at the summit. Obama and Harper said the two discussed Keystone, which would carry oil made from tar sands, but Obama insisted that his administration must await further determinations about the potential impact of the pipeline on climate change.
“We only have one planet,” Obama said.
NAFTA, the world’s largest trade bloc, comprises 470 million people from Canada’s Yukon to the Yucatan Peninsula in Mexico. The bloc represents nearly 30 percent of global economic output.
But leaders face pressures from special interests in each country, and Obama, speaking in the late afternoon next to Harper and Pena Nieto, said the leaders need help from voters to “deepen what are already incredible ties between our three nations.”
“We have every incentive to make this work,” Obama said. But he cautioned that, “you just can’t leave it to politicians alone.”
Issues surrounding NAFTA dwarf the economic impact of other global issues facing any of the three nations, yet more dramatic world events tend to overshadow efforts to strengthen the North American alliance.
Over eight million U.S. jobs depend on trade with Canada, and another six million on trade with Mexico. Trade between the three nations tops $1 trillion a year.
As dramatic as televised images of turmoil are from Ukraine, U.S. bilateral trade with the nation came to a mere $2.9 billion in 2013, the equivalent to less than two days’ trade between Mexico and the United States.
Experts say the NAFTA alliance has drifted with a lack of strategic vision.
“Twenty years later, it’s hard for us to talk to each other and reach agreement,” said Laura Macdonald, a political scientist who specializes in the region at Carleton University in Ottawa.
Rather than re-debate NAFTA, Obama pressed Pena Nieto and Harper to speak with one voice as they negotiate the Trans-Pacific Partnership, a proposed trade accord that includes 12 countries around the Pacific Rim. Obama dismissed a suggestion that he can’t get the accord through his own party in Congress.
“We’ll get this passed if it’s a good agreement,” Obama said.
Minutes before he disembarked from Air Force One, Obama signed a new executive order to reduce bureaucratic barriers and speed up imports and exports, a move intended to help businesses strengthen supply chains across borders. The move signaled that Obama would not cede to opposition, much of it within his own Democratic Party, to his trade agenda.
Yet multiple tensions surrounded the summit, and McDonald said it unfolded “at the worst moment in the trilateral relationship” since the Sept. 11, 2001, terror attacks in the United States triggered concerns over border security.
The bright spot is an energy revolution that is altering the global energy map and shifting its epicenter to North America, revitalizing manufacturing.
“We are in a fundamentally different place than we were even five years ago,” said Eric Farnsworth, vice president of the Council of the Americas, a Washington DC-based business group that promotes free trade, democracy and open markets in the hemisphere.
Farnsworth said faltering political intentions have hindered efforts to develop the Nafta region “in a comprehensive and strategic manner.”
“That sense of broader purpose here is missing,” Farnsworth said.
Mexico is irked at Canada over visa requirements that have seen its tourism to Canada drop by about 50 percent since 2008 to a level of about 130,000 Mexicans per year. In contrast, 1.9 million Canadians visit Mexico annually.
Mexican diplomats say Canada requires 10 times more information from Mexican citizens to grant a visa than the U.S. government requires.
Harper and Pena Nieto oversaw the signing Tuesday of an expanded air transport accord that will allow more direct flights between Canada and Mexico but Harper made no public mention of whether Canada would ease visa requirements.
Harper is irritated with Obama for U.S. delays on deciding whether to proceed with the $5.4 billion Keystone XL pipeline designed to carry oil made from tar sands in the province of Alberta through the Midwest to refineries along the Gulf Coast.
Macdonald said the pipeline project “is the most important foreign policy objective of the Harper government” in its quest to become an energy superpower.
Also irritating U.S.-Canada relations are delays in replacing the aged Ambassador Bridge between Detroit and Windsor, Ontario, the single busiest international land border crossing in North America in terms of trade volume.
It’s difficult to exaggerate the importance of U.S.-Mexico trade, which topped $500 billion last year. Components and finished products move in both directions across the border. Parts in vehicles built in North America, for example, are said to have crossed U.S. borders eight times before the vehicles are fully assembled.
“We design it together and we produce it together,” Farnsworth said of most goods, noting that 40 cents of each dollar of content of Mexican products exported to the United States comes from materials and parts produced in U.S. plants.
Once-annual summits between the NAFTA leaders have grown less frequent. The leaders met in Guadalajara in 2009 and in Washington in 2012.
The initial promise of the NAFTA trade bloc led to the moniker the Three Amigos for the leaders of the countries, taken from a 1986 comedy Western starring Steve Martin, Chevy Chase and Martin Short.
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