August 30, 2001
|Contact:||Robert A. Pastor||(404) 727-6969|
Washington, DCThe United States and Mexico should use the state visit to Washington of President Vicente Fox of Mexico on September 4-7 to build on President Fox's bold proposals to launch the creation of a true North American Community. They should invite Canada to join them in a creating a community that could:
These proposals to deepen the current North American Free Trade Area (NAFTA) are made in a new Institute book Toward a North American Community: Lessons from the Old World for the New. The study was written by Robert A. Pastor, the Goodrich C. White Professor of International Relations at Emory University. He was formerly director of Latin American Affairs at the National Security Council and has written fourteen books, including one on U.S.-Mexico relations with the current Foreign Minister of Mexico, Jorge Castañeda. Dr. Pastor has studied intensively the integration experience of the European Union, especially its successful effort to reduce the income gap between its rich and poor countries, and adapts the model for North America.
Dr. Pastor argues that the three leaders of North America have an opportunity, at the beginning of a new century, to construct a unique Community composed of two industrial countries and a developing one. All elected in the same year, Jean Chretien, prime minister of Canada, Vicente Fox, president of Mexico, and George W. Bush, president of the United States, recognize the growing economic weight of their neighborhood. Only Fox, however, has articulated a long-term vision of North America as a Common Market. The time has come for the United States and Canada to respond.
Although NAFTA has been subject to blistering criticism, Dr. Pastor argues that it has been extremely successful in what it was designed to do: reduce barriers and expand trade and investment. Today, the United States exports nearly four times more to its two neighbors than to Japan and China, and 40 percent more than to the 15-nation European Union. Mexico had the highest rate of export growth in the world in the 1990s. Canadian investment in the United States has grown at a faster rate than US investment in Canada. North America companies have become continental and more competitive. North America's trade as a percent of its trade with the world has grown from less than one-third to more than one-half.
NAFTA's failure has come from what it did not do. The peso crisis of 1995, which contracted Mexico's economy by 6 percent and disillusioned many in the United States and Mexico with NAFTA, occurred for many reasonsone of which was that the governments had not developed an institutional capacity to anticipate such problems or to coordinate their economic policies. Bureaucratic duplication on the border, combined with inadequate infrastructure and divergent regulatory policies, has raised transaction costs above the level of the tariffs that were eliminated. America's penchant for unilateralism, and Canadian and Mexican preferences for dealing bilaterally with the United States, has neutralized the chance to create a North American Community. No progress has been made on the glaring disparities in income between the three countries; as long as those disparities exist, the huge flow of Mexican immigrants will continue.
Pastor reviews the European Union's 40-year experience with reducing disparities between its rich and poor members. While the EU and NAFTA are different in many ways, he finds lessons of use to North America. From 1986-99, the per capita GDP of the four poorest countries of the EU rose from 65 percent to 78 percent of the EU average and emigration slowed markedly. The progress was due to the creation of the Single Market, foreign investment, and the transfer of resources at a level that ranged from 2-4 percent of the recipient's GDP. The most effective projects were in infrastructure and education.
President Fox of Mexico has made the issue of "immigration" one of his highest priorities. His purpose is to make sure that all Mexican immigrants are treated humanely and with respect, but he has also proposed an expansion of permanent visas, a new temporary worker program that provides more rights and opportunities to the workers, and a "legalization" program for 3-4 million undocumented Mexican workers. He has also cooperated with the United States to discourage illegal migration, arrest "coyotes" (smugglers) and extradite drug-traffickers. Pastor's book recommends a "North American passport" for frequent travelers, preferences for immigrants from the three countries, and a temporary worker program with safeguards, but he believes that a large-scale "legalization" program would be a mistake at this time. Rather he argues that the best approach toward migration is a new development strategy for Mexico.
During the last five years, more than one million Mexicans migrated from central Mexico to the border area to work in "maquila" plants. Foreign investment concentrated there despite the pollution and heavy turnover rates for workers, who soon realize that they can earn much more by crossing the border. NAFTA's "implicit" development strategy does not inhibit migration; it actually encourages it.
