North America's Second Decade

Robert A. Pastor

From Foreign Affairs, January/February 2004

Summary:  In just ten years, NAFTA has created the world's most formidable free trade area. But in the absence of true partnerships and multilateral institutions, movement toward further regional integration has slowed. The United States, Mexico, and Canada have many common interests; they need to pursue them in common ways.

Robert A. Pastor is Professor of International Relations and Director of the Center for North American Studies at American University. He is the author of Toward a North American Community: Lessons from the Old World for the New.

NORTH AMERICAN PLANS

NAFTA has failed to create a partnership because North American governments have not changed the way they deal with one another. Dual bilateralism, driven by U.S. power, continues to govern and to irritate. Adding a third party to bilateral disputes vastly increases the chance that rules, not power, will resolve problems.

This trilateral approach should be institutionalized in a new "North American Commission" (NAC). Unlike the sprawling and intrusive European Commission, the NAC should be lean and advisory, made up of just 15 distinguished individuals, 5 from each nation. Its principal purpose should be to prepare a North American agenda for leaders to consider at biannual summits and to monitor the implementation of the resulting agreements. It should also evaluate ways to facilitate economic integration, producing specific proposals on continental issues such as harmonizing environmental and labor standards and forging a competition policy.

The U.S. Congress should also merge the U.S.-Mexican and U.S.-Canadian interparliamentary groups into a single "North American Parliamentary Group." This might encourage legislators to stop tossing invective across their borders and instead start bargaining to solve shared problems.

A third institution should be a "Permanent Court on Trade and Investment." NAFTA established ad hoc dispute panels, but it has become increasingly difficult to find experts who do not have a conflict of interest to arbitrate conflicts. A permanent court would permit the accumulation of precedent and lay the groundwork for North American business law. It would also prevent the erosion of environmental standards and make proceedings more transparent.

Canada and Mexico have long organized their governments to give priority to their bilateral relationships with the United States. Washington alone is poorly organized to address North American issues. President Bush must take into account the extent to which the domestic interests of the United States collide with those of its neighbors by appointing a White House adviser for North American affairs. Such a figure would bridge national security, homeland security, and domestic policy councils and chair a cabinet-level interagency task force on North America. No president can forge a coherent U.S. policy toward North America without such a wholesale reorganization.

September 11, and the subsequent U.S. response, highlighted a basic dilemma of integration: how to facilitate legitimate flows of people and goods while stopping terrorists and smugglers. When Washington virtually sealed its borders after the attacks, trucks on the Canadian side backed up 22 miles. Companies that relied on "just-in-time" inventory systems began to close their plants. The new strategy -- exemplified by the "smart" border agreements already in the works before September 11 -- is to concentrate inspections on high-risk traffic while using better technology to expedite the transit of low-risk goods and people. This approach, however, is too narrow to solve so fundamental a problem. Now, the establishment of the U.S. Department of Homeland Security has unintentionally threatened integration as well.

Overcoming the tension between security and trade requires a bolder approach to continental integration: a North American customs union with a common external tariff (CET), which would significantly reduce border inspections and eliminate cumbersome rules-of-origin provisions designed to deny non-NAFTA products the same easy access. All three governments must also rethink the continental perimeter. Along with the CET, they should establish a "North American Customs and Immigration Force," composed of officials trained together in a single professional school, and they should fashion procedures to streamline border-crossing documentation. Most important, the Department of Homeland Security should expand its mission to include continental security -- a shift best achieved by incorporating Mexican and Canadian perspectives and personnel into its design and operation.

Security obstacles, however, are only the beginning of North America's transportation problems. As a May 2000 report by a member of Canada's Parliament concluded, "Crossing the border has actually gotten more difficult over the past five years. ... While continental trade has skyrocketed, the physical infrastructure enabling the movement of these goods has not." The bureaucratic barriers to cross-border business, meanwhile, make the infrastructural problems seem "minor in comparison." Washington has been criticized for imposing its own safety standards on Mexican trucks, but the truth is even more embarrassing: there are 64 different sets of safety regulations in North America, 51 of which are in the United States. A NAFTA subcommittee struggled to define a uniform standard and concluded that "there is no prospect" of doing so.

The NAC should develop an integrated continental plan for transportation and infrastructure that includes new North American highways and high-speed rail corridors. The United States and Canada should each develop national standards on weight, safety, and configuration of trucking and then negotiate with Mexico to establish a single set of standards.