Foreign investment in Mexico would relocate in the center of the country if there were better roads and infrastructure, but the World Bank estimates that Mexico needs to invest about $20 billion a year for ten years in order to meet the country's infrastructure demands. Pastor thus proposes a Development Fund that would channel aid to infrastructure and education in Mexico, much as the EU's regional policies did for its poorer countries. This program would employ Mexicans, reduce migration to the United States, and improve social problems at the border. Moreover, the funds could be used as leverage to help the Mexican government undertake its needed fiscal reforms.
The World Bank and the Inter-American Development Bank could administer the program and provide partial funding, but President Bush will need to make a strong case, just as President Kennedy did for the Alliance for Progress, for providing a small portion of the resources to Mexico that Europe provides for its poor countries. To make such a case, the President should define North America's special opportunities and note the broader lesson: if Mexico succeeds, the United States and Canada benefit, and the model will illuminate a path for other middle-income developing countries.
Europe made the mistake of creating too many institutions but NAFTA made the opposite mistake in neglecting to establish any credible organizations. Pastor proposes that the three governments start by establishing a North American Commission (NAC), composed of 15 distinguished individuals, of whom five would be appointed by each of the three governments. Unlike the massive, bureaucratic European Commission, the NAC would be lean and advisory. Its principal purpose would be to prepare a "North American agenda" for the leaders to consider at semi-annual meetings. Each leader would be staffed by his government but, by meeting under the auspices of the NAC, the leaders might be more inclined to think of problems from a trilateral perspective and develop rules that would solve problems or seize new opportunities.
The new book also proposes the merging of the two existing U.S. inter-Parliamentary groups on Mexico and Canada; the establishment of a Permanent Court on Trade and Investment; the exchange of executive and legislative personnel; the reorganization of Cabinet commissions; and a new organization for how the U.S. Executive branch should handle North American affairs.
A recurring dilemma of any free-trade scheme is that the reduction of trade and investment barriers also facilitates the flow of illegal goods. One country can impede the illegal flow of goods but only at the cost of slowing legal traffic and breeding resentment among its neighbors. To address this problem, the three governments could establish a single "Customs and Immigration Force" that would involve officials from all three countries that would be trained at a single site. This force would reduce paperwork on the border by at least half, and it could also work on the perimeter of the three countries.
The effort to stop Mexican trucks from entering the United States is not just a threat to NAFTA's integrity, it is regrettably just a small part of the transportation challenge facing the three countries. The problem is not that the United States is trying to impose discriminatory safety standards on Mexico; the real problem is there is no single set of safety standards. There are 64 sets in North America. The book proposes the creation of a safe, seamless, integrated transportation system with new trade corridors and greater collaboration on inspections for immigration and customs.
Is a North American Community feasible? Are the three governments willing to consider reducing their sovereignty? The big surprise from public opinion polls is that a majority of the public in all three countries is prepared to consider a single union provided that their cultures were not threatened and their standards of living would be improved. As stunning, the people in all three countries are becoming more alike. There is a convergence of values and attitudes on public policy in the three countries, particularly among young people. Society is considerably in front of its governments.
The state visit of President Fox to Washington in September can set the foundation for building a North American Community. The two leaders should invite the Canadian Prime Minister to a Trilateral Summit in six months and establish a North American Commission to prepare far-sighted North American proposals for them to consider. If the United States and Canada are prepared to make half the commitment that Europe has made to its poorer countries, the prospects for a North American Community will grow stronger. Such bold steps could become the 21st century equivalent of "the shot heard round the world."
About the Author
Robert A. Pastor is the Goodrich C. White Professor of International Relations at Emory University. He was a fellow at the Carter Center (1985-98) and founding director of its Latin American and Caribbean Programs, and Democracy and China Projects. He served as director of Latin American and Caribbean affairs on the National Security Council (1977-81) and has been a foreign affairs consultant to the government, business, and nongovernmental organizations. He is the author or editor of 14 books, including Exiting the Whirlpool: U.S. Foreign Policy Toward Latin America and the Caribbean (2001), A Century's Journey: How the Great Powers Shape the World (1999), and Congress and the Politics of U.S. Foreign Economic Policy (1980).
About the Institute
The Institute for International Economics is a private nonprofit research institution for the study and discussion of international economic policy. The Institute, directed by C. Fred Bergsten, provides fresh analyses of key economic, monetary, trade and investment issues and recommends practical policy approaches for strengthening public policy toward these important topics. The Institute receives funding from a large number of private foundations and corporations.